After weeks of speculation over how the new Biden Administration will approach U.S. relations in the Arab Gulf, the first real hurdles for a new JCPOA Iran agreement are already emerging. The pro-Biden Europeans, the majority of whom appear very happy with the President-elect, are all looking forward to a realignment of U.S.-European geopolitical powers in the Arab Gulf. Most analysts expect that in addition to Biden’s promise to rejoin the Paris Agreement, Washington will also attempt to re-enter the JCPOA discussions with Iran. Oil and gas markets appear to have incorporated into their 2021-2022 assessments a re-emergence of Iranian oil exports to global markets. There is also an expectation of a more active pro-democratic positioning by the U.S. in the case of Turkey, Saudi Arabia, Egypt, and even the UAE. Unrest is mounting in those countries that Trump’s legacy may be dismantled by the incoming administration. At least that is the main tenor in assessments at present. When looking at developments on the ground, the situation is not as pro-Biden as some expect. Trump’s legacy is more intertwined with the ongoing political and economic developments in the region than most want to admit.
There was an unexpected development this weekend. If media reports in Israel and the Arab world are to be believed, Israel’s Prime Minister Benyamin Netanyahu and Saudi Crown Prince Mohammed bin Salman met for a bilateral discussion in the well-known City of the Future NEOM, a central piece of MBS’s Saudi Vision 2030. During the well-reported visit of U.S. Secretary of State Pompeo to the Kingdom, Nethanyahu and his security chiefs were reportedly present. Based on flight-tracking, which has been confirmed by numerous sources, Netanyahu and the head of the Israeli Mossad, Yossi Cohen, flew to NEOM to take part in the meeting between MBS and Pompeo. No confirmation has been given of the meeting, but an Israeli minister acknowledged the fact to the press. The unexpected move is a further sign of the deepening cooperation between Tel-Aviv and Riyadh, even if both countries are not yet openly reporting on the discussions. The current rapprochement was expected, especially after that the UAE, Bahrain, Sudan, and Israel signed diplomatic agreements, followed by a multitude of technical, economic, and even defense meetings. Saudi Arabia has remained very quiet throughout these developments, keeping to official Saudi statements about the rights of Palestinians. However, a possible deal between Riyadh and Tel-Aviv appears to be in the works, breaking through decades of long-term rivalry and outright conflict. Whatever the Trump Administration’s history will be elsewhere, it appears to have been successful in bringing GCC countries and Israel closer together. Saudi Arabia would be the jewel in the crown for Trump, and could even lead to a new strategic reality on the ground.
The possibility of a full-scale Red Sea-GCC alliance has the potential to transform the region. Combined military-economic cooperation between Egypt, Sudan, GCC leadership, and parties in the East Med, would be a major stumble-block for any ambitions Biden may have to unite the U.S., EU, Turkey, Qatar, and Iran after January 2021. By setting up a Saudi-UAE-Israeli entente would confront the Biden Administration with a very strong faits-a-compli with regards to Iran or the Turkey-Qatar issues. The Democratic Administration will not be able to bulldozer through its possible changes planned in the MENA region without taking into account the strong backing of Israel or the Saudi-UAE groups in Washington’s political circles. The same is true for European powers in the region. In recent days, Biden’s ambitions to rejoin the JCPOA deal are looking increasingly unrealistic.
The Israeli-Saudi discussions also need to be seen in the light of a struggling Saudi-Emirati rentier-state economic environment. Israeli technology and defense knowledge could become a major part of the bargaining power for official relations with Riyadh in the coming weeks. A more anti-MBS stand by Biden and his cohorts would likely only lead to a deepening of the Tel-Aviv-Riyadh-Abu Dhabi axis. Mohammed bin Salman’s dream of setting up NEOM, one of the cornerstones of his Vision 2030 legacy, will be easier with Israeli technology, start-ups and investments are available. Don’t forget, NEOM is almost bordering Israel, so distance is not an issue. Related: Why Iraq Isn’t Producing 10 Million Barrels Per Day Yet
As always, geopolitics will bleed into oil markets if this regional power shift does take place. A stronger and bolder Saudi Arabia, supported by the UAE, will be able to block OPEC Iran issues much more easily. Israel’s deep relations with Vladimir Putin, somehow overlooked by a majority of analysts, is another asset of influence for MBS and MBZ. OPEC+ could be revived by Israeli peace treaties, as it will be a large and increasingly strong front against Iran. All Arab parties also appear eager to block Turkish expansion and power projections in their own backyard. Security and energy again are at play, but the U.S. is becoming an increasingly unimportant force in the region.
The new developments have already stirred anxiety in Ankara and Iran, with proxies already taking action. The latest Yemeni Houthi attacks on Saudi Aramco assets in Jeddah are just a sign of what could be coming. Iran is speeding up all its capabilities, while there appears to be a re-shaping of IRGC forces in the Persian Gulf region. Turkey’s strategy of putting oil on the fire in the East Med continues, while the Libyan conflict appears to be flaring up again. In the coming months, stability in the region is far from assured, and oil and gas markets should keep an eye on the Middle East.
It is truly remarkable that Israeli security officials and Prime Minister Netanyahu have taken a plane to NEOM. If this meeting was meant to be kept strictly confidential, taking a Netanyahu designated plane would have been out of the question. Taking the road to NEOM or a boat would have been much easier. Jordan’s King Hussein used to go to the beach in Tel Aviv on his own Harley Davidson for years. Tracking is sometimes a diplomatic move to increase pressure, something that is worth remembering.
By Cyril Widdershoven for Oilprice.com
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