Exclusive: The secret drone deal that created an Israel-UAE rift

A secret deal for the sale of drones from an Israeli company to the United Arab Emirates (UAE) that failed in 2009 caused a deep rift in relations between Israel and the Gulf state. Former U.S. and Israeli officials tell me the crisis was only resolved after two years of efforts by the Obama administration and Israel's Mossad intelligence service.

Why it matters: Israel and the UAE had formed a secret alliance in the fight against Iran's nuclear program and activity across the Middle East, which was damaged when the deal failed.

The backdrop: After Netanyahu assumed office in 2009, he was briefed by Mossad chief Meir Dagan about the proposed deal for the sale of sophisticated drones by a private Israeli company, former U.S. and Israeli officials told me.

• According to one account given by former Israeli and U.S. officials, Netanyahu saw the deal as an opportunity to advance future military options against Iran, and gave it the go ahead.
• According to another account, the private Israeli company signed a deal with the UAE government and only then notified the Israeli government — pushing Netanyahu into a corner.

The deal moved forward and the UAE even paid a down payment of tens of millions of dollars. But then trouble started.

• The Israeli ministry of defense is responsible for giving licenses for such deals. It was notified at a late stage and refused to approve the deal over concerns about giving sensitive technology to the UAE and because of U.S. reservations about the deal.
• When the deal was cancelled the UAE government, especially its de facto ruler Mohammed Bin Zayed (MBZ), was furious.
• Dan Shapiro, who was the Middle East director at the National Security Council at the time, told me MBZ felt betrayed by the Israelis.

Former U.S. and Israeli officials told me the failed deal, combined with the assassination of a Hamas operative in Dubai, created a deep crisis between Israel and the UAE which lasted from 2010 to 2012.

• Shapiro told me the National Security Council staff and the U.S. intelligence community were talking to both parties in order to understand what each side wanted or was willing to do to end the crisis. Those talks lasted around two years.

The deal that ended the crisis contained several elements, according to former U.S. officials:

• Israel did not take responsibility for the assassination but said it would not pursue assassinations on UAE soil in the future.
• The private company paid the UAE back some of the money and agreed to let the kingdom use the rest to buy other military hardware.
• The Israeli government agreed to boost security and intelligence dialogue with the UAE, and both sides committed to renew their joined efforts to isolate Iran and extremist terror groups.