The Political Economy of Saudi-Israel normalisation
Saudi is seeking to pressure Israel into making concessions by attaching a cost for not normalising to balance the relationship.
There is lots of hot air about the propsects of normalisation between Saudi and Israel. This commentary will address the cost of normalisation for both sides in addition to the benefits to gauge the prospects of such major breakthrough in ties.
First, Israel incurs no loss due to not normalising. For it normalisations just means more winning rather than averting paying a cost. Israel paid no price for any of the normalisation deals it got with other countries in the region. For Saudi, Israel offers no concessions whatsoever to MBS. It rejects doing so in any issue of strategic significance to Saudi. The lack of cost for the lack of normalisation means Israel is not eager, out of necessity, to normalise ties with Saudi. In fact, Israel deems any concessions as a loss despite any gains. Israel still sees itself as the regional hegemon regardless of its normalisation with Saudi or not.
This is quite telling given that Iran normalisation with Saudi had the opposite calculus. If it did not normalise, Iran would have lost Chinese investments worth billions which it really needs. It would have lost the backing of Russia and China who have been instrumental to the regime survival. The regional proxy conflicts would have inflammed and the cost of its foreign policy would have increased. Iran has a lot to lose from not normalising with Saudi, but Israel does not. Israel thinks it will remain a wealthly technological power.
Second, for Saudi, by normalising, its regional market creation and integration efforts will solidify and ensure war and conflict are not going to disrupt the efforts. However, this will be conditional on Israel committing to stopping attacks outside its borders which agitate unwanted reactions and instigates conflict. Furthermore, an end to the Palestinian Israeli conflict will be needed.
That said, at the same time, Saudi stands to incur some losses from normalisation with Israel. It will lose face among muslims, it will fuel Iran's rhetoric against it, it will shake public support for Saudi in the region and beyond. It will also be seen as supporting Israel attacks across the regoin although it contradicts its interests.
Third, security wise, Israel expects Saudi to collaborate with it in a way which ensures its continued qualitative military edge from last century. Saudi aspirations to be the leading regional actor contradicts Israel's insistence on it remaining the hegemon. Furthermore, Israel military supremacy is under question and its reliability is more questionable. Would Israel defend Saudi if Iran attacks it? Available evidence suggests Israel won't.
Fourth, economically, Saudi does not benefit directly from normalisation. Indeed Israel's technology can help the aspirations of Saudi, but it is not a requirement as Israel is not an exclusive provider of such tech. Israel is a small market which is saturated.
Israel, however, stands to benefit greatly. All the region's markets will be opened for it. Not just the region, but the Islamic world markets as well. Israel will no longer need to work in secrecy and can have official economic ties. Inbound tourism will skyrocket. The added stability will boost the investment environment in Israel as trust grows. It will be able to invest freely in many markets. Overall, economically, Israel stands to benefit from normalisation, but Saudi benefit is not equal.
Fifth, by not normalising, Saudi will struggle to achieve its regional integration plans as conflict and war will prolong regional instability whilst Israel and Iran continue to compete in the region. Hence, normalisation given the current balance will not yield the intended outcomes desired by Saudi.
Lastly, Saudi pursuit of rapprochement with Iran can be seen to some extent as part of its efforts to convince Israel of the necessity for normalisation and making concessions. Israel is now the only country in the region in confrontation with Iran. Israel needs to recalibrate its approach to the region. So far, Israel has not reacted to Saudi Iran rapprochement and its impact on its regional vision. Time will show to what extent Israel sees Saudi-Iran ties as a threat. The deeper and more strategic the ties will be, the greater the urgency and pressure to satisfy Saudi demands. Therefore, normalisation is unlikely in the short and mid terms unless geopolitical events change the landscape.
While normalisation is desired by both sides for different benefits, the lack of cost on Israel for not normalising undermines the prospects of normalisation. Saudi, hence, is seeking to push Israel into making concessions by attaching a cost for not normalising to balance the relationship.