Netanyahu Says Bet on Israel and Saudi Arabia Deepening Ties

(Bloomberg) -- Israel and Saudi Arabia will deepen economic and business ties even if they don’t formally recognize each other, according to Benjamin Netanyahu.

The Israeli prime minister told Bloomberg he’s confident he can strike a deal with the Saudis under which the countries have official diplomatic relations. Without one, the two can still build an “economic corridor” running from the Arabian Peninsula to Europe that encompasses energy, transport and communications technology, he said.

“We’re going to realize that,” he said in a television interview on Sunday in Jerusalem. “My sense is we’ll realize that whether we have formal peace or not.”

It’s unclear if Saudi Arabia would accept much deeper connections. Public opinion in the kingdom remains opposed to recognition of Israel.

Netanyahu, 73, has said the normalization of ties would benefit Israel and Saudi Arabia economically and discourage Iran from meddling aggressively in the region, including by disrupting oil-shipping routes.

While Saudi Arabia and Iran restored diplomatic relations earlier this year in a deal that China helped broker, Riyadh still views Tehran with suspicion and as a geopolitical rival.

US President Joe Biden is also keen for Saudi Arabia to recognize Israel. He sent National Security Adviser Jake Sullivan to the kingdom last month, partly to discuss the issue with Crown Prince Mohammed bin Salman.

It would have “enormous economic consequences for investors,” Netanyahu said. “If they had to bet on it, right now I’d bet on it. But I can’t guarantee it.”

Riyadh has previously said an independent Palestinian state is a precondition. It has expressed frustration in recent months over Israel’s deteriorating relations with the Palestinians — typified by the recent raid on a refugee camp in the West Bank and incendiary comments by some far-right members of Netanyahu’s coalition.

Privately, the Saudis have asked for firm defense guarantees from the US, access to top-notch American weaponry and for the White House to allow it to enrich uranium domestically as part of a plan to build nuclear power plants.

Palestinian ‘Check Box’

Netanyahu downplayed the Palestinian issue as something hindering a Saudi-Israel deal.

“It’s sort of a check box,” he said. “You have to check it to say you’re doing it. Is that what’s being said in corridors? Is that what’s being said in discreet negotiations? The answer is a lot less than you think.”

The premier declined to say if he would accept limitations on new Jewish settlements in the West Bank to get an agreement with Riyadh. He said he wouldn’t allow a Palestinian state without Israel having security control over it.

“You won’t have a Palestinian state — you’ll have an Iranian terror state,” he said. “The Palestinians should have all the powers to govern themselves and none of the powers to threaten Israel. This means that in whatever final peace settlement we have with the Palestinians, Israel has the overriding security power in the entire area — ours and theirs.”

On Monday, Palestinian Prime Minister Mohammad Shtayyeh said he was confident Saudi Arabia would take Palestinian interests into account.

The kingdom “considers the Palestinian issue to be a focus of its interest and a top priority in its regional and international deliberations,” Shtayyeh told a weekly cabinet meeting.

Guardian of Islam

Normalization would be a significant coup for Israel. While it’s signed historic diplomatic deals with the United Arab Emirates, Bahrain, Morocco and Sudan since 2020, Saudi Arabia is the biggest economy in the Middle East, with the government investing trillions of dollars to diversify from oil. In addition, it’s the guardian of Islam’s two holiest sites at Mecca and Medina.

Despite the lack of formal ties, Israeli tech and cyber-security firms have secretly done business with the kingdom for years. In late 2020, Israeli media said Netanyahu had flown to Saudi Arabia to meet the crown prince, a trip that was never officially acknowledged by either side.

Some dealings have become more open. Last year, Saudi Arabia opened its airspace to airlines flying in and out of Israel. And this month SolarEdge Technologies Inc., an S&P 500 company based in Israel, announced it’s forming a joint venture with a Saudi firm to develop renewable energy in the kingdom.

(Updates with reaction from Palestinian prime minister above ‘Guardian of Islam’ sub-head.)

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