Gulf tensions: Saudi Arabia flexes its economic muscles

Gulf tensions: Saudi Arabia flexes its economic muscles

When Saudi Arabia abruptly amended its rules for imports from neighbouring Gulf states, executives at an UAE conglomerate were stunned into action. They ordered company trucks packed with everything from cardboard packaging to steel pallets to return to Dubai from the Saudi border, while officials urgently phoned clients in the kingdom to ask if they would accept the increased cost of tariffs of between 5 per cent and 15 per cent on products that for years had been shipped tariff-free.

“We were in an absolute panic,” says an executive at the company. “We had no idea what to do with the cargo.”

Cross-border trade was disrupted for a week in July before the company’s Saudi-based clients agreed to take the financial hit and move on. But it was a stark warning that the cosy relationship companies based in the United Arab Emirates have enjoyed with Saudi Arabia — the main market for many Gulf businesses — is being shaken up.

The smaller, nimbler UAE has for decades leveraged its proximity to Saudi Arabia and the more liberal lifestyle it offers foreign executives as it built the Gulf’s premier trade and finance hub. Many of the bankers, consultants, lawyers and manufacturers who serve Saudi