TEL AVIV — Just three years ago, Israel solidified its status as a regional superpower by signing the Abraham Accords, establishing full diplomatic relations with the UAE and Bahrain. Shortly after, Morocco joined the circle of Arab states normalizing ties with Israel.
Israeli officials spoke with optimism, believing their country could project power across the region and even on the global stage. Israel’s strength rested on three main pillars: robust democratic institutions ensuring political stability, military prowess and deterrence that made the nation an appealing strategic counterweight to Iran and its proxies, and a thriving economy driven by one of the world’s fastest-growing high-tech ecosystems.
However, as Israel nears a year since Benjamin Netanyahu’s return to power last November, leading the most right-wing government in the nation’s history, these pillars are showing signs of wear. The internal division over the country’s direction—whether it should lean more towards religious nationalism or democratic secularism—is evident, especially on the streets where over 100,000 protesters regularly rally against Netanyahu and his coalition.
Currently, the clash centers around Netanyahu and his religious settler allies’ efforts to weaken the supreme court. Opponents argue this would grant the coalition unchecked power, transforming Israel into an authoritarian state. Critics also believe this move could help the prime minister evade corruption charges, which he vehemently denies.
“Israel’s standing has suffered. Arabs are shaking their heads and asking ‘what’s going on?’ Israeli deterrence has suffered and its image of being able to influence Washington has also suffered.
Yossi Alpher, former head of the Jaffee Center for Strategic Studies
With a long and bitter internal struggle expected, and the military and economy already showing signs of fraying, Israel is starting to suffer an erosion of its position in the region, veteran political and strategic analyst Yossi Alpher, former head of the Jaffee Center for Strategic Studies, told TRENDS. “Israel’s standing has suffered. Arabs are shaking their heads and asking ‘what’s going on?’ Israeli deterrence has suffered and its image of being able to influence Washington has also suffered.”
Disunity and uncertainty are the catchwords as Israel experiences what commentators say is the worst internal crisis in its history. This comes at a pivotal time in regional affairs: the US is trying to put together a mega deal upgrade of its relationship with Saudi Arabia that could see Riyadh normalize relations with Israel.
Israel’s political crisis could impact this effort. For one thing, it is possible Netanyahu sees a breakthrough with Saudi Arabia as the key to escaping his troubles and besting the protesters. But at the same time, any concessions demanded by Saudi Arabia from Israel on the Palestinian issue will be anathema to Netanyahu’s ultranationalist allies, the same parties that are spearheading the judicial overhaul with him.
“Netanyahu has more of an incentive now to make a deal so he can show achievement,” Bruce Maddy-Weitzman, an emeritus professor at Tel Aviv University’s Dayan Center for Middle Eastern and African Studies told TRENDS. “But what price would he be willing to pay? Would it include [Saudi] enrichment of Uranium? And what concessions would he be willing to make to the Palestinians? How does he make those concessions without losing his government?”
Maddy-Weitzman has doubts that there will be a normalization agreement soon, stressing that the Saudis do not have the same enormous incentive that Morocco had for taking the step. “I don’t see the Saudis jumping into it in a big way, I see their approach as more let’s talk about it, let’s dangle it in front of the Americans. But in terms of leaping whole hog, they don’t have something equivalent to getting the whole of Western Sahara.”
Netanyahu has more of an incentive now to make a deal so he can show achievement. But what price would he be willing to pay? Would it include [Saudi] enrichment of Uranium? And what concessions would he be willing to make to the Palestinians? How does he make those concessions without losing his government?
Bruce Maddy-Weitzman, emeritus professor at Tel Aviv University’s Dayan Center for Middle Eastern and African Studies
Instability is increasing in the occupied West Bank, with concern mounting in the international community over the Netanyahu government’s moves to annex the area, a step that would be in contravention of Israeli commitments made to the UAE at the time of the Abraham Accords. Between the West Bank push and US dissatisfaction with the judicial overhaul, the Biden administration is showing a cooler than usual attitude towards Israel.
Israel’s fabled military is fraying, with combat pilots among thousands of reservists who normally do volunteer service now making clear that advancement of the judicial overhaul precludes them from serving under what they perceive as a dictatorship in the making.
“The current assessment is that our force is competent but there is harm to its readiness that is worsening” Maj.-Gen. Tomer Bar, the airforce commander-in-chief, was quoted by Israel’s Channel Twelve television as saying last month Other media reports quoted him with an even bleaker assessment. “Unity has been very much harmed, the airforce won’t be the same as it was, even if everyone comes back tomorrow.”
Alpher says the troubles of the Israeli military are not passing beneath regional radars. “We have to assume we are deterring our enemies less because they perceive that we are fraying. And we have to assume we are assuring our friends less. There is no silver lining.”
Adding to concerns of the UAE, Bahrain and other Arab states that have ties with Israel is the volatility and violence around the resonant Palestinian issue. Israeli army raids and Palestinian attacks on soldiers and civilians are intensifying. The loose cannon nature of key Israeli ministers Itamar Ben-Gvir and Bezalel Smotrich who support extremist settlers creates a climate where settler violence is growing. After an assault by hundreds of settlers on the West Bank village of Huwara in March, Smotrich called for it to be “erased.” Violence has continued to surge, with defense analysts saying there is a spiral effect of settler reprisal and other attacks helping to motivate Palestinian attacks on Israeli targets.
“If there is a major flareup, something really horrible, like ten Huwaras, it is hard for me to see Israel’s neighbors ignoring it or making do with just lip service,” Maddy-Weitzman says. “Countries looking for a modus vivendi with Israel will breathe a lot easier when things become more stabilized.”
But the repercussions of a troubled Israel go beyond deterrence and extremism. The internal crisis is also raising questions about Israel’s economic profile, including internationally. The sense of instability and the threat of the elimination of viable recourse in court for investors -stemming from the planned weakening of the judiciary- is sending Israel’s vaunted high tech industry into a tailspin, sector leaders say.
A survey of 734 high tech professionals representing 521 companies that was taken between July 18-19 by Start Up Nation Central, which promotes Israeli high tech to the world, returned discouraging findings. It found that 68 percent of respondents have begun taking active financial and legal steps in response to the judicial overhaul. These include withdrawing cash revenues, changing location of headquarters to outside Israel, relocating employees and laying off staff.
Start-Up Nation Central CEO Avi Hasson said in remarks featured on its website that the trend of moving activity abroad rose sharply during the three months before the survey. “Concerning trends like registering a company abroad or launching new startups outside Israel will be hard to reverse,” he said.
Zvi Eckstein, former deputy governor of Israel’s Central Bank, is forecasting a large slowdown in the Israeli economy “going all the way to a recession in the next year,” he said in a recent interview with CNBC. As Israelis gear up to celebrate the Jewish New Year on September 15, indications suggest it won’t be a joyous occasion for the nation and its regional standing unless internal unity is reestablished.