J Street supports a comprehensive regional agreement that ends the Israeli-Palestinian conflict and, in turn, provides Israel with full acceptance by the 22 member states of the Arab League. For this solution to work, the 23rd state must be Palestine. Besides the obvious security benefits of a 23-state solution, the potential economic benefits for all parties are innumerable.
The 2020 Abraham Accords between Israel and four Arab states – UAE, Bahrain, Sudan, and Morocco – have already borne economic fruit. The annual value of trade and investments between Israel and Abraham Accords countries was estimated to exceed $10 billion in 2023. The longstanding peace agreements between Israel and the bordering countries of Egypt (1979) and Jordan (1994) have also yielded decades of economic growth. Between 2021 and 2024, trade between Israel and its Abraham Accords partners, as well as Egypt and Jordan, increased by a remarkable 127 percent.
These proven economic benefits demonstrate that a comprehensive regional agreement, which includes the remaining 16 Arab League states, would bolster Israel’s economy while the country faces growing isolation and economic downturn. Instead of Netanyahu’s “Super Sparta” vision, Israel should embrace a 23-state solution for its own economic benefit and the flourishing of the entire regional economy.
The UAE was the first Abraham Accords signatory to officially normalize relations with Israel and has since become Israel’s largest Arab trading partner. According to the Israel Central Bureau of Statistics, UAE-Israel bilateral trade reached $2.95 billion in 2023.
After the UAE, Bahrain became the fourth Arab country to normalize relations with Israel. Bahrain-Israel bilateral trade reached $11.5 million in 2023, and the two countries have taken steps toward a free trade agreement (FTA).
Sudan became the fifth country and Morocco the sixth to normalize relations with Israel. While trade with Sudan has been stalled by the ongoing civil war there, Morocco-Israel bilateral trade reached $116 million in 2023.
Israel and Morocco signed an economic cooperation and trade agreement in 2022 with a five-year target of $500 million in annual bilateral trade. This agreement brings the two countries closer to a formal FTA, which could eventually develop into a free trade zone for the whole region. Next year, Israel is reportedly planning to appoint its first economic attaché to Morocco.
Israel and Egypt signed a peace treaty in 1979 that includes a commitment to “promoting beneficial economic relations.” Egypt has since become Israel’s second-largest Arab trading partner. In 2022, the two countries set a three-year target of $700 million in annual bilateral trade, and reached $477 million in 2023.
Israel and Jordan signed a peace treaty in 1994 and a corresponding “Trade and Economic Cooperation” agreement. In 2023, Israel-Jordan bilateral trade reached $1 billion, when factoring in water and gas exports from Israel to Jordan.
The potential economic benefits of expanding the Abraham Accords and implementing a 23-state solution are innumerable. According to a Rand Corporation study, if the Abraham Accords expand to include additional major Arab and Muslim states, including Saudi Arabia, Indonesia, and Pakistan, they could produce more than four million new jobs and more than $1 trillion in new economic activity over the coming decade.
Prior to October 7, Israel and Saudi Arabia were making progress toward normalization. Saudi Crown Prince Mohammed bin Salman told US media in September 2023 that “every day we get closer” to normalizing relations with Israel – and Netanyahu concurred. The Gaza war had stalled these efforts, but the recent deal to end the war could revive them. In Egypt earlier this month, Arab states joined in a peaceful settlement of the Gaza war, reviving prospects for greater regional peace.
Israel is standing at a crossroads and must choose regional integration over economic isolation. According to Rand, normalizing relations with major Arab and Muslim states, including the “crown jewel” of Saudi Arabia, as well as Indonesia and Pakistan, would generate $260 billion in economic activity in Israel over ten years, creating 107,000 jobs. A negotiated end to the decades-long Israeli occupation of Palestinian territory would also relieve Israel of the devastating costs of never-ending conflict.
The alternative is for Israel to keep paying the heavy price of Netanyahu’s short-sighted “Super Sparta” approach. Last month, the European Union, Israel’s largest trading partner – accounting for 32% of its total trade – moved to downgrade economic relations in response to the Gaza war. Similarly, last year, all three leading credit rating agencies downgraded Israel’s rating to its lowest in decades, citing regional instability and defense spending. This is just a small preview of the economic isolation that Israel would endure if it continues down the path of perpetual conflict. Israel can either suffer those consequences or pursue a 23-state solution that unleashes the economic potential of the region – the choice is clear.