The underlying economic factors driving debt issuances, issues related to how raised funds are redeployed within local economies, and the implications of looming debt maturities help to paint a comprehensive picture of the state of Gulf Arab economies.
Whatever domestic calculations prompted President Donald J. Trump to announce on December 6 that the United States recognizes Jerusalem as the capital of Israel and will move its embassy there from Tel Aviv, the international consequences are likely to be far-reaching and almost entirely negative. This announcement puts Palestinian leaders, notably Palestinian Authority President Mahmoud Abbas, in an utterly impossible situation. It will also make it extremely difficult for Gulf Arab countries, specifically Saudi Arabia and the United Arab Emirates, to explore the possibility of a greater dialogue with Israel based on shared concerns about the growth of Iranian power in the Middle East.
Abbas will now find dealing constructively with Washington and engaging in peace talks with Israel virtually impossible from a domestic political perspective – unless there is clarification from the White House that the United States is recognizing West Jerusalem, and not occupied East Jerusalem, as Israel’s capital. After all, the future of Jerusalem has been a bedrock final status issue since the Oslo agreements and the entire peace process framework were developed in 1993. Even if Trump does clarify that he was only referring to West Jerusalem – which seems unlikely since that would have been easy to stipulate in his December 6 statement – he would still be prejudicing what has been heretofore universally recognized as a core final status issue.
However, by creating the impression that the United States now recognizes all of Jerusalem, including occupied East Jerusalem, as Israel’s capital, the betrayal of not only Palestinian expectations but also U.S. and Israeli treaty obligations toward the Palestinians, as well as previous U.S. policies and U.N. Security Council resolutions, is almost absolute.
Because of the occupation, Palestinians have no choice but to deal with the Israelis on day-to-day management of their unavoidable relationship. They do not, however, need to keep negotiating with them when the terms are being unilaterally and radically altered by the very guarantor of the process, the United States. That is not true of the Gulf Arab countries. Openness to a new dialogue with Israel based on common threat perceptions regarding Iranian hegemony is an option rather than requirement for them. No doubt there is a clear strategic imperative to explore the potential for such an opening and new relations. But there are also massive political obstacles to doing so, and those have just been greatly exacerbated.
Since the earliest days of the Trump administration, it was widely reported that the White House had developed a keen interest in exploring an “outside-in” approach to Israeli-Palestinian peace, in which fostering greater dialogue between Israel and Arab states, especially in the Gulf, would form a new basis for progress between Israelis and Palestinians. The Israeli-Palestinian file was entrusted to Trump’s senior advisor and son-in-law, Jared Kushner, which is widely seen as an indication of the seriousness with which the administration regarded the issue. Kushner has also been a key envoy to Riyadh, and reportedly has developed a strong rapport with Saudi Crown Prince Mohammed bin Salman, suggesting a possible overlap between strengthening Saudi-U.S. relations and the potential for a new Gulf opening to Israel.
Over the past year, few international issues have been subject to more speculation, rumors, and unfounded assumptions than prospects for an opening between Israel and Gulf Arab countries. This is understandable because such a development, should it ever occur, would be truly momentous, politically transformative, and strategically significant. However, despite much conjecture and gossip, there is no clear evidence that a genuinely new and significant relationship between Israel and Gulf Arab countries has actually developed.
To be sure, shared perceptions of the Iranian threat – particularly after the fall of Aleppo and the recent expansion of Iranian control of key areas of the Iraqi-Syrian border following the Kurdish independence referendum and the collapse of the Islamic State in Iraq and the Levant – provide a rational basis for a potential strategic opening. Yet the two sides have drastically contrasting narratives about how much has been accomplished. Israeli leaders, including Prime Minister Benjamin Netanyahu, frequently claim that there is a radical transformation in Arab attitudes toward Israel and a new strategic partnership against Iran is virtually realized. This appears to be deeply hyperbolic, and may be an effort to get the public on both sides used to the idea and foster the impression of a fait accompli in order to create what amounts to a self-fulfilling prophecy.
However, a recent interview by the Israeli military chief of staff, Lt. Gen. Gadi Eisenkot, with the London-based Saudi publication Elaph, may have more clearly indicated how little has been achieved thus far. True, interviewing a serving Israel Defense Forces chief was a first for a Saudi publication, and his assessment of the Iranian threat would have resonated strongly in much of the Gulf. However, his offer to share intelligence with “moderate Arab states” should probably be interpreted as meaning that very little is being exchanged at the moment, which would be a minimal form of cooperation when facing down a common dire threat. Or, at least, that there is much more that could be done.
The Saudi and broader Arab position toward improved relations with Israel has been predicated on the Arab Peace Initiative, first proposed by Saudi Arabia in 2002 and subsequently adopted by the Arab League and then the Organization of Islamic Cooperation. That hasn’t changed, although over the past year or so there were indications that some Arab countries, including Saudi Arabia, might have been willing to consider altering the structure whereby it is implemented. Originally, the Arab Peace Initiative offered full diplomatic and trade normalization for Israel with the Arab and Muslim countries at the end of the peace process, after a final status agreement with the Palestinians. The potential for a different approach, based on a model of concurrent, limited mutual steps to build confidence and develop relations, has been emerging. It would allow for Gulf countries to take steps toward Israel in regard to civil aviation, commerce, or limited diplomatic contacts in recognition of Israeli measures on Palestinian issues such as limiting settlement activity or easing the blockade of Gaza.
Any move to add such an “outside-in” dynamic to Israeli-Palestinian peace can only begin with such limited concurrent measures, in hopes of building a virtuous cycle that not only develops Arab-Israeli relations but helps the peace process as well. But the official Saudi position is the mirror image of Israel’s. Riyadh insists nothing has changed and the Arab Peace Initiative remains the only basis for moving forward. The truth may well lie somewhere between the contrasting Israeli and Saudi narratives. Clearly Israeli leaders are engaging in at least some calculated hyperbole. Yet there may really be some greater communication, and perhaps some limited forms of very quiet cooperation, developing behind the scenes. However, covert ties cannot be the basis of a new relationship, let alone a strategic partnership, even against Iran.
All the talk, largely driven by the Trump administration and the Israeli government, of a flourishing “outside-in” agenda has fostered a widespread mistaken impression, particularly in the Middle East, that there is an Israeli-Arab partnership to counter Iran. It has also fueled deep anxieties among Palestinians, especially at the prospect of an exchange of concurrent limited measures between Israel and Gulf Arab countries. This is because the Palestinian national movement has secured only two major indisputable assets since the late 1960s: the international diplomatic status of the Palestine Liberation Organization, and Palestinian control of their own decision-making process, particularly regarding Israel, free of undue influence from Arab governments.
The prospect of concurrence, which is the only way “outside-in” could be advanced, appears deeply threatening on this last point. If Arab states did agree on limited mutual measures with Israel, that would not, precisely, be dictating anything to the Palestinians. However, many Palestinians would surely regard it as foreclosing their options and making concessions, in effect, on their behalf, without their acquiescence and with uncertain benefit to their cause. That Palestinians have engaged in numerous concurrent confidence building exchanges with Israel – arguably even including the Oslo agreements – goes largely unrecognized. And it seems beside the point because those were still Palestinian decisions.
Such fears were greatly exacerbated by a poorly sourced and highly dubious report in The New York Times that suggested that, during a recent visit to Riyadh, Abbas was presented with “an American plan” for peace by Mohammed bin Salman that would be extremely disadvantageous to Palestinians, and was browbeaten about agreeing to it. There is no credible indication that such a plan has been finalized, that it was the subject of Abbas’ conversations in Riyadh, or that Saudi Arabia embraces it, let alone is trying to foist it on Palestinians. Yet no matter how weak and uncorroborated this reporting seems, it circulated widely and amplified concerns among Palestinians that an anti-Iranian convergence between Arab countries, the United States, and Israel would be primarily at their expense.
If such a three-way convergence has been at the heart of the Trump administration’s vision for countering Iran and promoting Middle East peace, the Jerusalem announcement has all but doomed serious prospects for its realization. Washington’s key Arab allies – Saudi Arabia, the UAE, Egypt, and Jordan – all strongly cautioned Trump not to make any such generalized announcement, and expressed strongly worded subsequent dismay. Indeed, the White House seemed to push back against this robust criticism, particularly from Saudi Arabia, when Trump issued his own blunt and unprecedented statement calling on “the leadership of the Kingdom of Saudi Arabia to … completely allow food, fuel, water, and medicine to reach the Yemeni people who desperately need it.”
An opening to Israel, however cautious and strategically valuable, even if carried out under the rubric of the Arab Peace Initiative, was always going to be politically difficult for Gulf Arab countries. Trump’s Jerusalem announcement has exponentially increased those complications. If there is a silver lining for Abbas and the Palestinians, it is that pressure on them from the Arab countries regarding the peace process will almost certainly now be greatly attenuated.
Jerusalem is (or was) not merely a final status issue, and a key aspect of the Israeli-Palestinian conflict. It is also a powerful political symbol throughout the Arab and Muslim worlds and a strong religious concern for Muslims. Trump tried to ease religious alarm by calling on all parties “to maintain the status quo at Jerusalem’s holy sites, including the Temple Mount, also known as Haram al-Sharif.” But that, and his vague remark that “We are not taking a position of any final status issues, including the specific boundaries of the Israeli sovereignty in Jerusalem, or the resolution of contested borders,” will do little to offset the diplomatic and political backlash in the Arab world.
Unless the White House moves quickly to clarify that U.S. recognition of Jerusalem as Israel’s capital applies only to West Jerusalem (as an April 6 Russian statement, which drew very little protest, appeared to do), prospects for progress on Israeli-Palestinian peace will be severely curtailed. Additionally, the potential for an “outside-in” initiative, and, more broadly, the development of new openings between Israel and Gulf Arab states will be, at best, greatly complicated, and quite possibly foreclosed for the foreseeable future.
Gulf states like Saudi Arabia and the UAE see the decline of Islamist groups in North Africa as a win for regional stability and cooperation; but even if Islamist parties may be slowly fading from the picture, this by no means suggests they are disappearing.
Through its careful examination of the forces shaping the evolution of Gulf societies and the new generation of emerging leaders, AGSIW facilitates a richer understanding of the role the countries in this key geostrategic region can be expected to play in the 21st century.Learn More