Business Deals May Give Netanyahu an Excuse Against Annexation

(Bloomberg Opinion) -- Two of Israel’s largest defense companies have signed a historic agreement with Group 42 Inc. in Abu Dhabi, to work on technology solutions for the coronavirus pandemic. Group 42 specializes in cloud computing and artificial intelligence; Israel’s Rafael Advanced Defense Systems Ltd and Israel Aerospace Industries Ltd are best known for military technology; both were involved in the development of the Iron Dome missile-defense system.

All three companies are already involved in fighting the pandemic in their respective countries. Group 42 has offered the use of its supercomputers to researchers working on solutions for the disease. In Israel, the government mobilized defense companies against the outbreak.

The agreement is being portrayed as a joint effort against a global pandemic, born of necessity and for the greater good, but it is also part of pattern of deepening ties between Israel and the Gulf Arab states, catalyzed by their shared concern about the Iranian threat and about extremist groups across the region. Israel and the UAE have strong economic reasons for collaboration, as well: the former is a high-tech hub, and the latter aspires to the same status.

Israel and the UAE do not have formal relations, but there has been increasing outreach from Prime Minister Benjamin Netanyahu to the Emiratis over the past few years. Israeli cabinet members have visited Abu Dhabi and Dubai. The UAE has also been involved in the Trump administration’s effort to develop a new Israeli-Palestinian peace plan; an Emirati envoy attended its unveiling in Washington earlier this year.

The agreement between the three counties signals the importance Israel attaches to relations with the UAE. IAI and Rafael, both rooted in Israel’s government history of creating local national defense giants, stand at the apex of Israel’s most sensitive security needs.

For the UAE, an eagerness for mutually-beneficial ties with Israel is somewhat offset by concerns about Netanyahu’s plan to annex large portions of the West Bank. In early June, the UAE’s  ambassador to Washington wrote an op-ed in an Israeli newspaper, arguing that annexation would imperil “improved security, economic and cultural ties with the Arab world and the United Arab Emirates.”

The op-ed seemed to underline an important shift in Emirati policy. Previously, the UAE’s precondition for relations with Israel—based on the 2002 Saudi-led Arab peace initiative—was complete withdrawal from the territories seized in 1967. Now, it appears the Emiratis will be satisfied with the maintenance of the current status quo in the West Bank.

In this context, the timing of the announcement of the agreement is especially significant: It came after the July 1 deadline for the start of the annexations had passed without any effort by Netanyahu to follow through on his promises, potentially signaling he had listened to international—and Arab—voices calling on him to desist.

Maintaining the status quo may also be a necessary condition for the two countries to take their relations to the next level. Economic and commercial opportunities abound. A top executive at the Abu Dhabi sovereign wealth fund Mubadala Investment Co. recently called on Israeli venture capitalists to invest in start-ups to in Gulf Arab countries. Israel will have a pavilion at the World Expo in Dubai, which was originally scheduled to start in October, but has been postponed because of the pandemic.

For his part, Netanyahu appears to be seeking a way out of his promise to annex territory. The coronavirus crisis was a good excuse for delay, but strong economic ties may be a more lasting motivation. The prime minister has long boasted that he has helped build bridges to the Arab world; burning them now would tarnish that legacy. Business deals between Israeli and Arab companies, on the other hand, would burnish it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Seth J. Frantzman covers Middle East affairs for the Jerusalem Post. He is the author of "After ISIS: America, Iran and the Struggle for the Middle East" and executive director of the Middle East Center for Reporting and Analysis.

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