Israel, Saudi Arabia Negotiating Economic Ties: Report

London: Saudi Arabia and Israel are in talks to establish economic ties, a dramatic move that would put the Jewish state on a path to normal relations with country that houses two of the holiest Muslim cities.

Daily Times quoting Arab and American sources reported that the links would start small: allowing Israeli businesses to operate in the Gulf, for example, and letting El Al, the national airline, fly over Saudi airspace.

However, any such progress would bolster the alliance between Iran's two most implacable enemies and change the dynamics of the many conflicts destabilising the Middle East.

The possibility of closer ties with Israel would partly explain why Saudi Arabia and its allies have imposed a sweeping blockade on Qatar, in an effort to force the Gulf state to drop its support for Hamas, the Palestinian resistance movement which controls Gaza.

The development comes close on the heels of President Trump's recent visits to Saudi Arabia and Israel. Mr Trump has boasted that his administration can produce a settlement in the Middle East that has eluded all of his predecessors.

Economic ties would not be altogether unprecedented -- Israel had a trade office in Doha until early 2009, when the Qataris closed it at the height of the Gaza war -- but such a shift would be the most public alliance between Israel and the Gulf in nearly a decade.

The prospect has become a source of controversy in the White House. Jason Greenblatt, the president's top envoy to the region, has taken a conventional approach to the peace process, trying to lure the Israelis and Palestinians back to talks, but he has clashed with Jared Kushner, Mr Trump's son-in-law, who has become close to Mohammed bin Salman, the Saudi deputy crown prince, The Times report said.

They have discussed an "outside-in" approach, by which Gulf states would improve ties with Israel as a prelude to a peace agreement -- and full recognition of Israel by Gulf and Arab states, according to the report. Only Egypt and Jordan currently have diplomatic relations with Israel.

The Palestinians are privately furious about the idea, fearing that it would normalise ties with Israel while giving them only the vague promise of a future state. In 2002 the Arab League adopted a Saudi proposal allowing for a general recognition of Israel in return for a peace deal with the Palestinians and a withdrawal from the occupied territories. Binyamin Netanyahu, the Israeli prime minister, has never formally responded to the offer.

Israel and the Gulf states have been quietly building security ties, motivated by a mutual fear of the Islamic Republic. A Saudi delegation led by a retired general made a trip to Israel last year and senior Israeli officials are keen to expand the alliance. "I think it's much better to co-operate on economic issues than the fight against terror," said Avigdor Lieberman, the Israeli defence minister. He praised efforts to isolate Qatar.

Riyadh and its allies are furious with their tiny neighbour because of its ambivalent attitude to Iran, broadcasts of state-funded Al Jazeera and its continued support of the Muslim Brotherhood, an anathema to both Saudi Arabia and Egypt.

Riyadh has demanded that Qatar cease support for Hamas and it expelled several of the Hamas leaders, including Salah al-Arouri, who is accused by Israel of organising attacks in the occupied West Bank. Qatar is unlikely completely to sever ties, though, and if it did the move could backfire for Israel: Qatari aid has been crucial in rebuilding Gaza, parts of which were devastated by the 2014 war.

There is a fundamental difference in the approach to counterterrorism taken by Qatar -- which wants to maintain dialogue with all groups, including Iran -- and Saudi Arabia, which is keen to maintain relations with the US by taking a hard line against all Islamist groups.

Qatar is playing it cool, protesting its innocence and refusing to indulge in personal attacks on the Saudi leadership. If the stand-off continues, Qatar may well suggest that Mr Bin Salman is driving Saudi policy towards an accommodation with Israel and may try to undermine the likely successor to King Salman and galvanise Islamist opposition to the House of Saud, the report said.

Israel appears to be waiting for the dust to settle, while declining to make concessions on a Palestinian peace plan. Saudi Arabia may be ready to open an informal liaison office to co-ordinate its interests with Israel, the report added.