Saudi Arabia on the brink of a breakthrough

Its economy in trouble and its regional leadership challenged, Riyadh is in talks that would reshape the Middle East

In the final weeks of November, Saudi Arabia’s foreign policy machine went into overdrive. Riyadh announced a series of defense and commercial agreements strengthening bilateral ties with Egypt, Iraq and the United States.

But while Saudi diplomats were traveling around to increase Saudi Arabia’s influence in the Greater Middle East, recent meetings between Saudi and U.S. officials may well lead to a breakthrough closer to home in the Gulf.

A U.S. delegation visit to Riyadh during the first week of December seeks to hit two birds with one stone: putting an end to the more than three-year crisis between Gulf countries and Qatar, and starting the process of diplomatic normalisation between Saudi Arabia and Israel.

While the United States has had success getting countries like Bahrain and the United Arab Emirates to adjust their regional diplomatic policy, the Saudis have been the hardest to budge.

The kingdom considers itself the natural, de facto leader of the Gulf and Sunni Arab world, and for some time reckoned it could not afford to lose political credibility by realigning itself with a historical rival (Israel) and a neighbour (Qatar) whose brand of religious ideology and independent foreign policy are considered a threat to Saudi regional influence.

But a breakthrough is more likely than ever, as a combination of waning regional influence, financial constraints and shifting fault lines in the Middle East push Saudi Arabia to explore normalisation with Israel and Qatar.

Leadership Contest

Saudi Arabia has traditionally been considered the effective ideological and religious leader of the Sunni Arab world.

The country’s vast oil wealth, combined with its custodianship over Islam’s holiest cities, Mecca and Medina, and location at the crossroads of Red Sea and Persian Gulf trade routes, make it a natural Gulf power.

Saudi Arabia was at the forefront of the Middle East’s modern political rifts, considering itself the moral and religious guardian of the Arab world in opposing Israeli annexations, upholding the Palestinian cause, taking the reins of the Arab League and Gulf Cooperation Council, and later, in the years after the 1979 Iranian Revolution, leading its Sunni allies in countering Iran’s Shiite Crescent strategy. But Saudi Arabia’s star is dimming.

The kingdom’s over-reliance on its oil industry (where prices are stubbornly low due to COVID-19 and oversupply), demographic challenges, and a 2030 Vision reform program on shaky ground have chipped away at its regional credibility and relative strength with its neighbours.

Additionally, the al-Saud royal family’s record on human rights and the country’s war i n Yemen have alienated traditional partners like the U.S. and the EU. All the while, the UAE – a country less than 4 percent the size of Saudi Arabia – has made a series of ambitious foreign policy moves that have begun to overshadow Saudi Arabia as regional leader.

The UAE has taken the lead in the ideological battle on political Islamism: Abu Dhabi has reportedly funded mercenaries and has armed the Libyan National Army against the Turkish- and Qatari-backed Government of National Accord in Libya; has been at the forefront of strengthening Gulf ties through the Eastern Mediterranean Gas Forum against Turkish expansionism in the Mediterranean; and, notably, was the first among its Gulf neighbours to initiate peace with Israel this year. Gone are the days when Riyadh could depend on its cultural soft power to maintain its Gulf hegemony and regional leadership.

While the Saudis have been on the sidelines, their Gulf peers have seen a flurry of economic and political opportunities from normalizing ties with Israel. In the four months since Israel and the UAE reached their agreement, they have signed a string of memorandums of understanding on banking and finance, commerce and trade infrastructure, and even an oil pipeline deal worth as much as $800 million that would transport Emirati oil to Europe via Israel’s ports of Eilat and Ashkelon.

Bahrain, which also normalised ties with Israel, hasn’t been far behind, inking business cooperation deals with Israel’s Chamber of Commerce and aviation agreements. Both countries have proved that normalisation can bring economic rewards at a time when most Gulf economies, particularly Saudi Arabia, desperately need diversification.

Riyadh is therefore in discussions with Washington about rapprochement with Israel.

At first, Saudi Arabia worried that normalisation with Israel would risk its regional legitimacy, but now it’s considering that the reverse may be true. An Israeli-Saudi peace deal could help Saudi Arabia catch up to its Emirati neighbour with a series of investment, commercial and infrastructure agreements that would create new regional trade and financial hubs between the Red Sea and the Mediterranean.

The U.S. and Israel have also reportedly hinted that joint custodianship over Jerusalem’s Al-Aqsa Mosque would be on the table – something that would enhance Saudi Arabia’s reputation as the Islamic world’s religious guardian (but could also cause tensions with Jordan, the current sole custodian of Al-Aqsa).

And, importantly, Riyadh would look to use normalisation to position itself as a mediator for an Israeli-Palestinian peace deal, which would score it major points among regional partners, the U.S. and the international community.

For the kingdom, the political short-term and economic long-term payoffs are worth the risk of changing its traditional stance.

Countering Iran and Turkey

Political credibility and economic opportunity aside, the kingdom has another significant reason for normalisation. By realigning with Israel and Qatar, Saudi Arabia and its Gulf partners would be able to further isolate two of their primary rivals in the region: Iran and Turkey.

For Israel and Saudi Arabia, Iran is a common enemy. As Iran has augmented its strategic depth in the region over the years, building a proxy network that extends from the Zagros Mountains to the Red Sea and Mediterranean, Saudi Arabia and Israel have found greater incentive to work together. Over the past two decades, the two countries expanded cooperation and intelligence-sharing behind closed doors, keeping relations ice-cold only on the surface.

But as the Gulf begins to open up toward Israel, Saudi Arabia has an opportunity to expand its coalition against Iran beyond traditional Sunni Arab lines and include one of the top military powers in the region in its circle.

The same logic applies to the Gulf Cooperation Council’s broadening campaign against Turkish i nfluence i n the region. As Turkey has gotten more deliberate about expanding its influence and control, Saudi Arabia and its Gulf counterparts are recognizing that they share an interest with Israel in opposing Turkish expansionism.

Saudi Arabia, the UAE, Egypt and their Gulf partners (excluding Qatar, of course) have been vocal opponents of Turkey, accusing the ruling Justice and Development Party of supporting political Islamist movements like the Muslim Brotherhood. And for Saudi Arabia in particular, Turkey’s neo-Ottoman approach and brand of Islamic identity politics is seen as a challenge to its leadership over the Sunni Muslim world.

Meanwhile, Israel has had hostile relations with Turkey since the 2010 Gaza flotilla incident and has become engaged in an ideological war of words with Turkish President Recep Tayyip Erdogan over the status of Palestine. Israel has resented Turkish attempts to take up the torch of the Palestinian cause over the years; Ankara in September hosted mediation discussions between rival Palestinian factions, Hamas and Fatah, to encourage unity against Israel, and has been a vocal opponent of Israeli annexations and

Israeli peace deals with Arab Gulf states. Israel is also a member of the Eastern Mediterranean Gas Forum, an emerging regional coalition that Saudi Arabia, the UAE and Gulf partners have begun to align with to amplify opposition to Turkish moves over maritime territory. When strategizing its next step against Turkey, Saudi Arabia is beginning to accept Israel as a natural partner.

Then there is the question of Qatar. Normalisation with Qatar offers a different, but more delicate, opportunity for Saudi Arabia. Doha has a relatively positive relationship with Iran and an intimate partnership with Turkey, as well as a Sunni ideological platform that runs counter to Saudi domestic interests. Saudi Arabia and its Gulf partners have criticised Qatar for alleged support of Islamist groups like the Muslim Brotherhood and have framed Qatar as an agent of foreign efforts to thwart regional stability through Islamist infiltration.

Of course, intra-Gulf tensions infamously came to a head in 2017 when Gulf states severed diplomatic relations with Doha and enacted an air, sea and land blockade, isolating Qatar from its former Gulf allies.

The ideological rivalry has by no means abated, particularly as Saudi Arabia and the UAE have countered Qatari i nfluence i n new theatres like Libya and have continued to accuse Doha of supporting Islamists. Shortly after the 2017 blockade, Qatar normalised relations with Iran and enhanced bilateral trade in gas and shipping. And since the diplomatic crisis, Qatar has become Turkey’s most reliable regional ally, offering Ankara financial relief through currency swap deals, investing in joint defense projects abroad and boosting trade relations. Unlike Israel, Qatar does not seem like a natural partner in broadening the regional coalition against Iran and Turkey. However, it could serve as a useful agent to isolate Saudi Arabia’s rivals.

As the sun sets on the current U.S. administration and Trump’s Middle East team scrambles to assemble a series of legacy-sealing deals before Jan. 20, 2021, Riyadh sees space for maneuver.

By extending an olive branch and lobbying the U.S. to apply pressure on Doha, Saudi Arabia and its Gulf partners are working to rein in Qatari influence and convince it to end its engagement with Iran and Turkey. While the exact details of what a deal would look like are uncertain, Gulf countries have insisted since 2017 on a 13-point ultimatum that includes demands to close a Turkish military base on Qatari soil, sever all ties with the Muslim Brotherhood and other Islamist groups, shut down diplomatic posts in Iran and limit Iranian-Qatari ties to trade and commerce that strictly complies with U.S. sanctions.

Though Qatar has been reluctant to yield to these demands, the incentives for re-initiating relations with its Gulf neighbours are increasing. Thanks to Qatar’s mammoth-size gas reserves (the third largest in the world), ramped up domestic production, and boosted economic ties with the U.S. and Turkey, the 2017 blockade didn’t entirely devastate the Qatari economy. However, the logistical issues remain as Qatar is cut off from the countries where 60 percent of its imports (namely food and supplies) transit through.

While Turkey and Iran have served as alternative supply routes, resolving the crisis with the Gulf Cooperation Council countries would ease these logistical conundrums as well as reintroduce Qatar into the Gulf’s expanding financial and trade hubs. If Doha was pressured to concede to such a deal, Turkey and Iran would be further isolated in the region. Of course, a snap decision on the Gulf crisis will likely not be ironclad, as tensions between Gulf states and Qatar linger beneath the surface, but it would put restrictions around Qatar’s foreign engagement – threatening to deprive Turkey of its sole regional ally, and weakening Iran’s foothold in the Gulf.

As meetings between U.S., Israeli, Qatari and Saudi officials continue into December, an opening between the Gulf’s de facto leader and its traditional rivals becomes more likely. With a precarious long-term economic outlook, waning religious and political credibility, and a fragmented regional campaign against Turkey and Iran, Saudi Arabia is indicating it no longer wishes to wait when it comes to peace with Israel and Qatar.