This week, the United Arab Emirates awarded a $20 billion contract to South Korea’s state power company to build four 1,400 megawatt nuclear reactors by 2020.

The UAE’s will be the first Arab country with nuclear power. Its transparency and non-proliferation safeguards have been hailed as a model by Western countries, including the US, in stark contrast of Iranian efforts. Namely, it has pledged to forego nuclear enrichment.

The question remains though how other Arab states will react and, more importantly, under what conditions.

At the very least, few doubt other Middle Eastern countries, like Saudi Arabia, Egypt, and Syria, will also pursue their own nuclear power programs, but some worry an arms race –with Israel and Iran in the backdrop- will follow.

The UAE, which is forecasting huge increases in power demand, has gone to great lengths to explain why it needs nuclear power. It has also signed onto international protocols and bilateral nuclear cooperation deals filled with safeguards, namely with Washington, Paris, and the UN’s International Atomic Energy Agency.

Korea Electric Power Corp, the country’s biggest power supplies best known as Kepco, will lead a consortium that will build and fuel the reactors. It will additionally jointly operate them for at least 60 years for another some $20 billion. Construction of the first should begin as early as 2012, with its completion targeted for 2017.

Kepco’s winning bid was reportedly at least $16 billion lower than the other competitors, Reuters reported. It partnered up with Doosan Heavy Industries & Construction Co., Hyundai Engineering & Construction Co., Samsung C&T Corp. and Westinghouse Electric Co., a U.S.-based unit of Toshiba.

The other two bidders were led by Electricity de France and General Electric. The French offer, which included oil major Total, was considered a shoe-in.

The deal is historic both for South Korea and the UAE. According to Seoul, this is single biggest contract ever won by a South Korean company. This is also its first nuclear export deal, which could further the country’s chances in other tenders it’s competing in, including several in the Middle East, from Turkey and Saudi Arabia to Jordan.

But the big winner is undoubtedly the UAE. By 2020 it expects its peak electricity demand to more than double to about 40,000 MW from its current 16,700 MW. Like many countries in the Middle East, the UAE lacks enough natural gas resources, which would only be able to supply up to 25,000 MW. The UAE has also trumpeted the environmental benefits of nuclear power.

But the biggest benefit, especially for an oil-rich country like the UAE, the world’s third largest exporter, is the economics of nuclear power. For most countries, the upfront cost is a non-starter. But for the UAE, recouping will come a lot faster as it will have more oil and derivatives to export, as opposed to burning them, while potentially reducing its gas import needs.

The UAE also gains prestige in the region, especially as it continues to shed Saudi dominance. It also serves as hefty leverage against Iran’s growing clout in the region, empowering the UAE, while serving as a model for peaceful nuclear development.

But the risk of nuclear weapon diversion is unavoidable, which explains why many worry that nuclear power will eventually trigger an arms race. The UAE deal “is commercial, but the diplomatic and political background does raise proliferation challenges because you can’t separate discussion of what’s happening in the UAE and what’s going on with Iran’s nuclear program,” said Simon Henderson, director of the gulf and energy policy program and Baker Fellow in the Washington Institute for Near East Policy.

“The logic of the UAE deal is that if you forsake nuclear weapons, you can still go for nuclear power and be an acceptable part of the international community. But other countries which will be seeking nuclear power, like Saudi Arabia and Egypt, are the ones which are also potentially nuclear rivals of Iran. The fear of proliferation is that other countries will try to match what Iran develops.”

It would be virtually impossible for Saudi Arabia or Egypt, for example, to enter nuclear agreements with Western-minded countries, including South Korea and Japan, without agreeing to the same safeguards as those agreed to by the UAE. But if Iran weaponizes its nuclear program, as many suspect is its intention, Middle Eastern countries could turn to other nuclear powers like Pakistan for help, Henderson said.

The threat might not necessarily come in the guise of nuclear power either. Western government are concerned Saudi Arabia might try to base some Pakistani nuclear weapons on its soil as a deterrent from Iran, Henderson said. The other major concern is spreading nuclear expertise. The UAE will not have enough nationals to run and operate its plants and will have to turn to foreign help. “I think they’ll be a concern that some foreigners could acquire nuclear skills for civilian processes, which aren’t so far removed” from military ones, he said.

There is precedent for that happening. The father of the Pakistani nuclear weapon, Abdul Qadeer Khan, stole centrifuge blueprints from a Dutch lab where he was employed.

Several countries in the past have secretly used technology from their power generation programs to develop nuclear weapons, such as India, North Korea and Israel, and even some Western countries. France and the UK began with a peaceful nuclear energy program and then secretly developed their weapons.

Israel has been operating a reactor at Dimona since the early 1960s and the Israeli military has an unknown number of nuclear weapons. But the best examples of countries trying to obtain nuclear weapons are Iran and North Korea, which also signed onto non-proliferation agreements.

Despite the oversight, they still managed to covertly develop their enrichment activities, in the latter’s case with nuclear bombs included.

So if history is a reference, it seems unavoidable, even if not in the short term, that the Middle East will enter a nuclear weapons race. The uncertainty, of course, is how it will end.