The UAE: from rags to riches

Learn how the UAE developed from a little-known Middle Eastern country to one of the world's richest destinations. Here's all you need to know about how the discovery of oil and an urgent need for security persuaded seven of the Trucial sheikhdoms to put aside local rivalries and form a federation...

Burj Khalifa and fountain - world's tallest tower at 828m at night with moon light. Photo: Shutterstock

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After more than a quarter of a century of existence, the United Arab Emirates has proved to be the Arab world’s most successful attempt at unity, despite widespread scepticism at its formation in 1971. Attempts by Egypt under Gamal Abdel Nasser and later by Libya under Muammar Gaddafi to merge with other states were short-lived, and the squabbles surrounding such moves made the emotive concept of the “Arab nation” something of a laughing stock among commentators outside the region. The UAE was one of the most unlikely bids for unity, but has shown itself to be the exception to the rule.

Old roots

The well-known rags-to-riches story of the Gulf states of Arabia created by the oil boom of the 1970s and 1980s caused many commentators to look upon the peoples of the region as upstarts. The UAE is quite new as a state – and its inhabitants are rather proud to be nouveaux riches – but these once largely maritime peoples can trace their roots back to prehistoric times. Excavations at Umm an Nar (now in the shadow of an oil refinery), an island off Abu Dhabi, and elsewhere show that in these early times the Gulf Arabs were under two influences – those of Mesopotamia and of the Indus civilisation in India.

The coastal dwellers were the first to deal with European travellers, but inland the Bedu continued their timeless nomadic existence or settled in places where they could grow a few crops, such as dates, or graze small numbers of livestock. The Bedu in particular achieved their sense of belonging not in terms of the districts or fixed borders within which they conducted their spartan lives but through their tribal allegiances to a local sheikh. Long before the rise of Islam in the 7th century, the land that is now the UAE and the other Gulf states – Kuwait, Bahrain, Qatar, Saudi Arabia and Oman – had a tightly structured Arab society that was divided into tribes, sub-tribes and clans.

Key tribes

The Bani Yas were one such powerful federation of clans, wandering great distances in search of grazing for their camels and then returning to their date gardens around the Liwa oases on the edge of the Empty Quarter. As long as anyone can remember, the leader of the Bani Yas has always come from the sheikhs of the Al bu Falasah sub-tribe. One of them, called Nahyan, was the ancestor of the present ruling family of Abu Dhabi. As pearls became increasingly popular in India and then among European women in the 19th century, the Bani Yas gravitated towards the rich pearl banks of the Trucial Coast. The town of Abu Dhabi was founded as early as 1761 after a good supply of water had been found there. A settlement grew down the coast in Dubai as a dependency of Abu Dhabi until 1833, when a faction of Bani Yas left Abu Dhabi and took control of Dubai, proclaiming their independence. The descendants of Maktoum bin Buti, leader of the breakaway, continue to rule the city to this day.

By 1900 the pearling industry was enjoying such a boom that not enough men could be found to man the 1,200 boats engaged in the trade. Control passed irrevocably to the sheikhs who ruled the coastal areas, and this power was further reinforced when the British made it clear they were only interested in the coastal areas and effectively endorsed only their rulers.

The pearl boom collapsed in the 1930s with the arrival of the Japanese cultured pearl. The ensuing depression caused some pearl boatmen to burn their boats in desperation for fuel. But the search for a new source of energy had begun.

Al Ras historic district of the Deira region of Dubai. Photo: Wikimedia Commons/public domain

Oil concessions

Between 1936 and 1952 the rulers of the seven Trucial States signed oil concession agreements with the Iraq Petroleum Company, an international consortium. But oil exploration only really began in earnest after World War II. The decline of the British Empire after the war, especially the granting of independence to India in 1947, helped to speed up changes in the Gulf. The British presence in the region was to linger a few more years. With British help the Trucial Oman Scouts (a defence force) was set up in 1951, while the following year a Trucial States Council was formed to bring a kind of unity to the coastal region through twice-yearly discussions on common problems and interests. The rulers of what became the United Arab Emirates had not met all together since 1905.

The British withdraw

The big bombshell came when Britain’s cash-strapped Labour government decided that big savings must be made in defence. In February 1967 the prime minister, Harold Wilson, announced that Britain’s military presence east of Suez was to be scrapped by the end of 1971. It spelt the end of British protection in the Gulf and was in breach of written agreements between Britain and the Trucial States, as well as the unwritten Arab law of trust and friendship. The British decision led directly to the formation of the UAE and speeded the process of modernisation in the region, which had already been accelerated by the discovery of massive oil deposits. But the emirates were ill-prepared for sudden independence and had few qualified people, particularly in the spheres of defence and foreign affairs, which the British had long taken care of.

Opening session of the first conference on the formation of a union consisting of the emirates of the Persian Gulf in February 1968. Photo: Wikimedia Commons/Unknown photographer

The UAE is formed

Shortly after the British decision to withdraw from the Gulf, the rulers of Abu Dhabi and Dubai announced that they would form a federation and reached an agreement over offshore oil rights. The speed of their action helped to settle frontiers, even though the UAE is now a patchwork of subdivisions making up the seven emirates that form the federation – a process that had never been formalised before because of the changing tribal allegiances.

Abu Dhabi, well aware by 1970 that it was the richest oil emirate, was especially anxious to reach an overall agreement on a federation and clearly demarcated borders because of the mounting importance of oil revenues and the oil rights that would be granted once land divisions had been agreed. From the outset it adopted a policy aimed at finding a middle ground between any opposing views. Sheikh Zayed bin Sultan Al Nahyan, Abu Dhabi’s ruler, repeatedly said that the resources of Abu Dhabi – which in a few years were to carry the emirate’s income to the highest in the world – were “at the service of all the emirates”. Dubai and Abu Dhabi invited the other Trucial States – Sharjah, Ajman, Umm al Qaiwain, Ras al Khaimah and Fujairah – to join them in the federation, together with Qatar and Bahrain. There was clearly a strong mutual desire for security, modified by a wish for a degree of independence in each emirate, as the departure of the British drew near.

By June 1971, Bahrain had decided it was secure enough on its own and announced in August it would not join the federation, while Qatar followed suit less than three weeks later. Six of the remaining sheikhdoms had reached agreement on a federal constitution by July, and the UAE formally came into being on 2 December. In Ras al Khaimah, Ruler Sheikh Saqr bin Mohammed al Qasimi – hoping that he would find oil on Qatar’s scale – held out for another two months before swallowing his pride at the prospect of massive largesse from Abu Dhabi and joined the federation too. Sheikh Zayed of Abu Dhabi became President of the Federation, with Sheikh Rashid bin Saeed Al Maktoum, ruler of Dubai, as vice-president and prime minister.

Security was a major motive for forming the UAE, and such concern was justified in view of the massive oil deposits later discovered in the region. The possibility of a threat from the Soviet Union (particularly after its invasion of Afghanistan) always existed in the minds of the Gulf leaders and of the Western politicians whose countries depended on the Gulf’s oil.

The volatility of the region was underlined by the Iran–Iraq War, which broke out in 1980, as well as the Arab-Israeli conflict. With the strategic giants of the Gulf – Iran and Iraq – busy fighting each other, the six oil-rich Gulf monarchies (Saudi Arabia, Kuwait, the UAE, Bahrain, Qatar and Oman) seized the chance to set up their own organisation – the Arabian Gulf Co-operation Council – modelled on the lines of the European Economic Community (now the EU), and which formally came into being in 1981.

Diversification and development

Meanwhile, massive changes were taking place in the emirates themselves, each of which was pursuing its own route towards development and economic security. Abu Dhabi, the largest and wealthiest of the seven statelets, followed a cautious path towards modernity under the leadership of the canny Sheikh Zayed, its vast oil reserves freeing it from the need either to diversify or to develop its economy, given that the massive flow of petro-dollars into the city guaranteed every citizen (and their descendants) a very comfortable income for life.

Dubai found itself in a rather different position, given that its oil reserves were only ever a fraction of Abu Dhabi’s. Initial revenues had already been invested by the far-sighted Sheikh Rashid into a string of infrastructure projects, including two huge new ports, an airport and the iconic World Trade Centre, laying down the economic basis for the city’s subsequent dramatic rise.

Money was even tighter (and oil revenues smaller) in neighbouring Sharjah, which was also plagued with political instability. The emirate’s entire banking system collapsed with debts of over US$500 million in 1989 and had to be bailed out by a Saudi consortium. Saudi influence remains strong in Sharjah to this day, accounting for the local adoption of a particularly conservative version of traditional Shariah law. Meanwhile, the relatively small, unpopulated and oil-less emirates of Ajman, Umm Al Qaiwain, Ras al Khaimah (RAK) and Fujairah struggled along as best they could, helped out with grants from the central government in Abu Dhabi, while the creation of large new industrial works in RAK and a vast new oil-exporting port in Fujairah also provided further economic stimulus – as did the new Habshan–Fujairah oil pipeline, opened in 2012.

The now world-famous Burj Khalifa under construction in 2008. Photo: Aheilner/Wikimedia Commons

Nineties and noughties

It was during the 1990s that the UAE really began to capture the world’s attention, mainly thanks to a spectacular new series of developments in Dubai instigated by Sheikh Mohammed, the third son of Sheikh Rashid and the driving force behind the emirate’s development from the mid-1980s onwards. It was Sheikh Mohammed who commissioned the famous Burj al Arab hotel (1999) and founded Emirates Airlines, which between them have probably done more to establish the UAE in the world’s consciousness than any other projects before or since. A further flurry of record-breaking megadevelopments were swiftly inaugurated, including the Palm Jumeirah (the world’s largest artificial island), Burj Khalifa (the world’s tallest building) and the vast Dubailand, intended to become the planet’s largest theme park and leisure attraction. Following the economic crisis of 2008, work on Dubailand was stalled for several years, but it resumed in 2013 and is now expected to open by 2020.

Dubai’s basic aim in all of this was to become a leading global centre for tourism, transport and business – aiming to dominate the region’s economy. Not to be outdone, Abu Dhabi soon hit back with its own string of eye-catching developments, including the Emirates Palace Hotel, Sheikh Zayed Grand Mosque and huge new Saadiyat Island complex which will come complete with five outstanding museums, including Louvre Abu Dhabi (inaugurated in 2015) and Guggenheim museum (opening in 2017), aiming to promote itself as a more cultured alternative to its brash neighbour.

Then, in 2008, just as it seemed the boom would never end, the UAE (Dubai in particular) was brought crashing back down to earth as the result of the global credit crunch. The real-estate market collapsed, investment fled, and Dubai, which had previously been announcing the launch of record-breaking new developments on an almost daily basis, found itself suddenly teetering on the edge of bankruptcy.

Abu Dhabi eventually came to the rescue with a massive bail-out package, although many of the city’s mega-projects were cancelled or put on hold, and now only a few of the projects have been revived. Abu Dhabi, protected by its oil revenues, remained relatively unaffected by the crunch, and even began to climb out of Dubai’s lengthening shadow thanks to headline events including the purchase of Manchester City football club by Sheikh Mansour (a son of Sheikh Zayed) and the staging, in 2009, of the first Abu Dhabi F1 Grand Prix. The spectacular new Sheikh Zayed Grand Mosque (2007) has also drawn increasing numbers of visitors to the emirate.

Overall, the credit crunch may have signalled the end of the UAE’s rock ’n’ roll years, although reports of Dubai’s demise have been greatly exaggerated, and the city is now beginning to face the future with renewed optimism, getting ready to host the World Expo 2020. With the theme ‘Connecting Minds, Creating the Future’, the 438-hectare purpose-built expo site is set to be another jaw-dropping project. The exhibition will run well into 2021, when the UEA will celebrate its 50th jubilee. Abu Dhabi, meanwhile, continues to establish itself as a genuine rival to its more glamorous neighbour, while elsewhere in the Emirates more modest industrial and tourist development continues apace. The political union between the seven emirates continues to provide a model of relative political harmony and stability in an often dysfunctional region. The country escaped the widespread protests and uprisings of the Arab Spring in early 2011 almost entirely unscathed (and in stark contrast to nearby Bahrain), although Emirati pro-democracy activists also pressed for reforms. The authorities continue to suppress any dissenting voices – online criticism of the government was even made illegal in 2012. In recent years, the country has been condemned for human rights violations by the European Parliament, Human Rights Watch and Amnesty International. Yet, the economic progress of the country, which is just over four decades old, and which many observers thought would not last even five years, is undeniable.