Exclusive-UAE seeks bilateral EU trade talks with GCC negotiations at impasse, sources say

ABU DHABI (Reuters) - The United Arab Emirates is quietly urging the European Union to start talks on a trade pact separate from an Arab bloc, five people familiar with the matter said, as the Gulf state seeks closer political and economic ties with Europe.

They told Reuters that Abu Dhabi is frustrated at long-stalled trade negotiations between the EU and the Gulf Cooperation Council (GCC), an Arab bloc that includes the UAE and Saudi Arabia.

The UAE, an influential, oil-rich Middle East state, has long advocated deeper EU involvement in the Gulf region. It is the Arab world's second largest economy after Saudi Arabia, a major Middle East trade partner for many other nations, and its sovereign wealth funds rank among the world's most active.

A UAE official denied Abu Dhabi had proposed bilateral talks with the EU, calling this "baseless and unfounded". Such a move might strain relations with the UAE's GCC partners.

Three of the sources said the UAE had not yet submitted a formal request to the EU and it was unclear whether the GCC was aware Abu Dhabi had sought to initiate a bilateral process.

Officially, the UAE continued to support the GCC-EU process, they said, although it was privately pushing for its own talks.

However, the sources said UAE officials regularly raised the idea of a bilateral trade process in meetings with counterparts from the EU and its 27 member states, including in recent weeks.

Emirati officials had brought up the matter in almost every meeting across many levels, said the sources, who asked for anonymity to discuss the matter as the details are not public.

The EU prefers a deal with the GCC, which includes Qatar, Kuwait, Oman and Bahrain, but some EU states have voiced support for a UAE deal given the lack of GCC progress, the sources said.

Failing any significant momentum by the summer, the EU could consider a bilateral process with the UAE, they said.

The UAE official said the GCC and EU had recently met to agree on a timeline for technical discussions.

"The UAE supports open, rules-based trade, and will always prioritise working through the GCC to support our collective regional and international trade ambitions," the official said.

The GCC, headquartered in Saudi Arabia's capital Riyadh, is a longstanding alliance that seeks to encourage political and economic cooperation between the six Gulf states.

The GCC Secretariat did not respond to emailed requests for comment. A European Commission spokesperson said expert-level discussions with the GCC were continuing and that the EU had also held talks with the UAE to enhance trade and investment relations, without saying whether the sides had discussed a bilateral process.

The EU would require a new mandate from its member states to start bilateral talks with the UAE, a process the sources said could take several months. The UAE does not want to engage in simultaneous bilateral and bloc-to-bloc negotiations, they said, meaning that the EU negotiates either with the UAE or GCC.

SLOW BURN

The EU and energy-rich GCC started trade talks in 1990 that, if reached, would give companies in the European bloc better access to what is today the EU's sixth biggest export market. However, the talks were formally suspended in 2008.

Saudi Arabia, the world's largest oil exporter and the Arab world's biggest economy, is undergoing an ambitious economic transformation that has created huge business opportunities.

A broader deal with the GCC could further open EU member states to investments from Gulf sovereign wealth funds, major cross-sector investors who take a decades-long outlook.

But the GCC has signed very few trade deals. It finalised a pact with South Korea last year, 16 years after talks started, and entered into negotiations with the Britain in 2022.

The UAE has also urged London to instead engage in a bilateral process, two other sources said, declining to be identified.

The UAE has signed several bilateral trade agreements since 2022, including with India and Indonesia, and is in talks with other countries in Africa, Latin America, Asia and elsewhere.

Those deals, known as comprehensive economic partnership agreements, often covered investment, services, and other areas, and, in the case of India, were finalised within months.

But EU negotiations with the UAE are likely to take several years and Brussels would want human and labour rights provisions in any final agreement, the five sources said.

(Reporting by Alexander Cornwell, additional reporting by William James in London and Philip Blenkinsop in Brussels; editing by Mark Heinrich)

By Alexander Cornwell