Gate to the Balkans: UAE and Serbia strengthen ties

The nature of the newly evolved relationship between the UAE and Serbia is mutually beneficial

Dr. Theodore Karasik

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The visit of His Highness Abu Dhabi Crown Prince Mohammad bin Zayed to Belgrade to meet the Serbian president is indeed a milestone of a budding relationship. A year ago, the United Arab Emirates and Serbia decided to make a sudden shift of the not-so-positive relationship they had been maintaining for the past fifteen years. Over 14 years ago, in 1999, the UAE voiced its support for the NATO campaign against Serbia, and Abu Dhabi later sent humanitarian personnel stationed in Kosovo as part of the international peacekeeping mission. In 2008, the UAE became the first Arab state to recognize Kosovo which led to the canceling of the implementation of the diplomatic relations agreement between the UAE and Serbia from 2007. From this low point, a new relationship is now being forged which highlights a huge potential for investment and cooperation across a number of sectors. This activity begs the question: why now? What is in the works?

The nature of the newly evolved relationship between the UAE and Serbia is mutually beneficial and has a high probability of being able to fulfill its potential for completion of the announced projects. Both countries’ national interest are aligned on the agreed issues which guarantees the longevity of cooperation. Also, establishing cooperation in many fields and industries – defense, IT, agriculture, and aviation - stabilizes the partnership between the countries.

UAE investment in Serbia

The most prominent UAE investment in Serbia is the formation of the new national airline AirSerbia (formerly JAT airways). The UAE bought 49 percent of AirSerbia and received a five year management contract, with the purpose of developing a transportation hub in the region. Etihad manages the brand and it will use its own vast experience to support the re-born company. At the same time, Etihad will likely benefit from the air routes of AirSerbia in central and Eastern Europe through code-sharing agreements. The first flight to Abu Dhabi also brought the Serbian delegation led by the Vice Prime Minister Aleksandar Vucic. The Serbian delegation’s primary objective was to secure a $3 billion line of credit to help the Serbian government avoid default.

Projects in the defense industry are another pillar of the reengagement between the UAE and the Balkan country. The Emirates Advanced Research and Technology Holding (EARTH), a subsidiary of Emirates Advanced Investments (EAI), signed an agreement with the Serbian state owned defense company, Yugoimport, to joint develop Advanced Light Attack System (ALAS) cruise missiles. This effort will involve Serbian companies, Krusik and Utva. This contract is reportedly worth 200 million euros and is a statement of intent for further cooperation between the two national industries.

The Serbian defense industry is well known for its capabilities in developing indigenous Armored Personnel Carriers (APC), Multi Role Vehicles (MRV), and Mine Resistant Ambush Protected (MRAP) vehicles with Serbia unveiling their newest model the Lazar 2 at the International Defense Exhibition (IDEX) in Abu Dhabi in February 2013. While the UAE currently operates other vehicles of a similar nature, the UAE is looking to replace its ageing BMP-3 fleet and may look to its new found partner to research and develop advanced capabilities to assist the UAE wheeled vehicle market. The UAE’s desire to advance Maintenance, Repair and Overhaul (MRO) services for land vehicles is a clear market of opportunity for the Serbian defense industry.

Serbia is another country where the UAE is using its foreign investments to pursue its national interests

Dr. Theodore Karasik

Another area of investments is agriculture, where the UAE, through the Abu Dhabi development Fund, is noted to invest in food production by taking over large arable field. Al Dahra has signed a preliminary agreement for a long term agricultural development in Serbia. By joint investment in state owned farms the effort will develop irrigation systems, machinery, agricultural infrastructure, etc. In exchange the Serbian Government is guaranteeing a multi-annual food export to the UAE. This fact follows the UAE foreign policy that desires numerous sources to meet the requirements needed to build a stable future in regards to food security.

The high-tech sector is another industry that the UAE has highlighted for potential cooperation with Serbia. The construction of aircraft parts (for Boeing and Airbus) is an area of interest for the UAE, especially if they hold a 49 percent share in the national Serbian airline. The bilateral transfer of technology can assist joint capabilities and help breed increased competence in both countries. In addition to a factory near Belgrade, a research and development center is said be established, employing up to 100 scientists and costing around 100 million dollars. Running alongside this agreement is the possibility of management of data centers in Serbia through joint cooperation between Mubadala and the Serbian Telecommunications operator Telekom Srbija. Talks are also being held over semiconductor and microchip hardware production with an MOU signed between both nations in October 2013. Other potential investments might be seen in the energy sector, in combined thermoelectric and hydroelectric power plants, as well as renewable energy. The latest announcements point to the UAE’s interest in renewable and clean energy, possibly in the area of wind generators or co-generation for which the UAE’s companies are considered to have advanced technology.

The UAE’s interest in expansion in the defense industry and diversifying its sources for weapon imports is seen in its investment in the defense industry of Serbia. In particular, the collaboration between EARTH and Yugoimport should lead towards serial production of ALAS missiles and missile systems. In short, the ALAS missiles are long range guided missiles, while the setup of the system ensures integration in different platforms (army, navy or airborne). The success of this investment will provide the UAE with interoperable sophisticated weaponry. This follows a trait of UAE defense policy where they are looking to diversify the origin of military hardware to boost the Emirates’ indigenous defense industry.

Additionally, food security is one of the key pillars in UAE’s foreign investments. The food security strategy of the UAE takes into account the volatile price of food as well as its dependency on weather, which is why the country diversifies its sources. It is no surprise that Al Dahra is a company that has a presence on almost every continent. It is also why one of their main investments is in the development of the food production industry in Serbia. The guaranteed export to the UAE of wheat, meat, dairy products, and semi-processed and finished food products is further secured by having a port on the Danube at Al Dahra’s disposal.

Serbian motives

The drive behind Serbia’s urgency and push to secure the discussed agreements is based on two main motives. One is the pressuring deadlines at the end of 2013 which threaten to lead the country into bankruptcy. The latest reports from the World Bank and IMF hint a positive message for Serbia in terms of offering assistance. However, the IMF package will mean further unpopular reforms having to be done by the government, and Serbia’s leaders know this. Hence, they are in a pursuit to secure bilateral agreements which would diversify its access to loans, as seen in the case with Russia. The second motive for Serbia’s strong will to ensure positive developments in this bilateral relationship is the need to demonstrate success before the elections scheduled for the beginning of 2014. With the UAE’s full backing of the investments provides security and mitigates the risk of financial default, hence it is likely that the Serbian Government will continue to leverage their partnership in the upcoming political campaign.

Future prospects are also good for investments in Serbian telecommunications. By the end of this year, the Serbian Government is expected to ask for bids for a license for a new 4G mobile operator and Serbian sources say that the UAE might be interested. Significantly, the UAE will look to utilize its relationship with Serbia to increase it foothold in the Balkans further by increasing their global footprint and significance. The array of joint ventures and technical programs that they are cooperating on will only continue to develop the youth of the UAE and further excel domestic capabilities.

Overall, reengagement between UAE and Serbia comes at a time when both countries are ready to not only improve their relations but are also willing to detect and utilize the potential benefits from such a partnership. Serbia is another country where the UAE is using its foreign investments to pursue its national interests. At the same time, the Emirates’ motive for long-term engagement in the Balkans should also provide certain comfort to some parts of Serbian society where skepticism towards foreign investments is rampant.


Dr. Theodore Karasik is the Director of Research and Consultancy at the Institute for Near East and Gulf Military Analysis (INEGMA) in Dubai, UAE. He is also a Lecturer at University of Wollongong Dubai. Dr. Karasik received his Ph.D in History from the University of California Los Angles.

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