A good deal in bad neighborhoods: Why the Gulf’s best bet remains in Jerusalem - opinion

Every year, just a few days before Rosh Hashanah, Israel’s Finance Ministry publishes the outgoing year’s economic balance sheet. Entering a fourth year of war, what Israel has pulled off is nothing short of remarkable. 

With a 3.3% unemployment rate (well below the OECD average), a rising GDP per capita of around $60,000, inflation under 2%, and foreign investment nearly doubling over the past year, Israelis have a lot to be proud of.

Through what is its longest war, Israel has done what few thought possible three years ago: cemented itself as an undisputed, stable economic powerhouse in the world’s most dangerous and unstable neighborhood.

Just look across the borders. Every single one of Israel’s neighbors faces crippling water and energy deficits, but their problems don’t end there.

Lebanon can barely call itself a sovereign state, having long since surrendered what sociologist and political philosopher Max Weber defined as a government’s baseline test: a monopoly on the legitimate use of physical force.

Syria, even as its new transitional authorities attempt to piece together the post-Assad state, remains fragmented and fragile. Egypt and Jordan maintain a cold peace with Israel, but both are in economic shambles.

Cairo splurges tens of billions on megaprojects, a glittering new administrative capital and sprawling sports cities, while its citizens face soaring unemployment and poverty.

In Jordan, millions remain classified as refugees despite living in the kingdom for generations, maintaining a persistent resentment toward the crown.

Not many know this, but the most coveted prize for a growing subset of Jordanians today is simply a daily work visa to cross the border and sweep floors in Eilat.

Further south, the siege on Hormuz shattered another illusion: the promise of a unified Arab Ummah (nation). 

Despite the so-called Sunni alliance, these states failed to protect their skies from an Iranian missile onslaught, or safeguard their two main economic engines – commercial aviation and oil exports – from Iranian and Houthi strikes, simply because they never established a joint and proactive preventative defense.

Meanwhile, Israel is doing, at least in an economic sense, pretty damn well for itself. This simple fact puts the region in a spot where, no matter what MENA governments say or do publicly, doing business with Israel remains their best bet.

The survival of the Abraham Accords proves it. Anti-Israel sentiment may be rampant on the Arab streets, but the Accords’ primary beneficiaries, the UAE and Morocco, continue to expand their trade and investment ties with the Jewish state.

Trade with the Emiratis has surpassed $3 billion this year. Morocco’s trade numbers look smaller at around $400 million, but you mustn’t tell their masses that over 10% of their defense imports now originate in Israel – for fear of sparking a riot.

The past

As we enter the seventh year of the Abraham Accords, it is easy to see why the diplomats can’t stop congratulating themselves. 

Grafting a hyper-productive tech economy onto a volatile neighborhood yields what economists call a synergistic surplus – and what real-world operators simply call a damn good deal.

The sight of Arab ministers gathering at Sde Boker for the 2022 Negev Summit to talk supply chains, desalination, and Iranian drones was the ultimate proof of concept.

Just months prior, the idea of foreign dignitaries chatting over coffee in David Ben-Gurion’s backyard was pure fan fiction.

Yet for all the anti-Israel rhetoric echoing through their capitals, regional leaders recognized that Israel’s structural stability is too useful to ignore.

Nowhere is this truer than in the defense sector. Under pressure from Iranian proxies and domestic instability, Arab monarchies are quietly doing joint drills and sharing radar data with the Israelis.

Washington, ever keen on maintaining Pax Americana on the cheap, essentially forced the marriage by shifting Israel into CENTCOM’s jurisdiction.

This presumably bland administrative reshuffle placed Israel and its Arab neighbors at the very same war room table, locking off-the-books security hookups into a permanent military apparatus.

Yet the Accords were never flawless. Lasting, mutually beneficial peace relies on three distinct tiers, and so far, the foundation remains uneven.

The first tier belongs to top-level elites: state officials and mega-corporations.

Opening an embassy in Abu Dhabi or watching business tycoons mingle at Negev resorts makes for great photo-ops, but these backchannels existed long before formal normalization, and they would survive a diplomatic rupture just as easily.

Sovereign governments don’t need a physical flag in Tel Aviv to move capital; an offshore shell company in Cyprus does the job with far less political noise.

The second tier is seemingly impossible to shift: the Arab street. Decades of entrenched anti-Israel sentiment do not vanish overnight. Look at the tourism numbers.

While hundreds of thousands of Israelis flooded Dubai, Abu Dhabi, and Marrakech, incoming visitors from the Gulf or Morocco were virtually nonexistent. But a lagging public does not cap the potential for a synergistic surplus.

The third tier is where the cheese lies: the middle-layer elites.

These are the agile, high-potential enterprises positioned just below the global giants – agrotech ventures, AI and semiconductor startups, independent energy developers, and cross-border logistics operators.

By stitching regional talent, capital, and technology directly into everyday commercial incentives, this middle tier builds the structural connective tissue that renders diplomatic peace not just symbolic, but unbreakable.

The future

Israel has an urgent incentive to anchor regional stability.

In a fracturing world order, supply chain disruptions and maritime chokeholds are becoming erratic and unpredictable. Expanding regional trade infrastructure is becoming a strategic imperative for Israel and its neighbors alike.

Executing this requires pursuing imperfect, high-stakes megaprojects.

Yet the risk of ambitious regional integration pales in comparison to the alternative: degenerating into an economic island tethered to over-regulated, low-growth European trading partners whose own geopolitical trajectory offers shrinking returns.

As I have argued previously in these pages, energy infrastructure is the ultimate lever for anchoring Israel’s regional standing.

The playbook is sitting right in front of us: combine capital-flush, tech-hungry Gulf states with the vast, sun-drenched, and labor-rich landscapes of Egypt and Jordan.

Consider an audacious proposition: a cross-border energy and compute hub in the Gulf of Aqaba.

Combine Saudi oil, Egyptian and Jordanian land and labor, and Israeli science and innovation. The resulting synergy unlocks a once-in-a-generation play: constructing and powering massive AI data centers using a hybrid blend of solar and oil for unbroken, 24/7 operations right in our backyard.

While the US and Western Europe collapse under acute grid constraints and local NIMBY resistance, a Middle Eastern AI corridor – with Israel as a load-bearing partner – would transform the region into one of the most indispensable nodes of the global economy.

This is not a project for the faint of heart – and neither are the alternative proposals on the table, whether a pan-Middle Eastern rail network linking the region to India or joint large-scale scientific endeavors.

Each requires Israel to have a hard-headed strategy and a serious appetite for risk.

Nor is it an easy pill for Arab governments to swallow, relying as it does on an “outside-in” peace model that prioritizes state-level alignment before resolving the Palestinian issue. Yet both sides would do well to take a cue from Alexander Hamilton.

Facing fierce opposition, Hamilton championed an imperfect framework because it was vastly superior to the status quo and flexible enough to evolve over time.

The document he fought for was the US Constitution – a deeply contested compromise that went on to power the most prosperous nation in human history.

The writer is a geopolitical analyst and former director of operations at Hashiloach, a policy journal. He can be reached at eewachs@gmail.com