Jerusalem and Manama have apparently achieved what President Trump took to Twitter to label a “HISTORIC breakthrough”. With the normalization of relations between Bahrain and Israel, following hot on the heels of the normalization of relations between the UAE and Israel, the administrations of Netanyahu, Trump, and the House of Khalifa have achieved a victory of sorts. 

Attempts to promote better relations between the Persian Gulf states and Israel have been more or less a constant of American policy in the Middle East at least since the end of the Suez Crisis in 1956 and perhaps even before. Any past mutual alignment of interests has been overshadowed by continuing disputes over Israeli actions regarding Palestine, preventing an agreement from being reached. Indeed, the Palestinian National Authority denounced the deal as another “stab in the back” for Palestinian ambitions for independence.

So what  has changed in the last few months to break the impasse? Three key factors appear to be driving the ongoing realignment. Firstly, access to Israel’s technological markets and large reservoirs of talent. Secondly, American withdrawal in the Middle East. Finally, an empowered Iran. 

See, the Gulf states have a problem. They’re states that depend mostly or entirely on oil. For a long time, they occupied a spot at the top of the economic food chain, with their hands firmly wrapped around the beating heart of the global economy. According to an analysis by the RAND corporation, they collectively control a staggering 50% of the world’s oil reserves

But the oil money is running out. Even the Saudis, the largest and most influential state in the region, could be bankrupt in 5 years. More concerning for policymakers in the Gulf states is a significant rise in oil imports from the People’s Republic of China, backed by a powerful state willing to finance literally limitless amounts of spending (like Oman’s Duqm port) in the name of geostrategic goals, has tied the Gulf States to a regime they’d rather not be beholden to, given that they prize their independence. Even more ominous for them, the rise of cheap and effective fracking has uncoupled the US from its historic energy sources in the Mideast, giving the US a freer hand in dealing with the Gulf states., It has also contributed to an oil price slide. For countries like Bahrain, who generate around 70% of their government revenues from sales of oil, this isn’t just inconvenient. It’s disastrous. The situation is even worse for Kuwait, which obtains 92% of its revenues  from oil money (and 40% of its GDP).

The tiny Gulf states are staring right down the barrel of economic collapse in a decade or less. The oil price crater earlier this year (with some oil futures even briefly dipping below zero) is likely to have crystallised this threat in the minds of officials who remained unconvinced of the need to wean their countries off oil. Oman, for instance, faced a second sovereign debt downgrade this year, with the rating agency Moody’s citing fears of continued erosion in the country’s finances, and a dim view of the likelihood of restoration of the country’s fiscal buffers. 2020 is likely to be the seventh year in a row that Oman’s government will run a fiscal deficit.

Faced with this terrifying prospect, many have begun the difficult process of diversifying their economies away from oil. Oman, for example, established in June of this year a Cyber Defense Center. With that move, they join the serried ranks of the other Gulf states who have, variously, invested in cryptocurrencies, data hosting, smart cities, fintech, and AI. Technology is, apparently, the way forward.

Given this context, it is not surprising that the Gulf states are starting to align with a country that still has a preposterous number of startups per capita, many of which are tech-based. The Gulf states need people and they need knowledge. Israel has both in spades. That’s factor one. 

Factor two is also likely highlighted by recent events – in particular, attacks on Emirati and other oil tankers which the U.S. has done little, other than the cosmetic, to redress. It is not surprising that a country whose foreign minister has stated that “we all must take a collective stand … to take the necessary steps to protect our nations from rogue states,” might seek to pursue better relations with at least one state offering protection to them. No prizes for guessing which “rogue state” Bahrain’s foreign minister is alluding to in the above quote (Iran). Bahrain’s hostility to Iran is deep-seated, given that it faced a coup in 1981 supported by the then-budding Islamic Republic. Many of the other Gulf states aren’t exactly fans of Ayatollah Khamenei’s regime, either. Recent events have inflamed tensions further. Long-standing rivals of Iran, Saudi Arabia, for instance, had their oil fields bombed in 2019 by IRGC-backed forces.

The UAE, Bahrain, Israel, and the rest of the Gulf states also share security interests in combining forces and intelligence against violent Islamist groups like al-Qaeda, Daesh, and Iranian proxies such as Hamas, the Houthis, and Hezbollah. Again, the American withdrawal has left the Gulf states and Israel feeling insecure and vulnerable. 

Factor three is an empowered Iran. If fear of Iran is the anvil on which the deal is forged, a strengthened Iran is the hammer striking the hot steel. The total failure that was the Obama-era JCPOA (popularly known as the Iran Deal) line of policy has led to, at best, a short term slowdown in Iranian nuclear capabilities. The Trump administration’s withdrawal from the deal and the reimposition of sanctions has been slightly more effective in checking the power of the regime. The Iranian people are growing more disaffected by the day with their government, placing the blame for economic woes on their leaders, as opposed to foreign governments, by a 16-point margin.  

But there are problems. America’s European allies, as well as Russia and the PRC, are uninterested in reimposing sanctions on the Iranian regime, and Beijing looks ready to step in to draw a potentially useful ally in the Middle East closer. Not incidentally, it would thereby secure its oil imports at the same time. It was a mistake for the Obama regime to give Moscow and Beijing this opportunity by being so desperate for a deal in the Middle East ahead of the end of the President’s second term that they ended up dropping all sanctions in return for a deal that more or less admitted that Iran would eventually be a nuclear-armed power. On the flip side, the JCPOA did precisely nothing to control, for instance, delivery systems like ballistic missiles, which are unnecessary for any purpose other than propaganda if Iran doesn’t intend to eventually have a nuclear weapon. Worse, the enforcement apparatus of the JCPOA is toothless. Iran can, if it so desires, deny inspectors access to nuclear sites, as well as engage in a wide variety of activities that contribute toward the eventual development of a viable nuclear force. It can, for instance, import uranium and manufacture nuclear fuel. Further, the JCPOA let Khomenei’s regime stabilise in the absence of sanctions – for example, by upping its defense spending by 30 percent. Even worse, the JCPOA did nothing at all to address Iran’s ongoing sponsorship of militant groups in the region. The JCPOA defanged America’s most effective means of curbing Iranian bad behaviour without doing anything at all to address Iran’s major mechanism of exercising its power against the US and its allies.

These were fixable problems. It was possible to eventually develop the JCPOA into an agreement that would not eventually concede a right to nuclear arms to Tehran. Instead, by leaving, the US has enabled Moscow and Beijing to draw Tehran further into their respective orbits, while providing a pretext for Europe to continue to operate under the eased sanctions regime implemented by the deal.  

And all the while the Iranian regime’s pell-mell progress toward a nuclear weapon continues, albeit with an apparent setback recently, in the form of a mysterious explosion at their Natanz nuclear facility – the very same facility that was targeted in a 2010 cyberattack, allegedly by representatives of American and Israeli intelligence agencies. This explosion may well be a further symptom of insecure regional rivals feeling the need to act directly and with violence if necessary – an echo of the same sentiment that has underpinned the thaw in relations between Israel and two of the Gulf states this year.

It is possible that Oman, or Kuwait, or Sudan, or – whisper it – Saudi Arabia may be next in line to shake hands with Bibi. However, some Western foreign policy experts, like Kenneth Pollack at the AEI, remain uneasy, calling the new deals “positive move[s] born of negative circumstances.” For Pollack, American abdication and Iranian empowerment have forced Israel and the Gulf States closer together. The latter is a good thing, but the former risks greater regional instability in the long run, and it represents a serious break with the substance of American foreign policy.

The status of Palestine remains a focal point of regional conflict. But, Palestinian statehood is now viewed in less absolute terms for Bahrain and the UAE than it has been in the past, with Abu Dhabi and Manama deciding that their other interests are more important than their continued commitment to the Palestinian impasse. The other Gulf states may follow suit. And ironically, this may de-escalate the situation. The issue of Palestine is currently framed as a grand clash of civilizations, forming a rallying pole for all the Arab nations in the region. Localizing the conflict to the region most directly affected may even serve to grant both sides greater flexibility in the long-stalled negotiations over Palestine’s future, stimulating progress towards a peaceful resolution. And that might even lead to meaningful change on the issue of the West Bank. Israel, for their part, are likely to come under increased pressure to pull settlers out.

Regardless, it’s clear that there’s been at least a slight lapse in tensions in a region rife with conflict – in itself a good thing. The continued normalization of relations between the Gulf states and Israel can only contribute to a more stable balance of power in the region. We are seeing the beginnings of a viable local counterbalance to an increasingly assertive Iran. Let us not forget, Iran is now willing, in concert with the People’s Republic of China, to do that which is both blatantly unlawful and hostile to Western interests. They are willing to do things like blockade international waterways and seize tankers, as well as continue their funding of militant groups in the Middle East and elsewhere. Iran is still a rogue state in the full sense of the term.

Bahrain now becomes only the fourth country in the region to normalize relations with Israel. And that is a good start. Here’s to many years of friendship.