Barry Topf
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Is the Saudi deal a dream or a nightmare?

Why has 'normalization' suddenly become so important? The answer is frighteningly simple: Netanyahu needs the photo-op
File: Benjamin Netanyahu (right) during a Likud party meeting at the Knesset in Jerusalem on December 13, 2021; Saudi Crown Prince Mohammed bin Salman (left) speaks during the Gulf Cooperation Council (GCC) Summit in Riyadh, Saudi Arabia, December 14, 2022. (Yonatan Sindel/Flash90; Bandar Aljaloud/Saudi Royal Palace via AP)
File: Benjamin Netanyahu (right) during a Likud party meeting at the Knesset in Jerusalem on December 13, 2021; Saudi Crown Prince Mohammed bin Salman (left) speaks during the Gulf Cooperation Council (GCC) Summit in Riyadh, Saudi Arabia, December 14, 2022. (Yonatan Sindel/Flash90; Bandar Aljaloud/Saudi Royal Palace via AP)

Imagine: Israel has diplomatic relations with a large, powerful and influential Muslim nation, the center for one of the major sects in Islam and custodian of some of its holiest sites. A major oil producer that can supply Israel’s needs. A state with an ambitious and dynamic leader seeking to modernize his country and give it a major role in regional and international affairs. A country whose Western orientation included open relations with the Jewish state. Imagine El Al flying into its capital, a military liaison officer coordinating close intelligence and military cooperation, stationed in Israel’s consulate in that same capital.

Sounds like a dream come true. Except that it already happened once before – with the Shah’s Iran. Then came the nightmare: the Islamic Revolution in 1979 and the abrupt severance of diplomatic relations with Israel. More than 40 years later, Iran is Israel’s most implacable and dangerous enemy.

Now, we are being told that the “normalization” with Saudi Arabia will be a game-changer, open a new era, be a historic event bringing untold benefits to Israel. Is that really the case?

One of the smartest things I heard in my career as an economist is that most decisions boil down to three things:

  1. What is it worth? What advantages does it bring?
  2. What does it cost? What are the drawbacks?
  3. What are the alternatives? Is there a better way?

What is it worth? What’s in it for Israel?

Will there be full relations, a warm peace or a cold peace? Some are even predicting the end of the “Arab-Israeli conflict” and even the end of Jewish-Muslim enmity. Yet the Shiite world will not be affected by a Saudi-Israel agreement, and it is the “Shiite crescent” that poses the biggest threat to Israel. Will Syria, Lebanon, and Iraq suddenly befriend Israel? Much closer to home, will it solve the Palestinian problem? Will Hamas suddenly see the light and seek coexistence?

Even under the most optimistic scenarios, flashpoints will remain – the Temple Mount, settlement expansion, not to mention provocative and incendiary actions and statements by our government ministers. The Arab world is not monolithic, and there is no lack of resentment of the rich, oil-exporting Gulf Arabs on the part of the poorer Arab nations. Nor is there a lack of fanatical anti-Israel feelings in Pakistan, Malaysia, and elsewhere, which is unlikely to be assuaged by the mere fact of Saudi-Israeli “normalization.” Just recently we saw an outburst of anti-Israel fervor in Libya when news of discussions between our foreign ministers was disastrously revealed by Israel.

Will there be economic benefits? Maybe, but these are unlikely to be significant for Israel. After decades of peace with neighboring Egypt and Jordan, both bordering Israel and with apparent synergy between the economies which should spur trade, exports to each country are less than 0.1% of Israel’s exports, less than half of Israel’s exports to tiny Malta, with a population of half a million. Trade with the UAE is more significant but has disappointed many, and the expected wave of investments has not materialized. Yes, Israeli tourists will undoubtedly swarm to Saudi Arabia if allowed, but the novelty will wear off quickly. And how many Egyptian, Jordanian and UAE tourists visit Israel? Is the right to overfly Saudi territory on the way to the Far East a strategic asset?

Militarily, Israel has nothing to gain. Peace treaties with Egypt and Jordan ended the threat of war, but normalization with Saudi Arabia will not bring any comparable benefits. Saudi Arabia has never been a threat to Israel – in fact, it is not even able to defend itself. Despite being the world’s largest importer of arms in 2016-2020, and having defense expenditures of $75 billion, the fifth highest in the world, more than three times Israel’s military spending, its armed forces are ineffective. It has struggled against Houthi tribesmen in Yemen and suffered from attacks on its airfields and important oil installations. In fact, when its oil facilities and shipping are attacked and threatened, it can only call for America to come to its aid.

What will it cost? What are the drawbacks, risks, and dangers?

It is impossible to evaluate them all until we know the details.

According to reports, one of Saudi Arabia’s main requests is for a civilian nuclear program with domestic control of fissionable material. That request, coming from the world’s largest holder of hydrocarbon reserves, is so transparent it is almost laughable. Moreover, its demands for additional and even more advanced weapons systems from the US is another worry for Israel.

What is clear is that Israel will be forced to make concessions. Given the threat of this extremist government to Israel’s well-being, being forced to make pragmatic concessions to the Palestinians might indeed be beneficial. If these are in Israel’s interest, they should be done after careful evaluation, and not in order to achieve a public relations bonus for the Prime Minister. It would be preferable for Israel to make them on its own, and not as part of a problematic three-way deal.

Can Saudi Arabia be entrusted with nuclear power? Just how stable is an undemocratic state headed by an ambitious and dictatorial autocrat, who under cover of progressive policies imprisons (and allegedly murders) opponents, and extorts his own extended family? Its economy is dependent on fossil fuels, on foreign labor, and expatriates, and has failed to diversify despite spending huge sums on grandiose projects. Will it be a reliable partner, capable of fulfilling its obligations? Or, like Iran in 1979, can it swiftly become a dangerous foe, with nuclear capabilities?

So why do a deal?

Why has normalization with Saudi Arabia suddenly become so important to Israel? I believe the answer is frighteningly simple: a photo-op. Prime Minister Netanyahu seeks to market an “achievement” and distract Israelis from the dangers, incompetence, and failures of his government. Israel is in crisis; its democracy and civil society threatened, its unity in tatters. With only a long list of failures – security threats, foreign policy fiascos, alienated allies, the economy jeopardized, corruption and violence rampant, the rule of law under attack, what could be better than another White House lawn triple handshake and endless rhetoric about an” historic achievement” leading to a new era? Facts be damned; what’s important is short-term political gain. Long-term consequences can be ignored in favor of today’s headlines.

This government has not shown that it can do anything right. The proposals have not been properly evaluated; the security establishment (and other professionals) have been ignored once again. Normalization with Saudi Arabia could bring great benefits, but it is too important and risky a step to be taken by a floundering government for short-term political gains. It needs to be taken after the risks and benefits are evaluated, and not blithely accepted on the word of a politician whose judgment is far from infallible.

About the Author
Barry Topf was a member of the Bank of Israel’s senior Management from 2001 until 2013. He was a member of the Monetary Policy Committee in 2011-2013. As a consultant for multinational organizations, he has advised more than 25 countries on macroeconomic and monetary policy.
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