Complex Made Simple

UAE and Serbia ties show no signs of slowdown

Bi-lateral economic relations between the Balkan and Gulf states are rapidly spreading across several sectors

By Philip P. Merrell

 

The UAE is a key partner in Serbia’s efforts to modernise its cripple infrastructure and revive its struggling economy.

Moreover, for the Gulf state, Belgrade has opened a window of opportunity to establish its economic influence in a region desperately seeking a helping hand.

Historically, the Balkan state has been on a crossroad between the West’s aggressive economic expansion and Russia’s cultural claim to control all in its back garden; a factor it has often used to its advantage. However, ethnic conflicts in the ’90s have resulted in several young, yet fractured, economies and a vacuum that neither a troubled EU nor an elsewhere-distracted Moscow have managed to entirely fill. It is in this vacuum, an unlikely source of vast investment, with no political strings attached, has been found in the UAE, ever-willing to extend its financial arm to the European continent.

The catalyst for these relations came in the shape of an invite from then-Serbian minister of defence  (today prime minister) Aleksandar Vucic, to his UAE counterpart, H.H. Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, for a visit to Belgrade in January 2013. Officially, the prime topic was a $400 million investment from Al-Dahra Agriculture into eight Serbian farms. In reality, this introduction opened the gateway for a much larger multi-sector partnership.

First, in August 2013, Abu Dhabi-based Etihad Airlines acquired a 49 per cent stake in Serbia’s national carrier, Jat Airways. Rebranding it into Air Serbia, Etihad has taken over the management rights for the following five years, pledging a further ten Airbus A320 planes to its fleet and opening nine new routes, including a daily to Abu Dhabi. With an increase in passengers by 66 per cent in less than ten months, it is widely expected, according to Etihad Airlines’ CEO, James Hogan, that Air Serbia will record a profit by the end of the year – for the first time in its 87-year history (under Jat Airways).

Secondly, in the interest of “strengthening co-operation and relationship ties between the UAE and the Republic of Serbia,” according to Abu Dhabi’s Department of Finance, in March 2014, Serbia cashed in on a $1 billion, low-interest loan from the Gulf state. In addition to a $400m loan in 2013, Serbia has seemingly found its credit alternative to the EU, Russia and the IMF, all of which have proved either unwilling or unable to secure financial assistance for Serbia or have simply placed unfavourable interest on the political conditions of the Balkan state.

Worth noting, too, is that throughout the flood crisis, which hit Serbia and Bosnia in May 2014, the UAE pledged approximately $10m in aid relief efforts. While the sum itself may not be overly significant by UAE standards, the sensationalised reaction of Serbian tabloid Informer, which included a picture of Sheikh Mohammed bin Zayed on the front page with the title: “He is our biggest friend today”, indicates that Emirati economic influence has truly penetrated Serbian society – for better.

Several other projects, including a $300m weapons deal in late 2013, and a memorandum between Belgrade and Abu Dhabi’s investment fund Mubadala on the possible production of aircraft parts and microchips simply highlight the increasingly cosy economic ties – in 2011 bilateral trade between the two countries stood at a mere $10m.

However, undoubtedly, the largest and most attractive project between the two states will be Belgrade Waterfront. Worth $5.4bn and when completed in seven to eight years, it will provide Serbia’s capital with an entire makeover, creating thousands of jobs. In an attempt to relocate Belgrade’s city centre to the banks of the Sava River, the project will boast eight new hotels, a 200-metre skyscraper resembling Dubai’s Burj Khalifa, shopping malls, as well as numerous luxury apartments and offices. According to Emaar Properties’ executive director, Mohamed Alabbar, the aim will be to make Belgrade Waterfront into a regional tourist and business hub that will be unmatched.

Nonetheless, the project is not without its critics as many have raised concerns that Serbia may not have the required demand for upscale properties to be built. As with Air Serbia, it is up to Belgrade now to ensure that these large investments are not handouts. As prime minister Vucic quite bluntly put it: “They (the UAE) are our friends. But this is business. If they do not see profit from this, they will be out.”

Having said that, Serbia and the UAE are wasting no time in bridging a relationship in which the sky is, quite literally, the limit.