Israel sees $6.5 billion in trade as UAE peace talks start

Talks to normalize relations between Israel and the United Arab Emirates launch this week with a focus on economic issues, with thornier defense matters pushed off as controversy churns around the Gulf Nation’s bid to buy the U.S.’s top warplane.

Israel’s Finance Ministry sees potential for annual bilateral trade starting at $2 billion and building up to $6.5 billion once cooperation matures, according to deputy chief economist Lev Drucker. This week’s trip will center on promoting cooperation in fields like tourism, finance, trade and health, according to Israeli Prime Minister Benjamin Netanyahu.

The UAE Foreign Ministry declined to comment.

Just three weeks ago such a meeting would have been unheard of. But on Aug. 13, the countries announced their plan to normalize ties, a first between Israel and a Gulf Arab nation, and only the third such arrangement between the Jewish state and an Arab one. Making this week’s two-day gathering even more eventful is that on Monday, the delegation of Israelis and Americans are flying from Tel Aviv to Abu Dhabi, over Saudi Arabia—a first commercial flight of its kind for an Israeli airline.

Shared animosity toward Iran brought Israel and the UAE closer, but commerce is another key motivator. While the UAE has been quiet about its aspirations for specific areas of cooperation, Israeli airlines and banks are already putting out feelers for working on Emirati turf, and Israeli officials have also expressed hope of cooperating in technology and aerospace.

The Finance Ministry’s trade projections are significantly higher than the $1 billion mooted by the Ministry of Economy. Finance Ministry officials are also looking into the potential for negotiating treaties on bilateral investment, taxation, customs and trade financing, according to a person familiar with the matter who asked for anonymity to discuss internal planning.

Defense matters will be addressed later on, Netanyahu said in a statement, amid tensions over the UAE’s request to buy F-35 stealth fighters from Lockheed Martin Corp. Such a purchase could chip away at Israel’s qualitative military edge in the region, which the U.S. has pledged to uphold.

Netanyahu has denied that normalization with the UAE includes any agreement on providing advanced weaponry and he’s publicly opposed an F-35 sale. Axios reported that the UAE was disappointed enough over Netanyahu’s public opposition to the sale to cancel or postpone a meeting with U.S. and Israeli representatives at the United Nations earlier this month.

U.S. President Donald Trump has said an F-35 sale is “under review” after the UAE made “a great advance in peace of the Middle East.” Secretary of State Michael Pompeo, in a visit to Jerusalem last week, emphasized that Washington is committed to maintaining Israel’s regional advantage, while standing behind U.S. efforts to sell the Gulf nation advanced weaponry.