How ‘Israeli’-Arab normalization is helping the US win the trade war with China

UAE Ambassador to Israel Mohamed Al Khaja and Israeli President Isaac Herzog at the opening ceremony of the United Arab Emirates embassy in Tel Aviv, July 14, 2021. (Miriam Alster/Flash90)

The proliferation of a regional economic bloc since the Abraham Accords is allowing the United States to consolidate its power in the Middle East.

By Majeed Malhas

 UAE Ambassador to Israel Mohamed Al Khaja and Israeli President Isaac Herzog at the opening ceremony of the United Arab Emirates embassy in Tel Aviv, July 14, 2021. (Miriam Alster/Flash90)

In the year since the signing of the Abraham Accords between Israel and the United Arab Emirates, the Middle East’s political-economic landscape has rapidly shifted. While financial deals were previously viewed begrudgingly or conducted in secret, in the aftermath of the peace agreement, regional trade with Israel has exponentially increased, an unlikely coalition has formed the East Mediterranean Gas Forum, and grand intra-regional infrastructure projects are in production.

This swift movement from cold to warm peace mirrors a significant change in U.S. foreign policy in the region. In decades prior, the stagnant cold peace between Israel and its neighbors maintained the delicate diplomatic balance of U.S. economic interests in the region. But with China gaining ground, the global economic cold war brewing between it and the United States is surfacing in the Middle East, spurring the United States to push for a restructuring of intra-regional diplomacy.

In the past few years, the United States has taken a more emboldened approach to push its Arab allies toward diplomatic normalization with Israel, with the ham-fisted passage of the Deal of the Century a reflection of it. The United States is banking on market interests to act as the diplomatic glue that brings these nations together in an economic bloc under its patronage, with little to no concessions made by Israel on the illegal occupation of the Palestinian territories. Appeasements and niceties have been shunted to the side to consolidate U.S. — and thereby Israeli and Gulf — hegemony in the region through this rapid consolidation of economic and diplomatic partnerships. 

These partnerships’ emphasis on tangible infrastructural projects in an age dominated by speculative economics and emerging digital markets is particularly interesting to the developing geopolitics of the region. The projects, mapped across the Middle East, are an effort to consolidate the region’s U.S.-led political-economic status quo and rebuff competition from China.  

Through its Belt and Road Initiative (BRI), China has in recent years started developing economic influence in the Middle East. In 2019, Saudi Arabia and the UAE contracted the Chinese company Huawei to build 5G telecom infrastructure amid a concentrated U.S.-led effort to boycott the company. In 2020, Iraq signed a $3 billion contract with the state-owned China ZhenHua Oil Company, with the country being China’s second-largest source of imported oil. Currently, the China State Construction and Engineering Company (CSCEC) is heading the $3 billion project to build Egypt’s New Administrative Capital.

China also enjoys “comprehensive strategic partnerships” with Algeria, Egypt, Saudi Arabia, the UAE and particularly Iran, from whom China purchases oil in violation of U.S. sanctions, and with whom China is currently conducting joint military drills alongside Russia. Hezbollah and other pro-Iran factions have also welcomed Chinese influence in the region. Such partnerships represent the pinnacle of China’s foreign relations and highlight the geostrategic importance it places on the Middle East.

The Belt and Road Initiative has even extended to the Israeli market. The China Railway Construction Corporation (CRCC), which the Biden administration issued an executive order against, banning them from receiving U.S. investment due to concerns “directly threaten[ing] U.S. security,” is currently constructing a railway between Tel Aviv and Jaffa. In 2020, Chinese company Pan Mediterranean won a contract bid to construct and operate a port in Ashdod; while a new port terminal in Haifa operated by the Shanghai International Port Group (SIPG) was inaugurated in September. The U.S. Navy is reportedly reconsidering its practice of periodically docking at the Israeli naval base in Haifa as a result.Workers seen at the construction site of the new seaport in Ashdod, Southern Israel, April 12, 2016. (Flash90)

Unlike in Africa, South America, and other continents into which the BRI has extended, Chinese deals in the Middle East have received little media coverage. For example, the $400 billion comprehensive strategic partnership between China and Iran only became public knowledge due to a leak. While recently, the construction of a secret infrastructure project inside a Chinese port in the UAE was halted following pressure from the United States, which threatened to scupper the sale of advanced jet fighters and other advanced munitions to the UAE over speculative concerns of the project’s military potential. This relative secrecy reflects China’s desire to maneuver about these political-economic deals and infrastructure projects covertly, to avoid upsetting the United States and accelerating the trade war — a sentiment shared by the United States and Israel in their similar diplomatic maneuvering in response.

Having one of the lowest intra-regional trade rates in the world, with just 5 percent of exports going to neighboring countries, the Middle East has no broad regional infrastructure to foster economic cooperation. For American and other multinational corporations, this has entailed disconnected supply chain logistics, investment barriers, and a lack of consistent regulatory frameworks between countries in the region — and with it, susceptibility to foreign economic influence providing alternatives and solutions. The agreements struck in the Abraham Accords and its aftermath has since attempted to change that.

Tracks for Regional Peace

One of several major infrastructural projects to emerge in the post-Accords landscape is the UAE-Israel railway. Though first proposed in 2018, the “tracks for peace” initiative has been fast-tracked since the signing of the peace agreement. The ambitious project seeks to connect the port of Haifa with Jordan’s railway, which would be linked to Saudi Arabia and extended to the UAE. Since the signing of the Accords, the railway proposal has been revived to consolidate the economic bloc.

“Beyond its contribution to Israel’s economy, the Jordanian and the Palestinian economies, the initiative will connect Israel economically and politically to the region and will consolidate the pragmatic camp in the region,” stated Israeli Transportation Minister Israel Katz. In March, the UAE established a $10 billion investment fund supporting “multiple sectors in Israel,” with an emphasis on ports, railways, and other transport infrastructure.UAE Ambassador to Israel Mohamed Al Khaja and Israeli President Isaac Herzog at the opening ceremony of the United Arab Emirates embassy in Tel Aviv, July 14, 2021. Photo by Miriam Alster/Flash90

The railway, though still in a preliminary stage of planning, is meant to curtail the politically unstable Strait of Hormuz in the Persian Gulf and the Bab al-Mandab Strait at the southern end of the Red Sea to secure inter-regional trade and regional exports — particularly oil exports. But it represents only one element of the ambitious infrastructure-centered vision that the Accords are intending to actualize.

The East Mediterranean Gas Forum & the Israeli-Egyptian Pipeline

In September 2020, Israel, Egypt, Cyprus, France, Greece, Italy, Jordan, and the Palestinian Authority formed the East Mediterranean Gas Forum (EMGF), with the United States as a permanent observer. The coalition seeks to “cooperate on developing an infrastructure for gas trade within the region and with external markets.”

Soon after the formation of the EMGF, the Egyptian and Israeli ministers of energy struck another deal in February to build a pipeline connecting Israel’s offshore Leviathan natural gas field to liquefied natural gas (LNG) terminals in northern Egypt. The Leviathan gas field is operated by Houston-based oil and natural gas exploration and production company Noble Energy, with Chevron and Delek Drilling among the shareholders. Egypt and Israel are currently weighing expanding the operation by constructing an additional $200 million pipeline.

The formation of the EMGF and the construction of the Israeli-Egyptian pipeline came as tensions simmered in the Mediterranean with Turkey, which has attempted to develop its own political-economic influence and project soft power into the region, especially in Syria — much to the United States and Israel’s chagrin. In 2019, Turkey and Libya signed a maritime boundary treaty delimiting exclusive economic zones and establishing military cooperation. The EMGF rejected the treaty’s validity, holding that it violates the UN Montego Bay Convention of 1982. The EMGF soon after constructed the Israeli-Egyptian pipeline and arranged for the signing of a similar maritime boundary treaty between Egypt and Greece to counter the perceived Turkish encroachment in the Mediterranean, a topic which repeatedly made headlines in 2020.Israeli Prime Minister Naftali Bennett meets with Egyptian president Abdel Fattah Al-Sisi in Sharm el-Sheikh, Egypt, on September 13, 2021. Photo by Kobi Gideon/GPO ***GPO HANDOUT, EDITORIAL USE ONLY/NO SALES***

The diplomatic and economic offensive of the EMGF to consolidate Mediterranean trade under its wing and stave off Turkey’s economic expansion succeeded. In January, the Libyan House of Representatives canceled the maritime treaty with Turkey to adhere to its international commitments. The inability to establish political dominance in the Mediterranean, along with the wave of normalization and economic mobilization brought upon the Accords, has shifted Turkish foreign policy toward alignment with Israel and the Gulf.

During a diplomatic visit to Cyprus in March, Israeli Energy Minister Yuval Steinitz said Israel is ready to cooperate with Turkey on natural gas in the Eastern Mediterranean. Since, Turkish President Recep Tayyip Erdoğan has softened his previous stance and pursued normalization with Israel and Gulf states alike, with some analysts speculating Turkey’s eventual inclusion in the EMGF. Turkey’s capitulation to the forming economic bloc reflects the regional political-economic hegemony that the Accords are attempting to make a reality, countering encroaching bilateral and multilateral deals from Turkey, China and other competitors to U.S. influence through regional-oriented economic diplomacy.

The Jordan-Israel Water-for-Energy deal

Most recently, on Nov. 21, Israel and Jordan announced an agreement to exchange solar energy for water. Brokered by the UAE, the agreement’s declaration of intent stipulates that Jordan’s photovoltaic plants will export 600MW of solar energy to Israel in exchange for 200 million cubic meters of desalinated water.

The agreement, which helps to ensure the water-poor kingdom’s continued stability, has been met with considerable civil unrest in Jordan amid widespread popular opposition to the warming of ties with Israel. But its significance can be seen in relation to this bloc’s increasing normalization with another power in the region: Syria. 

The UAE’s foreign minister met with Syrian President Bashar al-Assad on Nov. 9, while Jordanian rapprochement efforts with Syria have been ongoing in recent months. In an interview with CNN in August, King Abdullah II of Jordan expressed his desire to normalize relations with the Assad regime and bring Syria back into the regional diplomatic fold. 

While the United States has recently reiterated its opposition to the Assad regime, it reportedly gave Jordan guarantees that rapprochement with Syria won’t see them punished by the sanctions placed against the Assad regime. This tacit greenlighting of Syrian rapprochement has been seen as part of a proactive measure supported by the United States to limit Iran’s influence in Lebanon and Syria through Hezbollah.U.S. President Donald Trump, Minister of Foreign Affairs of Bahrain Dr. Abdullatif bin Rashid Al-Zayani, Israeli Prime Minister Benjamin Netanyahu and Minister of Foreign Affairs for the United Arab Emirates Abdullah bin Zayed Al Nahyan participate in the signing of the Abraham Accords, September 15, 2020, on the South Lawn of the White House. (Shealah Craighead/Official White House)

As part of this U.S.-supported initiative to consolidate the regional bloc and deter countervailing influences, Jordan spearheaded efforts to establish a deal in October to transfer electricity to Lebanon, which is currently suffering an acute energy crisis. The initiative facilitates the transit of Egyptian gas to Lebanon through Jordan and Syria. “The Americans have given the green light to the project,” noted Jordanian Energy Minister Walid Fayad. This swift unrolling of an inter-regional solution to Lebanon’s energy crisis comes as a surprise after years of regional diplomatic immobility, to the extent that grievances with Syria were put aside. However, it is not so surprising when seen as a response to Iran’s shipment of fuel and pledges of economic support to Lebanon in September.

For the United States, the consolidation of this friendly economic bloc in the region through its staunch ally in Jordan serves to distance both Lebanon and Syria from Iran and its proxies. However, the economically weak and resource-poor kingdom has long been burdened by this geopolitical role. Alongside aid received from the United States, post-Accords Israeli and Gulf-led infrastructure initiatives like the water-for-energy deal work to maintain the delicate (im)balance of relations within the region, allowing geostrategically important yet economically underdeveloped nations like Jordan to play a crucial role in these significant diplomatic maneuvers despite domestic economic instability.

A Trade War in the Middle East?

The Abraham Accords have changed the political-economic landscape of the Middle East, with a range of major infrastructure initiatives providing a window into the foreign policy motivations behind these shifts. Through its staunchest regional allies in Israel and the UAE, the United States seeks to deter China and others from encroaching into the region by consolidating its pro-U.S. economic bloc.

In contrast to the United States’ region-wide approach, China’s foreign policy relations in the Middle East are pursued primarily on a bilateral and multilateral basis. The Chinese lack of conceptualizing the Middle East regionally is further underpinned by the fact that there is no regional cooperation framework that would include all of the Arab states, Israel, Iran and Turkey — what the post-Accord landscape has sought to ameliorate in the U.S.’s favor. Expansion of the Belt and Road Initiative into the Middle East has been conducted quietly so as not to disrupt the delicate and volatile regional order, nor to draw the explicit ire of the United States and Israel.

Where China, Iran, and Turkey maneuver covertly by striking bilateral and multilateral deals directly with independent governments, the United States and Israel are looking to call their bluff by taking that approach to an intra-regional level. Currently, there is an uneasy coexistence of Chinese, U.S., Israeli, and Gulf investments dominating economic initiatives in the region, while China-aligned Iran continues to support its political and military factions in the region. Whether those tensions will come to a head is yet to be seen with the ever-evolving nature of the U.S.-China trade war. Either way, it is certain to play a crucial role in the future of Israeli and Gulf economic and foreign policy.

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