New Saudi customs rules could widen rift with UAE

  • Market: Crude oil, Natural gas, Oil products
  • 05/07/21

Saudi Arabia has amended its regulations on imports from other Gulf Co-operation Council (GCC) countries, potentially further damaging deteriorating relations between Riyadh and the UAE.

A disagreement between the two has held up a new Opec+ agreement over the past few days, and they have drifted apart over Saudi Arabia's refusal to follow the UAE in normalising relations with Israel, the speed with which Saudi Arabia has reconciled its difference with Qatar and Riyadh's opposition to UAE support for separatists in southern Yemen.

Under the new customs regulations, Saudi Arabia will no longer apply preferential tariffs to goods made by GCC companies that have a workforce comprising less than 25pc of local workers and produce goods that have a local content added value below 40pc. The UAE's industrial free zones, such as the Jabal Ali Freezone, allow foreign companies to fully-own companies and to work under light regulation. They are a major contributor to the UAE economy.

The amendment also states that goods including any components manufactured in Israel, or made by companies fully or partially owned by entities on the Arab League boycott list because of their commercial relations with Israel, will be excluded from preferential GCC customs tariffs. The UAE normalised relations with Israel in August last year, under a deal brokered by former US president Donald Trump. They have signed a tax agreement, and have established a council to promote economic and business co-operation.

The new Saudi customs regulations are a blow to a long-held GCC goal of creating a unified customs zone among its members Saudi Arabia, Kuwait, Qatar, the UAE, Bahrain and Oman.

Commercial and economic rivalry between erstwhile allies Riyadh and Abu Dhabi first surfaced in February, when the Saudi government stipulated that foreign businesses would not be given contracts unless they base their regional hubs in the country. That move was largely seen as a blow to the UAE's second largest emirate, Dubai, which has long promoted itself as the region's most attractive business centre to foreign investors and companies working across the Mideast Gulf.


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