Increased tensions between Saudi Arabia and the United Arab Emirates will result in heightened economic, diplomatic and defense competition, making it difficult for some businesses to operate in both countries and exacerbating security risks in countries like Sudan and Yemen. On July 18, The Wall Street Journal reported an uptick in tensions between erstwhile Arab Gulf allies, focusing on off-the-record comments made by Saudi Crown Prince Mohammed bin Salman made to reporters back in December 2022 in which he noted the United Arab Emirates had "stabbed us in the back" and threatened to take countermeasures because of perceived betrayals by the Emiratis. While the Saudi government did not confirm this report, the crown prince's alleged statements reflect underlying tensions between the two nations, which are driven by competition between their development models and their divergent foreign policies. Riyadh and Abu Dhabi are increasingly vying over investment, tourists, skilled labor and reputation as regional business hubs, as their economic diversification models overlap. The two countries also have conflicting foreign policies, including long-standing differences over how to approach the war in Yemen and more recent splits over who to back in Sudan's ongoing civil conflict. 

• Saudi Arabia and the United Arab Emirates grew close after the rise of Prince Mohammed in 2016, as the two countries perceived mutual threats from Iran, Qatar, and political Islam. At the time, Riyadh and Abu Dhabi also saw the election of former U.S. President Donald Trump as an opportunity to strengthen their ties with Washington and, in turn, reshape the region's strategic environment in their favor. Together, they lobbied for the Trump administration to exit the 2015 Iran nuclear deal, intervened in the Yemeni civil war against the Iran-backed Houthis, and blockaded Qatar from 2017-2021. 
• But the Arab Gulf neighbors' economic, post-oil programs have started to increasingly overlap in recent years. There are broad similarities between Saudi Arabia's Vision 2030 and the United Arab Emirates' various diversification programs, including goals to increase tourism, bring in foreign direct investment, transform their cities into technological and financial hubs, create mega-projects to jump-start development, and become logistical and transport hubs. 
• To gain an edge against one another economically, the United Arab Emirates and Saudi Arabia (as well as Qatar, Oman, and Bahrain) have liberalized their visas, employment, social rules and government contract policies. In 2021, Saudi Arabia announced that international companies would be required to have their headquarters in the kingdom by 2024 or risk losing government contracts, in what was widely perceived as a strong-arm attempt to force companies to relocate from neighboring countries. 

Saudi Arabia and the United Arab Emirates have not always had close relations. In the 1950s, Saudi forces invaded the Buraimi Oasis, which was then claimed by the British protectorates of the Trucial States (which became the United Arab Emirates in 1971) and Oman. British forces ultimately ejected the Saudi invaders in 1958, but territorial disputes continued to simmer until 1974 when the newly-independent United Arab Emirates and Saudi Arabia signed the Treaty of Jeddah that formalized their border and ceded claimed Emirati territory to Saudi Arabia, including a land bridge to Qatar. The Emiratis quickly challenged this cessation of territory, claiming that the final treaty violated the spirit of the negotiations. The United Arab Emirates has been trying to re-open negotiations for the treaty ever since.

The growing competition between the United Arab Emirates and Saudi Arabia will probably remain centered on the economic realm, with the former most likely focused on wooing more investment and workers. As the smaller and more politically complex of the two countries, the United Arab Emirates can only take so many risks to compete with Saudi Arabia economically. While wealthy Abu Dhabi has a greater tolerance for risk, the same is not true for Dubai and the northern emirates, which have no oil reserves to fall back on and need a stable geopolitical environment to continue their development. The development needs of the poorer emirates have driven the country to leverage its unique social and lifestyle strengths to lure workers and investments. For example, the United Arab Emirates is preparing to allow casino gambling in the region, a first for the Gulf Co-Operation Council (and the first in the Persian Gulf region since the overthrow of the Shah of Iran saw Iran's casinos closed). The United Arab Emirates can also try to block Saudi attempts to supplant it as a transport and logistical hub. This could involve denying landing rights to Saudi airlines or berthing rights to Saudi-owned vessels at times of tensions, something the United Arab Emirates did with Turkey before relations improved. 

Saudi Arabia will counter such UAE moves with carrots and sticks, creating some uncertainty with regard to business and working conditions. Riyadh is likely to respond assertively at times in part thanks to the ruling style of the crown prince and Saudi Arabia's greater economic and geographic heft. Saudi Arabia's fast-paced development and lucrative government contracts are very attractive to companies, and Saudi Arabia could intensify its efforts to force businesses to relocate more of their operations to the kingdom. Saudi Arabia may also use taxes to woo businesses away from their neighbors, potentially lowering the corporate tax rate from its current 20% to below the current UAE rate of 9% or offering special tax allowances for specific companies or industries. Saudi Arabia might expand VAT exemptions for tourists and specific goods and services to compete with the lower UAE rate. Finally, Saudi Arabia might try to undermine the UAE nomad visa program, which allows remote workers to live in the United Arab Emirates while working for a company based elsewhere, by demanding that remote employees only work for Saudi-based companies or by prohibiting working for companies based in neighbors like the United Arab Emirates. 

Saudi Arabia and the United Arab Emirates have divergent, long-term strategies to secure their influence along the Red Sea in Sudan, leading them to favor different outcomes in the current Sudanese civil conflict. Saudi Arabia and the United Arab Emirates both have large investments in Sudan, including port and agricultural investments, aimed at using the country to help guarantee their food security and to gain influence over the international trade that traverses the Red Sea to the Suez Canal. This economic competition impacts their views of the warring factions in the current conflict in Sudan. The Saudis are attempting to mediate a de-escalation through their influence over both the Sudanese military and Rapid Support Forces (RSF). The Saudis are closer to Gen. Abdel Fatah al-Burhan of the Sudanese military, while the Emiratis are closer to the RSF's Mohammed Hamdan Dagalo (aka "Hemmetti"). In Yemen, Saudi Arabia is closer to the internationally recognized government of Yemeni President Mansour Hadi, while the United Arab Emirates backs the Southern Transitional Council, which favors South Yemen secession. In both cases, the Saudis are more comfortable working with existing and recognized states and leaders to achieve their goals, even if such states are ineffective or corrupt, while the Emiratis are more willing to use proxies that may threaten national or state unity if they are more likely to achieve Emirati goals. 

• STC-Yemeni government tensions are long-standing and linked to both the STC's secession push and overall UAE goals in Yemen. While Saudi Arabia aims to secure its homeland from attacks by the Iran-backed Houthi movement and reduce the Houthi role in the country, if not roll them back to their pre-civil war position, the Emiratis are more focused on developing ports along the Gulf of Aden, targeting political Islamist movements like Yemen's al-Islah party, and developing South Yemen as a potential economic partner for the United Arab Emirates in the event of its independence. In 2019, the United Arab Emirates reportedly angered Saudi Arabia when it drew down its forces from the anti-Houthi fight to focus on its interests in the south. Without a unified approach to Yemen, the STC will be emboldened to challenge the relatively weak Saudi-backed Yemeni national government to increase its autonomy or even declare independence. This becomes more likely if Saudi Arabia becomes aggressive towards the United Arab Emirates, either in Yemen or elsewhere, and incentivizes the United Arab Emirates to signal to Riyadh the risks of such an approach by threatening the unity of Saudi Arabia's southern neighbor.
• In Sudan, Saudi Arabia has attempted to mediate an end to fighting to preserve state unity but has run afoul of entrenched militant attitudes on both sides of the conflict. The Emiratis have made fewer attempts to use their leverage over the RSF to end the fighting, as the Emiratis either calculate such attempts could undo their gains in the country and/or that continued fighting might expand RSF influence in Sudan. The RSF is likely to be emboldened to continue fighting so long as the United Arab Emirates continues its financial and military support for the group; the United Arab Emirates may even escalate its support in response to perceptions that Saudi Arabia is threatening its influence in Sudan or its development model at home. This would prolong fighting in Sudan, perhaps into a sustained civil war. 

Saudi Arabia and the United Arab Emirates are also likely to use economic investment and aid to pull countries like Turkey, Egypt, Jordan and Tunisia toward their regional alignments. The Saudis and Emiratis are both pouring money into Turkey. For Saudi Arabia, such investments have now earned a promise from Turkey to build a Bayraktar TB2 drone factory in Saudi Arabia. The Emiratis are investing in Turkey's agricultural and energy sectors as well. They are doing the same with Egypt, where both are concerned about regime stability but also want Egypt's support in Sudan's civil conflict (where Egypt backs the Sudanese military but has hesitated to carry out a military intervention to end the conflict). In Jordan and Tunisia, the United Arab Emirates and Saudi Arabia diverge on the threat of political Islam, which the United Arab Emirates sees as an existential threat and wants it entirely suppressed while Riyadh views it as tolerable so long as it takes place within the framework of existing, pro-Saudi governments. The Emiratis will try to use aid to undermine the Saudi viewpoint on political Islam in these countries. 

• On July 19, the United Arab Emirates and Turkey signed a pledge for $50 billion in deals as the United Arab Emirates tries to deepen its economic influence in Turkey. Turkey was a key check on Emirati ambitions to force Qatar to reshape its politics during the blockade, sending Turkish troops to secure Doha against a possible coup or invasion. The United Arab Emirates wants to keep Turkey from returning to be a major proponent of political Islam regionally, and likely also seeks defense deals to help it diversify the UAE military away from the United States. 
• The Saudis have also provided aid to Turkey, including a $5 billion deposit into Turkey's Central Bank in March 2023 to help Turkey's strained foreign exchange reserves. 
• The Saudis and Emiratis have also bought up billions in Egyptian state assets as they seek to turn away from aid and toward investment as a means of shoring up allies. In July 2023, however, the Emiratis reportedly entered talks with Egypt to subsidize their food programs in a return to more traditional aid.