Will geoeconomics carry Saudi-Israeli relations into the future?

Posted originally to The Cradle on 11 November 2021.

Saudi-Israeli relations presently stand in sharp contrast to the full normalization Israel achieved with the UAE via the August 2020 Abraham Accords.

While Israel and the UAE work to establish tangible foundations for their bilateral ties in business and security, the ad hoc and transitional nature of Saudi-Israeli unofficial cooperation has inevitably led the latter to regress.

As the kingdom makes foreign policy adjustments, such as sustained diplomacy with Iran which render a UAE-like embrace of Israel untenable, it is in the geoeconomics realm where Saudi-Israeli relations could potentially make a breakthrough.

The Kushner-MbS era

Saudi-Israeli relations largely revolved around Crown Prince Mohammed bin Salman’s (MbS) close personal relationship with Jared Kushner, the son-in-law of the previous US president Donald Trump. Kushner made a frequent practice of bypassing key State and Defense Department officials to nudge MbS toward dramatic regional power-plays favored by Israel yet viewed as reckless by the US foreign policy bureaucracy.

Kushner provided MbS with the appearance of a supportive White House, enabling the crown prince to launch such power-plays as the Qatar blockade, the kidnapping of Lebanon’s Prime Minister and purges of domestic rivals in the space of a few months in 2017.

These power-plays failed their objectives, which ranged from scapegoating and pressuring Hezbollah and Iran to establishing MbS as the Gulf Cooperation Council’s (GCC) dominant leader in exchange for his deference to Kushner and Tel Aviv.

Moreover, Kushner’s role as an ‘insider’ ally for Riyadh in Washington, as MbS’ payoff for these risky moves, seemed limited to encouraging the prince’s regional brinkmanship without helping generate any substantive buy-in for it in the US.

Consequently, the arrangement with Kushner proved unsustainable, and MbS needed an off-ramp from it. Accordingly, Israeli-American billionaire and pro-Israel lobbyist Haim Saban reported last October that MbS told him about his fears of backlash from rivals such as Iran and even an uprising from the Saudi populace if he signed the Abraham Accords. Saban also noted that the Abraham Accords were another one of Kushner’s own initiatives; evidently, the Kushner-MbS partnership was on its way out.

Still interested

Present Saudi foreign policy prioritizes de-escalating the tensions at the kingdom’s doorstep, featuring months-long, Iraqi-mediated talks with Iran and efforts to achieve as graceful an exit from its military quagmire in Yemen as possible. It is thus not surprising that MbS did not normalize relations with Israel – a surefire way of sending tensions with Iran and its Houthi allies in Yemen skyward once more.

However, MbS’ interest in furthering relations with Israel remains. Indeed, Bahrain’s accession to the Abraham Accords – Saudi Arabia’s much smaller neighbor and client state – ensured Riyadh was not completely out of touch with the new format for Arab-Israeli normalization.

The key to once again touching base with Israeli interests, but in a steadier, gradual and less provocative manner, may lie in MbS’ Vision 2030 mega-project for Saudi Arabia’s foreign investment-driven transformation to a more advanced, less oil-reliant economy.

Vision 2030 and Israel

There is a degree of synergy between Vision 2030 and Israel’s own long-term geoeconomic plans.

Among these plans is the Israeli-GCC Gulf-Mediterranean Sea trade and transport corridor. As per a March 2021 report by Israeli business daily Globes, the corridor as a GCC-Jordan-Israel railway network was ‘officially moving ahead.’

Alongside other objectives, this corridor is tasked with providing tangible foundations to Israel’s relations with the GCC as a collective. If developed, the corridor can also prove to be a more foolproof vector for Israel’s diplomatic normalization with the rest of the Gulf Arab countries than the supposed ‘shared struggle’ against Iran that Tel Aviv touts.

A key theme in Vision 2030 and its more regional facets is leveraging Saudi Arabia’s geographical and demographic size advantage over its Gulf Arab peers to make the kingdom the Persian Gulf region’s dominant economic hub.

An example of this is the Saudi decree that international companies must shift their regional headquarters to Riyadh by 2024 in order to continue operating in the Saudi market; this challenges the UAE, since Dubai has long stood as the choice location for multinational corporate offices for the West Asian market.

The sheer size of Saudi Arabia suggests it would host the greatest length of the transnational railway network needed to connect Israel and the GCC (via Jordan) and make the Israeli-GCC corridor a reality. This would mean greater transit earnings for the kingdom relative to its neighbors.

Additionally, a longer railway network would mean more scope for economic zones, which are typically positioned near major transport infrastructure. Riyadh views these zones as key to one-upping the UAE, having recently raised tariffs on its own imports of goods from UAE-based economic zones in order to compel their producers to shift to Saudi economic zones to preserve their profit margins in the region’s largest market.

Moreover, this potential geoeconomic convergence with Israel derives some viability from Saudi Arabia’s aforementioned diplomatic engagement with Iran.

Provided Saudi Arabia continues holding off on establishing direct relations with Israel, it can frame the alignment of its economic strategy with Israel’s as a coincidental outcome of Vision 2030 as opposed to a calculated tilt toward Tel Aviv.

Since Iran expects serious dividends from the talks with Saudi Arabia, it may accept this interpretation for the time being and put off challenging Riyadh’s placement in the Israeli-GCC corridor so as not to jeopardize their talks.

As spiking tensions with Tehran was the main hazard MbS faced from his prior cooperation with Israel via Kushner, this will lower the risks for the prince as he seeks to plug Saudi Arabia into the incipient Israeli-GCC corridor.

Safer yet still precarious

If viewed as a self-contained affair, the geoeconomic pathway to a more substantive relationship with Israel seems a sound bet for Saudi Arabia. In reality, however, even the most adroit diplomacy cannot spare it from becoming collateral damage to future escalations between Saudi Arabia and Iran, Iran and Israel, or all three of them.

The tendency of the Iranian-Israeli conflict to expand in geographical scope means that Saudi Arabia still stands at risk of being caught in its crossfire should it grow to encompass the Gulf as a key front after Palestine, Syria, Lebanon and Iraq.

If Iran feels that Israel’s present array of partnerships, formal and informal, in the GCC are coalescing into a lasting Israeli foothold in the Gulf region, it will likely sacrifice the incipient détente with Saudi Arabia in order to exact a holistic pressure campaign against Israel-linked Gulf policies and projects – chief among them the Israeli-GCC corridor of which Riyadh is a vital part.

It is also far from certain whether MbS can himself avoid scuttling the détente with Iran and thus undoing the regional stability he needs in order to carry his geoeconomic agenda forward. Saudi Arabia’s recent severance of diplomatic and trade ties with Lebanon, citing a Lebanese official’s condemnation of its war in Yemen, is a case in point.

As it did in 2017, Riyadh has assailed Hezbollah as the cause of the crisis. Since Hezbollah spearheads Iran’s regional strategy to block Israel’s expansion attempts along its frontiers, the latest Saudi gambit in Lebanon – unless dialed back significantly – may end up torpedoing the talks with Tehran.

Ultimately, Israel will continue to be a particularly risky, high-stakes foreign policy file for Saudi Arabia, regardless of whether their relations are oriented around long-term geoeconomics or transactional, immediate impact-driven strategic ventures.

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