A Military Power Rises in the Mideast, Courtesy of One Man

  • Steered by Sheikh Mohamed bin Zayed, U.A.E. flexes muscles
  • Abu Dhabi prince reshapes his nation as business risks grow

Martyrs’ Day is a new addition to the United Arab Emirates calendar this November, wedged between the Islamic holy days and the Dubai Shopping Festival.

Many nations commemorate their fallen soldiers, but the U.A.E. has always been different. The glittering towers of Dubai and Abu Dhabi are monuments to an alternative Middle East, standing above the fray, where investors can forget the region’s conflicts and make money. If that’s now changing, it’s largely the work of one man.

Sheikh Mohamed bin Zayed Al Nahyan
Sheikh Mohamed bin Zayed Al Nahyan
Source: Emirates News Agency/Anadolu Agency via Getty Images

Sheikh Mohamed bin Zayed Al Nahyan, the crown prince of the U.A.E.’s capital Abu Dhabi and the de-facto national leader, controls 6 percent of the world’s oil and its second-richest wealth fund. At 54, young for an Arab leader, he’s trusted by Washington and feted in Moscow. And he’s spent three decades beefing up his small nation’s military, making him one of Lockheed Martin Corp.’s best customers.

Sheikh Mohamed has always been security conscious. As a young prince in the air force in 1990, when U.S. troops were massing in the Persian Gulf to fight Saddam Hussein, he drove through the sand dunes to meet an American general for lunch, stashing a rifle under the front seat, just in case he got shot at. Now, to Gulf leaders, the neighborhood looks more dangerous than ever, with Islamic State taking root and Iran rising -- and the crown prince wants his country to have more weapons.

Switzerland to Sparta

From the Switzerland of the Persian Gulf to its Sparta, is how one Western official describes the transformation. It’s one full of risks, because the U.A.E.’s business model has largely worked -- turning it from a $50 billion economy in 1990 to the Arab world’s second-largest after Saudi Arabia, with output of $400 billion last year.

From Dubai skyscrapers, Citigroup and Uber run regional hubs. Abu Dhabi, where Sheikh Mohamed holds court, has Ferrari World and branches of New York University and Paris’s Sorbonne; Guggenheim and Louvre museums are under construction.

On Oct. 4, the prince was far from those glitzy landmarks, in the small northern emirate of Umm al-Quwain. There, the family of Ahmed Hebaitan al-Baloushi was in mourning. He was one of more than 50 Emirati soldiers killed by a missile attack in Yemen, while fighting Shiite rebels with ties to Iran.

Sheikh Mohamed has engaged the U.A.E. in that war alongside Saudi Arabia, part of a wider effort to roll back Iranian influence. He’s also joined the bombing of Islamic State in Syria and struck at jihadists in Libya. Concerned about a U.S. retreat from a turbulent Middle East, he’s on the offensive across the region.

Sheikh Mohamed’s supporters say he had no choice.

“The U.A.E. couldn’t afford to just sit there and pretend to be Switzerland and have the whole region burn down,” said Mishaal Al Gergawi, managing director of the Delma Institute research center in Abu Dhabi. “You need to either put out the fire or leave the neighborhood. But countries don’t have wheels.”

“The situation is quite fragile because they’re becoming more and more a target,” said the Western official who made the Sparta comparison. “They’re perfectly aware of it.”

As he raises his country’s standing, Sheikh Mohamed, known as MBZ, keeps a low profile. Through an aide, he declined to be interviewed for this article. More than 35 conversations with diplomats, defense and intelligence officials and analysts shed light on a leader whose moves are watched carefully from New York’s oil markets to Washington think tanks and Middle Eastern capitals.

Lifelong Soldier

Sheikh Mohamed isn’t the U.A.E.’s president -- that’s his older brother, Sheikh Khalifa, who’s scarcely been seen in public since suffering a stroke in January 2014. Long before that, MBZ was the prime mover on security, and the point-person for Washington.

Chuck Horner, the former Air Force general who met MBZ for lunch in 1990, credits him for opening U.A.E. bases to American forces. Later, Horner helped Lockheed Martin secure the sale of fighter jets to the U.A.E. “They got the most modern F16s in the world,” Horner said.

Born in 1961 in the oasis town of Al Ain, Sheikh Mohamed is a lifelong soldier. He graduated from the U.K.’s Royal Military Academy at Sandhurst and served in the U.A.E.’s special forces and as a helicopter pilot, before becoming head of the air force and then deputy supreme commander of its armed forces in 2005.

“He wants to have a military force that can at least hold any foreign aggressor until help arrives from the United States,” said Bruce Riedel, who spent 30 years at the Central Intelligence Agency and served on the National Security Council. “He is very knowledgeable about military equipment.”

Desert Falcons

From Sheikh Mohamed’s vantage point, there are potential aggressors all around. To the east lies Iran, blamed for undermining Gulf Arab rulers. The Muslim Brotherhood, and the more radical Islamists of al-Qaeda and Islamic State, are considered dangerous enemies.

As threats proliferate, so do doubts about the bedrock relationship with the U.S.

Bush and Sheikh Mohamed
Bush and Sheikh Mohamed
Photographer: Pablo Martinez Monsivais/AP Photo

Sheikh Mohamed enjoyed a strong rapport with former President George W. Bush, who invited him several times to Camp David. On a chilly evening in January 2008, MBZ also took Bush to a desert camp in Abu Dhabi where they sat on carpets and watched a display of falconry, a tradition of Bedouin hunting culture. It was an Emirati version of a Texas barbecue, according to a former Bush administration official who was there.

But there’s been a shift under President Barack Obama. Dennis Ross, who served on Obama’s National Security Council, said Sheikh Mohammed “never held back” in their conversations. When the U.S. condoned the ouster of Egypt’s Hosni Mubarak amid uprisings in 2011, MBZ “was very upset” and said so “very bluntly, not just to me but to every American official, including the president,” Ross said. He posed the question: Is this how the U.S. treats a longtime friend?

He was also frustrated by the diplomatic outreach toward Iran that led to July’s nuclear accord, according to a former Obama administration official. Many Gulf Arab leaders worry that Iran could expand its influence once sanctions are lifted.

National Fabric

That’s the backdrop to Sheikh Mohamed’s military drive. Last year, the U.A.E. began mandatory army service for men, and was the world’s fourth-biggest arms importer, according to IHS Inc.

The U.A.E. isn’t just buying weapons, it’s using them. Initially, Emirati officials were reticent about their ground involvement in Yemen. By September, they were flying journalists there to showcase the troops in action.

The task MBZ has set himself goes beyond building an army: he’s trying to bond a nation created in 1971 out of seven separate sheikhdoms. Abu Dhabi, the one with the oil, has always been in the driver’s seat. But former diplomats say that decades ago, when it was less common for officials to do so, the young Sheikh Mohamed regularly traveled outside Abu Dhabi, visiting sheikhs who viewed themselves as heads of state, patiently weaving a national fabric.

Photos hanging at the Al Ain museum show Abu Dhabi before the oil rush: A woman, her face veiled, walks by a marketplace full of men wearing turbans; children stand in front of a thatched hut, holding goats. On the wall is a quote from MBZ’s father and the U.A.E.’s founder, Sheikh Zayed: “Whoever has no past has neither present nor future.”

Tribal-Style

The future arrived first in Dubai, but Abu Dhabi has emerged from its neighbor’s shadow since Sheikh Zayed died in 2004. It’s now barely recognizable from the Al Ain images, a sprawling assortment of high-rise buildings and grand villas. Expatriates stroll along a tree-lined corniche, a sign the desert emirate can afford precious water resources to keep the city green.

MBZ preserves some of the old traditions. He holds a weekly majlis in the customary tribal style, sitting at the center of a horseshoe-shaped assembly. But his fiercely loyal cadre is modern-minded, largely made up of military types and young, non-royal men educated abroad. They call him “the boss.”

David Mack was U.S. ambassador to the U.A.E. in the late 1980s, and says MBZ stood out even then. Their meetings were always at 7:30 a.m., hours before most government agencies would open. “How early do you get started?’” Mack once asked. Sheikh Mohamed replied that he’d begin the day by waking up his father and giving him a cup of milk, followed by dawn prayers together.

Mack remembers stories about the young prince “doing crazy things,” like driving backwards with one of his brothers along Abu Dhabi’s corniche. But the future leader was learning about Middle East politics too. It was a time when Muslim Brotherhood members, facing clampdowns in places like Egypt, flocked to the Gulf to fill a shortfall of teachers and bureaucrats. MBZ has told visitors that the period showed him how young people can be brainwashed.

‘Last Barrel’

Like his father, Sheikh Mohamed has shown little tolerance to Islamists. That shapes foreign policy: the U.A.E. sent billions of dollars to Egypt to support army chief Abdel-Fattah El-Sisi after he toppled an elected Muslim Brotherhood leader in 2013.

It’s a factor at home, too. Last year, the U.A.E. designated more than 80 groups as terrorist organizations, including some that operate legally in the U.S. and U.K. The Brotherhood, which advocates Islam via the ballot box, is perceived as an especially insidious threat to the U.A.E.’s absolute monarchy.

A longer-term threat is oil dependence. Sheikh Mohamed’s plans to end it draw inspiration from models such as Norway, oil-rich but with a diverse economy. “Fifty years from now, after we have loaded the last barrel, are we going to feel sad?” he asked at a rare public speech in Dubai in February. “If our investment today is right, I think we will celebrate that moment.”

For now, oil still dominates, and revenue has taken a hit with the crude slump. The U.A.E. is ahead of Gulf peers in its fiscal response: it’s scrapped energy subsidies and is weighing sales and corporation taxes. That would be another big change to the model: to the wider world, Dubai means tax-free.

‘There Is Resistance’

The U.A.E. has limited human resources too: More than 80 percent of the population are expatriates. That’s one reason Sheikh Mohamed has backed a wider role for women, who enjoy more freedoms and higher-profile jobs than in nearby Saudi Arabia. When the U.A.E. started bombing Islamic State last year, female pilot Mariam Al Mansouri grabbed headlines.

Sheikh Mohamed has a freer hand than any modernizer would have in Saudi Arabia, with its powerful conservative clerics. Still, “there is resistance,” said Ross. “Not everyone is enthusiastic about that kind of change.”

MBZ has mostly steered change from behind the scenes. While his brother would meet foreign officials in formal settings with a translator, Sheikh Mohamed takes them for intimate meals. He’s a regular at the crowded Jones the Grocer café near the offices of Mubadala, Abu Dhabi’s investment company, and once took Hillary Clinton there; he sits in the back, ducking in and out unannounced as diners whisper at the sighting. He’s sometimes spotted driving his own car.

The Yemen war has brought him to the forefront. Local media have showed him holding hands with relatives of fallen soldiers, or kissing the forehead of a young man lying on a hospital bed in a bloodstained gown.

‘The Shiny Part’

Even at war, the U.A.E. has remained a safe place, free of the attacks that have unsettled Saudi Arabia, Kuwait and Bahrain. There’s no sign of any business exodus either, though privately some executives say they’re closely watching the foreign-policy shift. In a country where free speech is limited, few openly discuss the risks.

Ludovic Subran, chief economist at Euler Hermes Group, the world’s biggest trade-credit insurer, said in Dubai this month that the U.A.E. is right to become more assertive: “external pressures are becoming harsh.”

If the country can’t preserve its safe-haven status, he said, “you have a big confidence issue, and so the brand, the shiny part of the U.A.E., isn’t interesting any more.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE