The United Arab Emirates (UAE) recently deported Pakistani Shiite workers after they were removed from their jobs, citing security reasons as the war in West Asia continues. Following this, Etihad Airways abruptly terminated the jobs of 15 Pakistani employees. What was surprising was that the order asked the workers within a mere 48 hours. This incident signals a growing divide in Pakistan’s relations with the UAE, especially amid the ongoing conflict in the region and Pakistan’s ties with Saudi Arabia, bringing a question to the forefront: Will Pakistan change its position in the Saudi-UAE rivalry?

The Gulf conflict will likely strain the relationships between many South Asian countries and those in the Gulf region. Given Pakistan’s economic vulnerability, it is likely to be affected immediately. Two of the steps that the UAE has taken—first, the repatriation of Pakistani workers citing security reasons, and second, the demand to return the money that it had lent to Pakistan—will have an immediate economic and political impact.

Cushion of economic partnership

The UAE’s demand to return $3.5 billion, which is roughly 21 percent of Pakistan’s foreign exchange reserves, was described by the government as a ‘routine financial transaction’, as the rollover period of two months expired. Many people attribute the UAE’s demand to pay off its debt as a reaction to Pakistan’s stance on the war in West Asia. At the same time, Pakistan has been requesting the UAE to reduce the interest rate, one of the highest, from 6.5 percent to 3 percent, which the UAE has not agreed to. Interestingly, while it requested Iran not to hit Saudi Arabia, with which it has recently signed a Mutual Defence Cooperation Agreement, there was no condemnation of Iran’s missile strikes on the UAE in the past. However, the recent missile strike launched by Iran on the UAE has drawn condemnation from Pakistani Prime Minister Shehbaz Sharif, who termed this attack as a violation of the ceasefire agreement that Iran reached with the United States.

The UAE has been watching the growing relationship among Pakistan, Saudi Arabia and Turkey for quite some time. As the payment to the UAE worsened Pakistan’s foreign exchange reserve, Saudi Arabia stepped in by providing $3 billion in additional support. Riyadh has already extended a $ 5 billion rollover arrangement to Pakistan for a longer period. This is to enable Islamabad to address the economic challenges posed by debt and other financial commitments, especially after Pakistan paid the UAE. The International Monetary Fund (IMF) had counted the ‘Gulf deposits’ as a key pillar of Pakistan’s multimillion-dollar bailout plan. The Gulf rivalry has come out in the open as the UAE announced it is leaving the Organisation of the Petroleum Exporting Countries (OPEC).

Security ties

Since the UAE’s formation in 1971, Pakistan and the UAE have shared a very close security relationship. The first five air chiefs of the UAE air force were from Pakistan. The UAE has always extended financial support to Pakistan during economic crises. In 2022, the UAE extended $13.6 million to flood victims in Pakistan. It was unhappy over Pakistan’s position on the Yemen conflict, when Pakistan was seen as closer to Iran, which was supporting the Houthis. In 2015, Pakistan declined to join the Saudi-led coalition force in which the UAE was participating. Interestingly, Saudi Arabia and the UAE fell out over the Southern Transitional Council in Yemen as they supported rival groups.

The UAE also sees Pakistan’s mediation effort in the Iran war as taking a clear position in this conflict that is closer to Riyadh, Istanbul and Cairo without securing the UAE’s security interest. Moreover, Pakistan is equally unhappy regarding the UAE’s closeness with India. Islamabad, however, does not take the same stance on India-Saudi Arabia relations. The UAE hosts the second-largest Pakistani expatriate population in the Gulf after Saudi Arabia. Last year, 1.8 million Pakistanis working in the UAE remitted $8.21 billion.

India’s ties with the UAE

Pakistan has been closely watching the UAE’s growing ties with India. Pakistan projects the UAE’s ties with it and its regional rival India as a zero-sum game. A downturn in its relationship is evident in how the UAE’s economic relationship with India has evolved, with more than $100 billion in trade and a pledge to double it by 2032. The two countries have strengthened close defence and strategic ties with high-level visits and military exercises. During the visit of the UAE President, Sheikh Mohamed bin Zayed Al Nahyan, a Letter of Intent on the Strategic Defence Partnership was exchanged. They also signed a 10-year $3 billion liquefied natural gas (LNG) agreement and a Comprehensive Economic Partnership Agreement (CEPA). Most importantly, the UAE is part of the India-Middle East-Europe Economic Corridor (IMEC), the much-vaunted corridor that links India to the Middle East. 4.3 million Indian migrant workers are working in the UAE and contributing to 19.2 percent of the total remittance that flows into India.

As the situation in the Middle East evolves and the contest for the control of the Strait of Hormuz continues, the changing strategic reconfiguration in the region will have a direct impact on South Asia. The latter depends on the Gulf for energy and also as an employment destination for its nationals, who send crucial remittances, shaping the economies of this region. The UAE is an important player in the South Asian region, especially in Pakistan, where both the government and private sectors have invested $10 billion in telecommunications, banking, port, real estate and oil sectors.

A lot is at stake for Pakistan as it gets pulled in all directions by its Gulf partners. As Pakistan diversifies its relationship with Gulf countries, the UAE will seek new partners in South Asia, and in this context, India’s ties with the UAE will deepen further into mutually beneficial relations that New Delhi is seeking from the Gulf countries.