Context:
Donald Trump, who is known for his bold negotiation tactics, proposed on February 4, 2025, that Gaza’s 2.3 million residents be relocated to Egypt and Jordan while the U.S. would redevelop the strip into a global tourist hub. This highly controversial proposal has sparked widespread reactions, with Saudi Crown Prince Mohammed bin Salman (MbS) stating that Saudi Arabia would not establish ties with Israel without a Palestinian state.
Key Highlights:
Key Trump Proposal & Reactions
- Trump proposed depopulating Gaza and making it a “riviera for the world’s people”. Netanyahu sided with Trump on this.
- MbS took exception, reminding everyone that ties between Saudi and Israel need to have a two state solution. The proposal appears to be maximalist bargaining. The stakeholders have no choice but to present their counter offers.
West Asia Geopolitical Reconfigurations
- This is an area that has undergone massive turmoil since October 7, 2023, making all previous assumptions crumble.
- Israel’s military supremacy has been threatened.
- Iran’s strategic control in the area from the Red Sea to the Mediterranean has declined.
- The Axis of Resistance (Iran, Hezbollah, Hamas) is temporarily neutralized but could revive.
- The war has redefined political alliances, with Saudi Arabia playing an increasingly central role.
Trump’s Foreign Policy Approach
- He remains impulsive and transactional, prioritizing economic deals but still deeply entangled in global conflicts.
- His expansion of the Abraham Accords is now complicated by Palestinian statehood demands.
- Ultra religious Jewish groups in Israel and hardline factions in Syria add further unpredictability.
Economic Consequences
- Conflict Driven Economic Destruction Gaza reconstruction: $50 billion for 170,000 destroyed homes.
- Lebanon damages: $8.5 billion due to conflict.
- Syria war costs: Some $500 billion over 13 years. .
- Western sanctions exacerbate the challenge of recovery.
Structural Economic Challenges
- West Asian economies remain dependent on oil, but global demand is expected to decline by the decade’s end.
- Trump’s climate and energy policies, such as withdrawing from the Paris Agreement and pushing for more oil drilling, may disrupt energy markets.
- A powerful U.S. dollar is rendering West Asian economies less competitive.
Saudi Arabia’s Critical Position
- With a $1.07 trillion GDP, Saudi Arabia has dodged severe war related damage and continues to be the region’s economic powerhouse. MbS has consolidated power, managing relationships with Iran, Qatar, China, and the U.S.
- The Saudi Public Investment Fund ($930 billion) and Aramco’s $1.79 trillion market cap place the Kingdom in a position of great financial leverage.
- Trump and MbS’s relationship is the key, as MbS is said to have offered $600 billion in U.S. investments, which Trump countered by asking him to round it up to $1 trillion.
Challenges & Outlook
- Normalization now hinges on the Palestinian state, which Israel’s Parliament has already officially rejected.
- However, tensions notwithstanding, Saudi U.S. re engagement is key to provide funding for the reconstruction of this region and urge diplomatic solutions
- The potential of Trump’s ability to squeeze concessions from Israel while keeping its Arab allies’ support will frame the future for West Asia
Abraham Accord
The Abraham Accords are bilateral agreements signed between Israel and the UAE and Bahrain on September 15, 2020. These deals, mediated by the US, concern Israel and the UAE before Israel and Bahrain. The signing was hosted by US President Donald Trump on the Truman Balcony, where he hoped to evoke historic peace treaties that were otherwise relevant only in previous administrations.
