Key to Mideast Peace May Lurk Within the Economy

that embroils other nations, including the United States. A lasting formula for peace is flamoxt generations of political leaders, and yet out of the public eye, the wheels of peace are turning, not at the diplomatic table, and not on the vaunted roadmap, but in the world of business and in the economy. And if those wheels keep spinning, maybe, just maybe we'll see movement on the political side as well.

That's what we'll be talking about today on Benchmark. I'm Scott Landman and anomics editor with Bloomberg in Washington, and I'm Daniel Moss, Executive editor for Global Economics with Bloomberg in New York. The reason peace is becoming less out of reach note that contortion has to do with the fact that Israel and its economy have been a hotbed of technological innovation fees innovation that's forcing otherwise hostile Arab

neighbors to look at ways they could also benefit. Trade and collaboration in technology and intelligence are flourishing below the radar between Israel and a host of Arab states, one of which is Saudi Arabia. The big question is whether this is really putting us anywhere down the road to a normalization of relations. There are a lot of caveats, and whether this will affect relations with Palestinians or Iran is another question. But just the fact that Israelis and Saudis,

for example, are quietly getting along in one way. As a start, Let's turn to Jonathan Ferziger, a reporter for Bloomberg in Tel Aviv. John has been following this angle closely. He joined us today from our office that John, thanks for being with us. Thank you, Dan, It's good to be with you both. But where are these connections happening between Israeli's and people from Arab nations? Tell us the story.

Most of the connections are made in third countries, generally in Europe and the US, but also close by and Jordan and Turkey. Often the contacts are made at international conferences or through middlemen. It's not really a new phenomenon. Israeli's Arabs have been doing deals for years. But what's new is that it's starting to come out of the closet. And why do they have to go through such cloak and dagger techniques to do this? And is it becoming

less than before because it's technically illegal um. The air world is essentially officially at war um with Israel since there have been peace agreements with Egypt and Jordan's, but it is illegal in most of these Arab states to do business with Israel. So what are these deals? How are they happening? So the greatest demand right now is for cybersecurity, that's where Israel has developed some of the

most advanced techniques Arab states. Also by Israel's desalination technology and water management systems used informing the super secret stuff involves military and aeronautic deals and they're done covertly with

some of Israel's biggest defense companies. So why are these kinds of deals coming out of the closet now instead of being concealed like you're before, Like you were talking about, Like I said, they are technically illegal and they've been going on for a long time, but the region is changing um and a lot of the Gulf countries are looking at Israel's technology and saying why not. They are trying to find a solution to Houstindian problem that is

the guerrilla in the room. And meanwhile there is some level of nuance trying to see if it's possible to get these products um and still keep things this greet and the respective governments where these companies are based. No, this is going on. I know that, you know that, I know that you know that. We know right, there's a lot of winking. Um it is h They don't want this to come out publicly. There are corporate constructs third countries and straw companies that are used to create

a level of plausible deniability. It's sort of like, um, hey, why are you doing business with Israel? And you say back, WHOA, I had no idea that companies Israelly. I was going to say if, for example, if the businesses is technically illegal, if the Saudi government decided, well, you know we we want to shut this down where we want to sanction these companies or put people in jail for dealing with Israel, could they just snap their fingers and do that right

now since it's all out there. They absolutely could and they have not put people in jail, but they've shut down, um, certain businesses. I was talking to one guy that was running tomatoes across the Jordanian border into Saudi Arabian and it came out publicly. In fact, the competitors said, hey, what's going on with Israeli tomatoes? And so they shut down that border crossing or they wouldn't let the trucks

go through. But as some of these products, especially the security products, the technology they want and they make it happen, so hiding to sound like an echo on make determinates here, it's follow the money and the ties will follow. Um, that's true. They are trying to find a way to thread this needle. Yes, there is a lot of history, there's a lot of hostility, but they're the Arab States and Israel are looking at each other and saying, oh my gosh, this going on for for seventy years, Um,

how can we do business together? Jonathan hold that thought. We're going to take a moment now to tell you about something new from Bloomberg. Starting right now, you can use our io s app or our new Google Chrome extension to scan any news story on any website, instantly revealing relevant news and market data from Bloomberg and other sources. So no matter where you're reading the news, you can bring the power of Bloomberg to you. It's pretty amazing.

Download out Io s app or search for the Bloomberg extension on the Chrome Store to try it. Learn more at Bloomberg dot com. Backslash lands. All right, and we're back with Jonathan Ferziger. Jonathan, you wrote a lengthy article for Bloomberg Business Week recently about this topic. In my opinion, it's one of the most undertold parts of the Israel

story these days. You know. You all usually always here is about about the issues between Israel and the Palestinians, or the war in Syria, so on and so forth. Is there any chance that these kinds of business ties are going to extend to the diplomatic sphere or have they already extended in that direction. It's just something that we don't hear about that much. Yes, it's happening. The strongest expression is in the so called Arab Peace Initiative,

and that dates back to two thousand two. The deal is that Israel can have peace and business relations with fifty seven Muslim states the entire Arab world. Further um, as long as it resolves things with the Palestinians, and that would mean Israel's complete withdrawal from the West Bank from the Gazasriban East Jerusalem, which Prime Minister N'tanyao is not prepared to do. He says publicly that the air Plan is a good start, but only if he can

fiddle with some of its provisions. So the business aspects are not ready to come to the surface yet, but they're happening, okay. But there we seem stuck in the traditional dialogue when what's actually happening sub rosa is corporate links between Israeli based companies and Arab firms are becoming more and more intimate. That's right. One of the uh interesting bits of the story that was in Bloomberg Business Week was about one of the biggest defense companies in Israel.

It's called Albert Systems, and they're interesting for lots of reasons. For one thing, the shares trade on Nasdack. Just two years ago, one of Elbot's employees from the u S subsidiary went to Saudi Arabia to fix a missile installation. Now, this kind of stuff is usually kept secret. In this case,

the Elbot employee was found dead outside his hotel. It's still not certain if he was murdered or jumped out of the window, but it's the most public evidence so far that a big Israeli company like Elbot is active in Saudi Arabia. That this mysterious death peaked our curiosity. So my Blumber colleague Peter Walton, went to Elbert's US facility in New Hampshire and he found some interesting practices.

The employees there told him that when Gulf customers come to visit, managers would take down Hebrew signs, maps, and any markings indicating Israeli origins. I called Elbot spokeswoman about that, and she said that's not company policy. I found that anecdote really interesting, Jonathan, because you know, wouldn't these Gulf customers know that Elbot is an Israeli company even if they're visiting the office in the US, whether or not

that's officially company policy. That sounds kind of like a um non denial of the of the information you had in the story. But you know, is that really just

for show purposes? Just to kind of keep up the fiction that these Arab states are not dealing directly with Israeli Israeli companies, Well, of course, yes, no, um, yes, there's a general sense that um these are that there their relations between two and yes, if you look at Elbot, uh, any serious customer knows that Elbot Systems of America is a branch of the Israeli company. So yes, there's a lot of thinking and nodding, talk about winks and nods.

One of the most compelling anecdotes Jonathan, is how is Riley technology almost got used and how the Saudi royal family manages the pilgrimage to Mecca of all things. Yeah. This grew out of a mega project in which a security system that was developed on an Israeli key boots on a farm was installed in the Gulf Emirate of Abu Dhabi. The contract was worth about six billion dollars.

That got the company's chairman thinking about how to sell elsewhere in the Gulf, with the ultimate prize being Saudi Arabia. And it took a lot of nerve, you might say, hutzba to pitch this contract. The idea was to root out unauthorized people who try to reach Mecca during the annual Hodge religious pilgrimage. In the end, the deal went to a Saudi company, even though the Israeli technology is

said to have been judged to be the best. Now these ties happening as the Saudi Arabian government itself wants to reinventage economy. Talk about that a bit. It's interesting. The guy in charge of overhauling the economy in Saudi Arabia is the Deputy Crown Prince, Mohammed bin Selman. He doesn't come out and say this openly, but some of his aids are very clear that Israel is on their map.

There's a Sally lobbyist in Washington we talked to who's close to the Deputy Crown Prince, and he told us there's no question that they're in the market for Israeli technology again in the fields of cyber security, desalination, and agriculture. On the other hand, when we asked for a Palace response, the official position was that Saudi Arabia has no commercial

relations with Israel. So the bottom line here is this kind of peace in the business and economic world going to keep extending, keeps breading, deepening, regardless of what happens with the Israel and Palestinian question. Well, you know, it's it's certainly possible, but but heart safe. For sure. The formula of business essentially lubricating the way for political compromise has been out there for decades um. Certainly it's part

of the Oslo Piece Accords. There's some strong political forces and strategic interests that are bringing the Gulf States to build ties with Israel. But again, nobody wants to be seen as abandoning the Palestinians. So most people I talked to said that the prospects for public deals with Israel are still pretty dim for now. At the same time,

this under the radar business keeps on growing. So with these economic and technological forces bearing down relentlessly on the relationship, is it entirely possible peace could be made among these nations the Palestinians left at the altar. You know, I don't think that that's going to happen. Although it looks like it. Every time that a deal uh looks like it's it's coming together, it doesn't. There have been fifty years since the nineties seven Six Day War, and every

time that you have a piece initiative. It just seems to fall through the through the cracks now as far as business happening despite the absence of a deal, as I say, it is growing under the radar um, but I don't think that they're ready to leave the Palestinians high and try like that. Jonathan, this has just been a really interesting talk. The article you wrote is fascinating and I would urge anybody listening to this podcast to go and check out that article in Business Week. Jonathan Ferziger,

thanks so much for joining us today. Thank you, Scott, Thanks Dan. Benchmark will be back next week and until then, you can find us on the Bloomberg terminal, Bloomberg dot com, or Bloomberg app, as well as on Apple Podcasts, pocket Casts, and Stitcher. While you're there, take a minute to rate and review the show so more listeners can find us and let us know what you thought of the show. You can follow me on Twitter at at Scott Landman, Dan you are at moss Underscore Echo, and Jonathan you're

at at at. Benchmark is produced by Sarah Patterson and the head of Bloomberg Podcast is Alec McCabe. Thanks for listening, so you next time