What's at stake in normalization with Saudi Arabia?

F-35 Adir credit: Israel Air Force
F-35 Adir credit: Israel Air Force

Any deal will have terms hard for Israel to swallow, but economic interests might prevail in the end.

For years, Israel and the US have been dreaming of an agreement between Israel and Saudi Arabia. Three years ago, Saudi Arabia participated in the negotiations on the Abraham Accords, but then withdrew. Israel eventually signed the accords with the UAE and Bahrain.

In the past year, the US administration has made feverish efforts to forge relations between Israel and Saudi Arabia, but the latter has played very hard to get, and the matter has remained a question that the rulers of the respective countries prefer to avoid. That is, until US President Joe Biden’s remark the other week to contributors to his re-election campaign.

"There’s a rapprochement maybe under way," Biden said, but gave no further details. Meanwhile, "The New York Times" published details of the deal being put together, and US media were inundated with reports attempting to follow the diplomatic contacts.

According to these reports, Saudi Arabia is linking normalization with Israel to substantial demands from the US. The first is a civilian nuclear facility capable of enriching uranium. The Saudis also want a defense pact with the US, because of their fears of Iran, and the sale to it of F-35 combat aircraft. As far as Israel is concerned, they are demanding progress on the Palestinian issue, involving a halt to construction in Judea and Samaria for an extended period, and even a commitment to refrain from annexation of territory.

What lies behind the Saudis’ demands, and why is the White House so keen to sign an agreement?

Uranium enrichment

A key element of the possible deal is the Saudi demand for uranium enrichment for civilian purposes, such as electricity production from nuclear energy. Why would an oil power like Saudi Arabia need energy solutions?

Saudi Arabia’s Crown Prince Mohammed bin Salman has a vision for 2030, part of which is something that Saudi Arabia is finding it especially difficult to achieve: targets for power production from renewable sources. In fact, Saudi Arabia is one of the most backward countries in the region when it comes to producing power from solar energy, the foremost renewable energy source in the Middle East.

Although Israel too is a long way from meeting its targets for power production from renewable energy sources, Saudi Arabia regards it with envy. While Saudi Arabia has just 1 gigawatt installed solar capacity, putting it at 45th in the world, Israel has more than five times that, and is in 28th place.

"All the oil producing countries, including Saudi Arabia, have to gear up for the new world," says Dr. Moshe Tshuva, head of the Department of Mechanical Engineering at the Afeka Tel Aviv Academic College of Engineering. "These countries are looking to renewable energy, and looking for alternatives, one of which is nuclear. The fourth generation nuclear systems are much safer, and the environmental pollution is in any case smaller."

Normalization with Israel that would open the way to cooperation in solar energy and also in power production from nuclear energy - a solution also being looked at in the West - could help propel Saudi Arabia towards the goals it has set itself.

It is, however, hard to ignore the dangers of this demand. Can Saudi Arabia be relied upon to use nuclear know-how for civilian purposes only? Nuclear reactors for power production use 3-5% enriched uranium, but the same know-how, together with considerable improvements in systems, could be used to reach enrichment levels suitable for a nuclear weapon (90%). If Saudi Arabia develops these capacities, it will damage the regional superiority that, according to foreign reports, Israel possesses in nuclear weaponry.

The US perspective: Control of the global oil market

The energy aspect of normalization between Israel and Saudi Arabia does not end with the Saudis. The US, the world’s biggest oil producer, has recently seen its efforts to curb rising oil prices blocked. Saudi Arabia and Russia, with their partners in the OPEC+ oil cartel, cut production in an attempt to boost prices, an attempt that succeeded. The price of Brent crude rose 10% in a month.

The US would presumably be happy to raise its production rate and expand global supply, but it cannot do so because it has reached the limit of its capacity. In the past year, the US has found it difficult to surpass its regular production rate of about twelve million barrels a day. The US therefore needs to coopt Saudi Arabia to any attempt to cut the price of oil.

Mohammed bin Salman has good reasons to come to the aid of the US. The reduction in oil production brought Saudi Arabia’s economic growth rate to an annualized 1.1% in the second quarter of this year, which compares with 3.8% in the corresponding period of 2022, and 11% two years ago. The country has tumbled from first place for economic growth in the G20 forum to last. An agreement with Israel would actually only be an excuse for the Saudi crown prince to withdraw from the recent oil production manipulations.

"Bin Salman’s aim is to reduce the use of oil, and increase his export capacity," says Dr. Yoel Gozansky of the Israel Institute of National Security Studies. "As far as he is concerned, oil is a diplomatic tool. Bin Salman thinks that the way to normalization with the US, after a period of cold relations, lies through Israel."

Yaki Dayan, an expert on the US who served as Israeli consul general in Los Angeles, adds that the US energy lobby, which wields considerable power in Washington, is also influencing events. "These companies don’t like the rise in prices," Dayan says, "Over time, such a normalization agreement could lead those US companies to invest in the region, and perhaps even to drilling for oil. As soon as this connects to the strategic aspect, a perfect storm is created."

No less important in US eyes is a further interest: to distance Saudi Arabia from China. In recent years, Saudi Arabia and China have promoted a series of cooperative initiatives, mainly in infrastructure. China, like many countries, realized long ago that Saudi Arabia is not just a powerful economic force, but one that will sooner or later join the G7 countries. It is already a leader among the G20 countries, in fourth place for GDP per capita according to the World Bank.

Rail-link potential

Among the mix of economic interests there is one that could have far reaching effects on the region, namely a rail link between Israel and Saudi Arabia and the other states in the Arabian peninsula. If normalization happens, Saudi Arabia could become very interested in the railway to Eilat that Minister of Transport Miri Regev is pushing for, or in the initiative of one of her predecessors in the post, Israel Katz, for connecting the Gulf states to Haifa Port by rail. Saudi Arabia hopes that the railways will help them realize Bin Salman’s city of the future, Neom.

According to the Saudi crown prince’s declarations, the city will be totally based on power from renewable sources. It will cover 26.5 square kilometers, and the investment in its construction is estimated at $500 billion. To reach this ambitious goal, the Saudis need to bring in the private sector. "The hope of the Saudis is to open up the kingdom to investment, and the city of Neom represents part of that," explains Gozansky.

One thing that could bring the private sector to Saudi Arabia as a whole is a railway infrastructure connecting it and its neighbors to Israel. Such a transport corridor will not affect transportation of oil, but it could certainly be an alternative to transporting goods via the Suez Canal. Instead of goods going by sea from Turkey via the Suez Canal and the Red Sea to Bab-el-Mandeb and the Gulf of Aden, they could be transported from Israeli ports by train.

A similar vision has already been realized by the route between Moscow and Mumbai. Land haulage will, in stages, shorten the time it takes to move goods between Russia and India from 30-45 days to just ten days. Israel and Saudi Arabia could copy this model, and present competition to Egypt’s Suez Canal.

The obstacles: The king’s conservatism, and the Palestinian issue

Despite the benefits to all concerned in the normalization agreement being formulated, there are obstacles to it, particularly in Saudi Arabia and Israel.

Although Mohammed bin Salman runs Saudi Arabia in practice, his 87-year old father King Salman is still alive. The king is considered a conservative, and his anti-Israel stance is well known. Without a solution to the Palestinian problem, it is doubtful whether King Salman will support a deal. In addition, it was Saudi Arabia that led the Arab peace initiative of 2002 that makes normalization of ties between with Israel and the Arab countries conditional on a peace agreement between Israel and the Palestinians.

There are many reservations on the Israeli side too. The first of them, perhaps, concerns the Saudi demand to be supplied with F-35 stealth combat aircraft (the "Adir" as it is called in Israel).

A month ago, it was reported that the Israeli Ministry of Defense would buy 25 F-35s from the US to join the 50 already in the Israel Air Force’s fleet, in a deal estimated at $3 billion, to be paid for out of US military aid. Meanwhile, Saudi Arabia does not have a single F-35, and has to make do with F-15 aircraft, considered relatively obsolete.

On this question, Israel finds itself between hammer and anvil. If it imposes a veto on an F-35 deal, it is liable to blow to pieces what appears to be a golden opportunity for normalization with the strongest of the Arab countries. If it agrees to a deal, it could harm its regional military superiority. Either way, the Israeli government will probably be subjected to harsh public criticism, and will run considerable risks.

But perhaps the business sector will have the last word. For years, Israel and Saudi Arabia have maintained a kind of silent normalization, and recently it has gained momentum. Just last year, "Globes" revealed that dozens of Israeli businesspeople traveled to Saudi Arabia, with huge deals at stake, while Saudi Arabia itself has started investing in Israeli companies.

Published by Globes, Israel business news - en.globes.co.il - on August 6, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

F-35 Adir credit: Israel Air Force
F-35 Adir credit: Israel Air Force
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