Hamas is going to be able to claim very few victories in its war with Israel, but one that it has already notched is an abrupt halt in the momentum toward a U.S.-brokered deal between Israel and Saudi Arabia. The Israeli-Saudi agreement would have broken historic ground, normalizing relations between the two countries, bringing Saudi Arabia more firmly into the U.S. security fold, and eliciting Israeli commitments on the Palestinian issue. In fact, fears of an Israeli-Saudi rapprochement may have been one of the key drivers of Hamas’s October 7 attack.
The war leaves Saudi Crown Prince Mohammed bin Salman, also known as MBS, in a difficult position, at least in the short term. MBS craves regional stability, which would make it easier for him to pursue his goal of diversifying Saudi Arabia’s economy and reducing its reliance on oil exports. The horrific violence and threat of a wider escalation threaten his progress on this front. MBS is now also facing competing pressures at home and abroad, with U.S. and European leaders calling for Saudi Arabia to take a leading role in a post-Hamas Gaza and with regional and domestic groups urging Riyadh to more actively support the Palestinians in their hour of need.
Both sides in the tug-of-war on Riyadh will likely be disappointed. Saudi Arabia has neither the ability nor the desire to put boots on the ground in a postwar Gaza or to massively finance Gaza’s reconstruction. Nor has it demonstrated any willingness to wield the tools at its disposal, such as its ability to cut oil output or exports to put pressure on Israel and the United States. Although an Israeli-Saudi deal is off the table for now, the incentives that brought Saudi Arabia to consider recognizing Israel have not gone away. MBS’s ambitious economic goals for Saudi Arabia can be achieved only in a stable Middle East and with strong ties to the United States. This long-term agenda will shape his course of action in the current conflict.
Ahead of Hamas’s surprise assault on Israel, the Biden administration had made notable strides in its efforts to broker Saudi recognition of Israel. There were significant obstacles in the way of a deal—namely, the divergent interests of the three parties. The Saudis were demanding tangible Israeli moves to improve the political prospects of the Palestinian Authority, at least opening up the possibility of negotiations toward a two-state solution. Given the far-right composition of the Israeli government, such steps were unlikely. Riyadh’s demands of the United States were also a reach, including a formal security guarantee and assistance in building a Saudi civilian nuclear infrastructure without the safeguards that Washington has required of previous partners. Nevertheless, there was a sense of progress. Less than three weeks before Hamas’s attack, MBS told Fox News that “every day we get closer” in the negotiations.
That may have been so, but the Palestinian issue was always going to pose an obstacle. Although the taboo in the Gulf states against relations with Israel has fallen away in recent years, Arab publics still care about the Palestinian cause. As a result, Arab leaders have to at least appear to do the same. Even before the war, Saudi Arabia signaled that Israel would have to do something substantial on the Palestinian issue as a prerequisite for normalization. In August, as discussions with Israel were progressing, Saudi Arabia appointed its first ambassador to the Palestinians, a gesture that was interpreted by many as a demonstration of Riyadh’s commitment to pushing for Israeli guarantees on the Palestinians’ behalf. To achieve a rapprochement with Riyadh, Israel would need to do more than it had in the lead-up to the Abraham Accords, a 2020–21 series of normalization agreements between Israel and Bahrain, Morocco, Sudan, and the United Arab Emirates. As part of those deals, Israel had agreed to drop plans it had floated to annex 30 percent of the West Bank, extending its sovereignty over territory it currently occupies—a move that would have effectively killed the prospect of a two-state solution.
MBS’s ambitious economic goals for Saudi Arabia can be achieved only in a stable Middle East.
Modest steps such as these will no longer suffice. The terrible toll the Israeli military assault on Gaza has taken on Palestinian civilians has upped that ante. As long as Israel is consumed with Gaza and Arab public opinion is mobilized to support Palestinians, the Israeli-Saudi deal is a nonstarter.
Saudi Arabia’s willingness to even consider a deal with Israel reflected a broader shift in its foreign policy. When MBS came to power with his father’s ascendance to the throne in 2015, the Saudi crown prince set the country on an ambitious course for economic change and began throwing Riyadh’s weight around in the region, often with the goal of countering its archrival, Iran. In alliance with the United Arab Emirates, he launched a war to roll back the power of the Iranian-supported Houthi movement in Yemen. He organized a blockade of Qatar over its support for Sunni Islamist groups, including Hamas. When Saad al-Hariri, then the Lebanese prime minister, visited Riyadh in 2017, MBS coerced him into resigning his position, hoping that a political crisis in Lebanon would damage Iran’s ally Hezbollah. (Hariri rescinded his resignation after returning home.) And MBS amped up his rhetoric toward Tehran. “We won’t wait for the battle to be in Saudi Arabia,” he declared, claiming that Iran was seeking to take control of Islamic holy sites in his country. “Instead, we will work so that the battle is for them in Iran, not in Saudi Arabia.” Most notably for Americans, in 2018 he ordered the killing of the Saudi dissident journalist Jamal Khashoggi, a U.S. resident, during Khashoggi’s visit to the Saudi consulate in Istanbul.
MBS’s aggressive international stance backfired in many ways, failing to harm his enemies while alienating international supporters, including U.S. President Joe Biden, who as a presidential candidate in 2020 promised to make Riyadh an international “pariah.” In the wake of this backlash, Riyadh has in the last few years changed its regional approach, emphasizing dialogue and seeking stability. A cease-fire with the Houthis in Yemen has essentially endured for over a year and a half. The Saudi-led boycott of Qatar ended in early 2021. Most significantly, Saudi Arabia reached out to China to mediate a resumption of diplomatic relations with Iran this year. All of this was done in the name of MBS’s economic reform program, Vision 2030, which aims to diversify the Saudi economy and reduce its dependence on oil exports. Riyadh has emphasized the need for regional stability to foster the foreign investment, regional integration, and economic development that it aspires to. It was in this context that the U.S. mediation between Israel and Saudi Arabia proceeded.
Saudi hopes for regional stability in the pursuit of economic development were shattered on October 7. Riyadh has little love for Hamas, which created the crisis. The Saudis feared and opposed the political gains made by Muslim Brotherhood affiliates in Egypt, Tunisia, and elsewhere during the Arab Spring; Hamas is the Palestinian branch of the Brotherhood. On the other hand, the Saudis cannot be seen as standing aside (or worse yet, continuing to negotiate with Israel) as the Israelis pummel Palestinians in Gaza. Riyadh has an interest in ending the fighting and making progress toward a peaceful settlement of the Israeli-Palestinian issue but has few levers that it can or will use to advance that goal right now.
U.S. Secretary of State Antony Blinken and a number of American commentators have suggested that Arab states could play a role in the administration of postwar Gaza. Diplomatic discussions along these lines have already begun. The most ambitious proposals call for Saudi Arabia to contribute military and administrative personnel to govern Gaza after the war. More modest proposals still assign the Saudis the role of financing Gaza’s reconstruction. But Riyadh will not allow itself to be seen as cleaning up an Israeli mess in Gaza. Saudi internal security forces have no experience acting outside their borders. The Saudi military’s poor performance in Yemen is not a recommendation for its deployment elsewhere. And Saudi forces have never acted as peacekeepers under the UN flag.
It is possible that Saudi Arabia would be willing to play a financial role in a UN-approved transitional administration that leads to the return of Palestinian Authority control in Gaza. However, that role would not resemble past Saudi aid deals, which amounted to cash dumps on favored clients. Riyadh has made clear in recent negotiations with cash-strapped Egypt that it prefers investment opportunities, not cash transfers. Its approach to Gaza will be similar, unless the United States is willing to sweeten the deal with the kind of diplomatic windfalls Riyadh was seeking from Washington in exchange for a rapprochement with Israel.
After the 1973 Arab-Israeli War, also known as the Yom Kippur War, Saudi Arabia and other Arab oil producers imposed an oil embargo on the United States to punish Washington for its support for Israel. The embargo and accompanying cuts in oil production by the Saudis and others caused oil prices to quadruple—a period evoked in the United States by the image of long lines at gas stations. The World Bank, the International Energy Agency, and financial leaders including the chief executive of JPMorgan Chase, Jamie Dimon, are among those warning that a new oil crisis echoing the shock of 1973–74 could be on the horizon.
Those concerns are overblown, in part because they rely on a misunderstanding of what happened in 1973. Contrary to the myth surrounding it, the vaunted embargo had little effect. Major oil companies simply redirected supplies from other sources, such as South America, West Africa, and Iran. The notorious lines at U.S. gas stations had more to do with price controls, allocation regulations, and consumer panic than with a significant shortage at the national level. The price of oil rose because Arab production cuts in the last months of 1973 spooked the markets, though it later became apparent that overall world oil supplies were not significantly affected. The panic created by Arab oil producers asserting their power was enough to drive prices up. The even balance between the world oil supply and world demand helped keep prices up for the rest of the decade, before the Iranian Revolution of 1979 prompted a second price shock.
Even if policymakers and business leaders are haunted by the specter of the embargo, they should take comfort from the fact that conditions today are far different from those of 1973. Back then, Saudi Arabia was closely aligned with Egypt and Syria, Israel’s primary foes in the Yom Kippur War, in a way that it is not with Hamas. In 1973, the Saudis were willing to take great risks to support Egyptian President Anwar Sadat, who had ended his country’s hostility toward Riyadh. Today, the Saudis feel no equivalent sense of solidarity with Hamas, a Muslim Brotherhood offshoot allied with Iran.
Some observers worry about production cuts, but the Saudis have already cut output by almost two million barrels per day since late 2022 in an effort to prop up prices. (These efforts have had little effect: prices are currently in the range of $80 to $85 per barrel, far below the $100 per barrel that was forecast during the summer.) Riyadh would not stand to gain from further cuts to production, which would be unlikely to give Saudi Arabia any leverage and would alienate consumers not only in the United States but also in China. Most importantly, MBS has no interest in Saudi Arabia’s being perceived as a place where politics trumps profits—especially given that his main aim is the economic transformation of his country. MBS has demonstrated his single-minded commitment to the pursuit of this goal even amid the current turmoil: in late October, with horrific news coming out of Gaza, Saudi Arabia proceeded with its annual Future Investment Initiative conference, which was attended by leading financial figures from around the world. MBS wants to be seen as a reliable economic partner, not a disrupter brandishing an “oil weapon.”
The Gaza crisis will end, as all crises do. That is more likely to take months than weeks, putting any other diplomatic efforts in the Middle East on hold. As long as Israeli troops are in Gaza, the chances of regaining momentum in the indirect Israeli-Saudi dialogue mediated by the Biden administration are slim to none.
But the factors that drove those negotiations have not changed. Israel would very much like to have a closer relationship with Saudi Arabia. The Saudis would like to be able to benefit from Israel’s dynamic economy, as the United Arab Emirates has since signing the Abraham Accords. Both Israel and Saudi Arabia still see Iran as a regional threat, providing strategic ballast to the pursuit of closer economic ties. Saudi demands that Israel make some concrete steps toward Palestinian statehood will remain an obstacle, but perhaps less so if the war in Gaza leads to a new, more flexible Israeli government. A return to the negotiating table is more likely than not.
In this context, it is important to remember that every Arab agreement with Israel has been, at its core, an Arab agreement with the United States. That holds true for the Egyptian-Israeli peace treaty of 1979, which opened the door to U.S. foreign and military aid to Egypt; for the Israeli-Jordanian peace agreement of 1994, which brought Jordan back into Washington’s good graces after its support for Saddam Hussein in the 1990–91 Gulf War; and for the Abraham Accords of 2020-21, which involved U.S. recognition of Morocco’s annexation of the Western Sahara, the lifting of the U.S. designation of Sudan as a state supporter of terrorism, and a promise from the Trump administration that the United Arab Emirates could buy F-35 fighter jets (a commitment that was later put on hold by the Biden administration). The prospect of receiving those kinds of benefits will remain attractive to Saudi Arabia, regardless of what occurs in Israel and Gaza.
An eventual return to Israeli-Saudi discussions will also mean a return to U.S.-Saudi negotiations on Riyadh’s wish list: a security guarantee and U.S. support for Saudi nuclear development without the limitations of the safeguards Washington has imposed on others. If and when the United States can refocus on Israeli-Saudi diplomacy, it will be important for it to consider whether the prize of Israeli-Saudi normalization is worth the cost of new U.S. military commitments and a greater risk of nuclear weapons proliferation in the region. For now, however, Washington can put off such concerns: as long as the conflict in Gaza persists, the Israeli-Saudi deal will remain on ice.
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