The Bahraini Economy Might Benefit From Trump’s Tariffs
Bahrain’s free trade agreement with the United States might give Manama a golden opportunity to attract foreign capital and produce a diverse range of merchandise exports.
Trump’s unrealized quest to craft a major international agreement presents significant potential opportunities for Riyadh.
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DonateThe reelection of Donald J. Trump as U.S. president offers intriguing possibilities for U.S.-Saudi relations in his coming second term. While Trump describes himself as a dealmaker, he struck relatively few during his first term as president, most significant of which were the four Abraham Accords with the United Arab Emirates, Bahrain, Morocco, and Sudan. But even in that case, his personal role in securing the agreement appears to have been limited. In fact, he gained a reputation for withdrawing from deals made by his immediate predecessor, President Barack Obama, especially the Trans-Pacific Partnership and the Joint Comprehensive Plan of Action nuclear deal with Iran. And while he tried to secure agreements with North Korea, Israel and the Palestinians, Iran, and others, no concrete deals emerged. This unrealized quest for a significant international agreement or “deal” – and even unrealized dreams of securing a Nobel Peace Prize – is likely to be a major aspect of Trump’s foreign policy, and that presents significant potential opportunities for Riyadh.
The same reasons Saudi Arabia so warmly welcomed Trump’s election in 2016 and became the site of his first international trip in 2017 mostly still apply. Trump will do his best to sell advanced weapons systems and other U.S. technologies to Saudi Arabia, and it’s hard to imagine him acquiescing to any congressional holds or restraints. He’s also likely to encourage mutual investment projects and, especially, Saudi investment in the United States. He has a deep history of friendship with Saudi Crown Prince and Prime Minister Mohammed bin Salman. The second Trump term offers Mohammed bin Salman the possibility of a warm welcome back to Washington. With Trump in the White House, the Saudi crown prince can work steadily to complete his slow but steady rehabilitation in the United States.
The ultimate key to that rehabilitation throughout U.S. society could come from normalizing relations with Israel. And here’s where the most enticing possibilities for Riyadh may emerge. Trump will face three potential agreements that he could cast as groundbreaking achievements in the Middle East. First, he could try, again, to propose some formula for Israeli-Palestinian progress, if not a final status arrangement. But he sides so strongly with Israel and, especially, those in favor of annexation of Palestinian territory as outlined in his January 2020 “Peace to Prosperity” formula, that success in negotiating between these parties is doubtful. On this front, a new Israel-imposed reality, possibly involving significant further de facto annexation in the occupied West Bank, is more likely than a deal negotiated with Palestinians.
Alternatively, he may be tempted to respond to Iran’s ongoing overtures for new talks with Washington on nuclear issues, hoping to add missiles and Iran’s Arab militia “axis of resistance” network into the mix this time (those issues having been kept off the table in Tehran’s negotiations with Obama in 2014-16). But there, too, he faces significant obstacles because Tehran would likely seek to keep its missile program entirely off the table – noting that unilateral missile concessions are exceptionally rare in international relations. Tehran would probably also drive a hard bargain over its militia allies, even with Hezbollah reeling from highly effective Israeli attacks in recent months. The prominence of Iran hawks in the U.S. administration is also likely to skew the administration’s approach heavily toward a resumption of maximum pressure, with insufficient attention to a possible deal that could emerge from it. At a bare minimum, the second Trump administration will have to reach a consensus over the fundamental purpose of sanctions and other means of pressure on Iran that was never achieved during his first term: Are they intended to soften Iran up for a better deal from the U.S. perspective, or are they intended to help create conditions for regime change in Tehran? Without a consensus on policy goals, success is inherently impossible because there will be no coherent metric to judge success or failure, and policies are therefore almost bound to become incoherent.
Instead, Trump may see a new agreement with Saudi Arabia as the most achievable, and potentially meaningful, of his three dealmaking opportunities in the Middle East. He inherits a remarkably advanced set of negotiations crafted by the administration of President Joseph R. Biden Jr., mainly in 2023 before the Hamas-led October 7 attacks on southern Israel. The Biden administration sought to develop a game-changing triangular agreement with Saudi Arabia and Israel. The bilateral Saudi component was the simplest and, by October 7, 2023, the Biden team had almost finalized the main aspects of this possible arrangement. Essentially, the United States would provide Saudi Arabia with a new mutual defense agreement modeled after those crafted with Japan and South Korea in the early 1950s plus an agreement for U.S. oversight of Saudi nuclear energy production. The sticking point for the deal that was never overcome was the parallel bilateral U.S.-Israeli negotiations for a “Significant Palestinian Component” accompanying Saudi normalization with Israel.
Before the Hamas-led attack on Israel, the Significant Palestinian Component needed for normalization was relatively limited. Saudi Arabia was reportedly asking for greater power for the Palestinian Authority in the occupied West Bank, perhaps consisting of an expansion of either Area A, which is supposedly ruled entirely by the Palestinian Authority, or Area B, in which the Palestinian Authority has nominal civic control, but Israel retains full security authority. There would also probably have been a demand for some sort of Israeli diplomatic reengagement with the Palestine Liberation Organization. But the main feature was to be a huge influx of Saudi financial support for the Palestinian Authority in Ramallah. The potential for a sudden and significant influx of new cash, as well as limited but identifiable diplomatic and political gains for the Palestinians in the West Bank, was certainly among the factors contributing to Hamas’ decision to attack Israel on October 7, hoping to block this set of limited but meaningful advantages to its secular nationalist rivals in Fatah, which controls both the Palestinian Authority and the Palestine Liberation Organization.
For Saudi Arabia, normalization with Israel functions like a commodity whose price can fluctuate according to relative costs. The cost for Riyadh will be calculated in political, diplomatic, and strategic risks accrued. After the Gaza war erupted following the October 7 attack, Saudi Arabia suspended all negotiations with Washington, and indirectly Israel, on normalization and the Significant Palestinian Component. When Riyadh began to reopen the door to these talks in January, Saudi Arabia had, naturally, reevaluated the risk it would be incurring in the context of Israel’s war of vengeance against Gaza and its Palestinian population. Saudi Arabia is a huge country with a large population and a complex and potentially delicate domestic political scene. The normalization of ties with Israel might open the Saudi government to criticism from a wide range of constituencies in the kingdom. Moreover, Saudi Arabia has regional Arab and global Muslim leadership roles that normalization with Israel could undermine. Finally, for Riyadh’s greatest enemies, normalization with Israel is certain to be used as a cudgel to attack the kingdom and its government and policies at every opportune moment.
Needing to reflect those risks in its normalization asking price, Riyadh was once again talking about the need to establish a Palestinian state along the 1967 lines with its capital in East Jerusalem. It was a return, in effect, to the original conceptualization of the 2002 Saudi-authored Arab Peace Initiative, which made normalization contingent on moving to end the occupation that began in 1967.
The problem is that the government of Israeli Prime Minister Benjamin Netanyahu never showed any inclination to accommodate even the far more limited, pre-October 7 Significant Palestinian Component consisting of modest political and diplomatic concessions from Israel along with significant Saudi support for the Palestinian Authority. After October 7, most Israelis were more opposed to Palestinian statehood than they had been at any time since before 1993. The prospect of Israel agreeing to even a step as simple as recognizing that right to a state seems very difficult to imagine, given those shifts in Israeli opinion (and the rightward trajectory of recent Israeli governments), but it is equally difficult to imagine Saudi Arabia normalizing with Israel absent such a recognition and the Israeli undertaking to enter into a process designed to eventually create such a Palestinian state, given the cost-benefit analysis that currently applies in Riyadh.
How might Trump square the circle of Saudi recognition of Israel in the context of Israel’s near-unanimous rejection of the prospect of Palestinian statehood? With his deep ties to the Israeli right, might Trump counterintuitively be the man to knock heads in both Israel and Saudi Arabia to get both to shift enough to bring them together? It’s not inconceivable. Trump might be able to reassure Israel that recognizing the right of Palestinians to a state and getting into an open-ended diplomatic process designed to create one does not, in fact, necessarily contradict long-term Israeli ambitions in the occupied Palestinian territories. Israel has engaged in such obfuscation in the past. During the Oslo process in the 1990s, which the world believed was designed to culminate in a two-state solution, Israel nearly tripled the number of settlers in the occupied territories while at the same time carefully avoiding any formal recognition of a Palestinian right to a state.
Even Trump’s own “Peace to Prosperity” proposal released in January 2020 purported to be a model for two states. The details were horrifying to Palestinians, because they involved Israel annexing an additional 30% of the remaining occupied West Bank, including the Jordan Valley, which would leave any Palestinian entity entirely surrounded by a new greater Israel. However, the proposal did envisage the remaining Palestinian entity as a kind of “state,” and Trump might be able to remind Israelis that he and they share the vision of some sort of de minimis Palestinian entity that both describe as a “state.” Palestinians might not see it that way, but the objective would be for Israel to recognize that such a state is necessary and enter into a process to create one, not commit to its borders or any fundamental characteristics of sovereignty a normal state would exercise. Creative fudging and constructive ambiguity are constant features of diplomacy on such fraught topics.
It’s significant that the Trump peace plan’s nominal author, Trump’s son-in-law Jared Kushner, has sought to recast its provisions as merely a “starting point” for talks, specifically meaning that the scope of the Israeli annexation it envisaged might be substantially decreased in negotiations under Trump. Building on that crucial explanation, no matter how discouraged, dissatisfied, and anxious they may find themselves, Palestinians might want to seriously consider trying to build upon any new process set in motion under Trump, particularly given that no political horizon for their independence in any form has been available since Obama’s first term. There is arguably little left to lose by at least testing the waters and exploring whether Trump could be more open to their perspectives if he senses the potential for a truly historic breakthrough.
There is also likely to be space for Trump to convince Saudi Arabia to modify its position to accommodate such a deal. This would hinge on Israel ending the Gaza war, another key part of Saudi Arabia’s demands. Trump has already said that Israel should “wrap up” the post-October 7 wars in Gaza and Lebanon. If he were able to secure an Israeli declaration of an end to the war and movement toward the establishment of a “day after” scenario in Gaza, and possibly an end to the fighting in Lebanon (although this is less necessary for such an agreement), he might be able to persuade Riyadh to lower the price for normalization to the pre-October 7 level, or at least much closer to the contours of the earlier Significant Palestinian Component. Saudi movement would likely hinge on Israeli willingness to accept more forthcoming language – however artfully worded – on a pathway to Palestinian statehood.
Saudi Arabia will certainly continue to pursue a new bilateral mutual defense agreement with the United States. But a new defense pact must be ratified by the Senate to be meaningful, and there is little hope of that without Saudi normalization with Israel. The conundrum facing Biden will also be inherited by Trump. A bilateral agreement would suit Saudi interests perfectly. It would be ideal for Riyadh to get the United States to commit to a much stronger defense pact without recognizing Israel. But from a U.S. perspective, the whole point is to bring its two most important Middle Eastern partners – Israel and Saudi Arabia – together in an open, albeit loose, alliance designed to thwart Iran in the short run and China in the long run in the strategically crucial region and maritime chokepoints around the Arabian Peninsula. Washington will be hoping that the United States, Israel, and Saudi Arabia will be the three pillars upon which to form a loose consortium involving states such as the UAE, Bahrain, Kuwait, Egypt, Jordan, and even Greece and Cyprus to create a U.S.-led arc of security around the Arabian Peninsula. Achieving that through diplomatic normalization between Israel and Saudi Arabia is, therefore, a major U.S. strategic goal. If Trump could achieve this, he could finally emerge as the international dealmaker he aspires to be.
is a senior resident scholar at the Arab Gulf States Institute in Washington.
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