Latest / Trumponomics / Key to Mideast Peace May Lurk Within the Economy

Transcript

Key to Mideast Peace May Lurk Within the Economy · Trumponomics

• 0:00
  Speaker 1: For more than half a century, the world's most vexing
• 0:03
  Speaker 1: geopolitical challenge has been how to bring peace and stability
• 0:06
  Speaker 1: to the Middle East, particularly between Israel and its Arab neighbors.
• 0:11
  Speaker 1: They largely don't have diplomatic relations with the Jewish State,
• 0:15
  Speaker 1: and Israel's occupation of the Palestinian territories as a flashpoint
• 0:19
  Speaker 1: that embroils other nations, including the United States. A lasting
• 0:23
  Speaker 1: formula for peace is flamoxt generations of political leaders, and
• 0:27
  Speaker 1: yet out of the public eye, the wheels of peace
• 0:30
  Speaker 1: are turning, not at the diplomatic table, and not on
• 0:33
  Speaker 1: the vaunted roadmap, but in the world of business and
• 0:37
  Speaker 1: in the economy. And if those wheels keep spinning, maybe,
• 0:41
  Speaker 1: just maybe we'll see movement on the political side as well.
• 0:45
  Speaker 1: That's what we'll be talking about today on Benchmark. I'm
• 0:58
  Speaker 1: Scott Landman and anomics editor with Bloomberg in Washington, and
• 1:02
  Speaker 1: I'm Daniel Moss, Executive editor for Global Economics with Bloomberg
• 1:06
  Speaker 1: in New York. The reason peace is becoming less out
• 1:10
  Speaker 1: of reach note that contortion has to do with the
• 1:13
  Speaker 1: fact that Israel and its economy have been a hotbed
• 1:16
  Speaker 1: of technological innovation fees innovation that's forcing otherwise hostile Arab
• 1:22
  Speaker 1: neighbors to look at ways they could also benefit. Trade
• 1:26
  Speaker 1: and collaboration in technology and intelligence are flourishing below the
• 1:30
  Speaker 1: radar between Israel and a host of Arab states, one
• 1:33
  Speaker 1: of which is Saudi Arabia. The big question is whether
• 1:37
  Speaker 1: this is really putting us anywhere down the road to
• 1:40
  Speaker 1: a normalization of relations. There are a lot of caveats,
• 1:44
  Speaker 1: and whether this will affect relations with Palestinians or Iran
• 1:47
  Speaker 1: is another question. But just the fact that Israelis and Saudis,
• 1:51
  Speaker 1: for example, are quietly getting along in one way. As
• 1:53
  Speaker 1: a start, Let's turn to Jonathan Ferziger, a reporter for
• 1:57
  Speaker 1: Bloomberg in Tel Aviv. John has been following this angle closely.
• 2:01
  Speaker 1: He joined us today from our office that John, thanks
• 2:04
  Speaker 1: for being with us. Thank you, Dan, It's good to
• 2:07
  Speaker 1: be with you both. But where are these connections happening
• 2:10
  Speaker 1: between Israeli's and people from Arab nations? Tell us the story.
• 2:15
  Speaker 1: Most of the connections are made in third countries, generally
• 2:18
  Speaker 1: in Europe and the US, but also close by and
• 2:21
  Speaker 1: Jordan and Turkey. Often the contacts are made at international
• 2:25
  Speaker 1: conferences or through middlemen. It's not really a new phenomenon.
• 2:29
  Speaker 1: Israeli's Arabs have been doing deals for years. But what's
• 2:32
  Speaker 1: new is that it's starting to come out of the closet.
• 2:36
  Speaker 1: And why do they have to go through such cloak
• 2:38
  Speaker 1: and dagger techniques to do this? And is it becoming
• 2:41
  Speaker 1: less than before because it's technically illegal um. The air
• 2:45
  Speaker 1: world is essentially officially at war um with Israel since
• 2:53
  Speaker 1: there have been peace agreements with Egypt and Jordan's, but
• 2:58
  Speaker 1: it is illegal in most of these Arab states to
• 3:01
  Speaker 1: do business with Israel. So what are these deals? How
• 3:05
  Speaker 1: are they happening? So the greatest demand right now is
• 3:09
  Speaker 1: for cybersecurity, that's where Israel has developed some of the
• 3:13
  Speaker 1: most advanced techniques Arab states. Also by Israel's desalination technology
• 3:19
  Speaker 1: and water management systems used informing the super secret stuff
• 3:23
  Speaker 1: involves military and aeronautic deals and they're done covertly with
• 3:28
  Speaker 1: some of Israel's biggest defense companies. So why are these
• 3:32
  Speaker 1: kinds of deals coming out of the closet now instead
• 3:35
  Speaker 1: of being concealed like you're before, Like you were talking about,
• 3:39
  Speaker 1: Like I said, they are technically illegal and they've been
• 3:43
  Speaker 1: going on for a long time, but the region is
• 3:46
  Speaker 1: changing um and a lot of the Gulf countries are
• 3:52
  Speaker 1: looking at Israel's technology and saying why not. They are
• 3:57
  Speaker 1: trying to find a solution to Houstindian problem that is
• 4:02
  Speaker 1: the guerrilla in the room. And meanwhile there is some
• 4:07
  Speaker 1: level of nuance trying to see if it's possible to
• 4:13
  Speaker 1: get these products um and still keep things this greet
• 4:18
  Speaker 1: and the respective governments where these companies are based. No,
• 4:22
  Speaker 1: this is going on. I know that, you know that,
• 4:24
  Speaker 1: I know that you know that. We know right, there's
• 4:27
  Speaker 1: a lot of winking. Um it is h They don't
• 4:33
  Speaker 1: want this to come out publicly. There are corporate constructs
• 4:40
  Speaker 1: third countries and straw companies that are used to create
• 4:46
  Speaker 1: a level of plausible deniability. It's sort of like, um, hey,
• 4:51
  Speaker 1: why are you doing business with Israel? And you say back, WHOA,
• 4:54
  Speaker 1: I had no idea that companies Israelly. I was going
• 4:57
  Speaker 1: to say if, for example, if the businesses is technically illegal,
• 5:02
  Speaker 1: if the Saudi government decided, well, you know we we
• 5:05
  Speaker 1: want to shut this down where we want to sanction
• 5:08
  Speaker 1: these companies or put people in jail for dealing with Israel,
• 5:11
  Speaker 1: could they just snap their fingers and do that right
• 5:13
  Speaker 1: now since it's all out there. They absolutely could and
• 5:18
  Speaker 1: they have not put people in jail, but they've shut down, um,
• 5:23
  Speaker 1: certain businesses. I was talking to one guy that was
• 5:28
  Speaker 1: running tomatoes across the Jordanian border into Saudi Arabian and
• 5:34
  Speaker 1: it came out publicly. In fact, the competitors said, hey,
• 5:38
  Speaker 1: what's going on with Israeli tomatoes? And so they shut
• 5:42
  Speaker 1: down that border crossing or they wouldn't let the trucks
• 5:47
  Speaker 1: go through. But as some of these products, especially the
• 5:53
  Speaker 1: security products, the technology they want and they make it happen,
• 5:58
  Speaker 1: so hiding to sound like an echo on make determinates here,
• 6:02
  Speaker 1: it's follow the money and the ties will follow. Um,
• 6:06
  Speaker 1: that's true. They are trying to find a way to
• 6:12
  Speaker 1: thread this needle. Yes, there is a lot of history,
• 6:17
  Speaker 1: there's a lot of hostility, but they're the Arab States
• 6:22
  Speaker 1: and Israel are looking at each other and saying, oh
• 6:25
  Speaker 1: my gosh, this going on for for seventy years, Um,
• 6:29
  Speaker 1: how can we do business together? Jonathan hold that thought.
• 6:33
  Speaker 1: We're going to take a moment now to tell you
• 6:35
  Speaker 1: about something new from Bloomberg. Starting right now, you can
• 6:41
  Speaker 1: use our io s app or our new Google Chrome
• 6:44
  Speaker 1: extension to scan any news story on any website, instantly
• 6:49
  Speaker 1: revealing relevant news and market data from Bloomberg and other sources.
• 6:54
  Speaker 1: So no matter where you're reading the news, you can
• 6:56
  Speaker 1: bring the power of Bloomberg to you. It's pretty amazing.
• 7:01
  Speaker 1: Download out Io s app or search for the Bloomberg
• 7:04
  Speaker 1: extension on the Chrome Store to try it. Learn more
• 7:07
  Speaker 1: at Bloomberg dot com. Backslash lands. All right, and we're
• 7:13
  Speaker 1: back with Jonathan Ferziger. Jonathan, you wrote a lengthy article
• 7:18
  Speaker 1: for Bloomberg Business Week recently about this topic. In my opinion,
• 7:22
  Speaker 1: it's one of the most undertold parts of the Israel
• 7:25
  Speaker 1: story these days. You know. You all usually always here
• 7:28
  Speaker 1: is about about the issues between Israel and the Palestinians,
• 7:32
  Speaker 1: or the war in Syria, so on and so forth.
• 7:36
  Speaker 1: Is there any chance that these kinds of business ties
• 7:40
  Speaker 1: are going to extend to the diplomatic sphere or have
• 7:44
  Speaker 1: they already extended in that direction. It's just something that
• 7:47
  Speaker 1: we don't hear about that much. Yes, it's happening. The
• 7:52
  Speaker 1: strongest expression is in the so called Arab Peace Initiative,
• 7:56
  Speaker 1: and that dates back to two thousand two. The deal
• 7:59
  Speaker 1: is that Israel can have peace and business relations with
• 8:03
  Speaker 1: fifty seven Muslim states the entire Arab world. Further um,
• 8:08
  Speaker 1: as long as it resolves things with the Palestinians, and
• 8:11
  Speaker 1: that would mean Israel's complete withdrawal from the West Bank
• 8:15
  Speaker 1: from the Gazasriban East Jerusalem, which Prime Minister N'tanyao is
• 8:20
  Speaker 1: not prepared to do. He says publicly that the air
• 8:23
  Speaker 1: Plan is a good start, but only if he can
• 8:25
  Speaker 1: fiddle with some of its provisions. So the business aspects
• 8:30
  Speaker 1: are not ready to come to the surface yet, but
• 8:32
  Speaker 1: they're happening, okay. But there we seem stuck in the
• 8:35
  Speaker 1: traditional dialogue when what's actually happening sub rosa is corporate
• 8:41
  Speaker 1: links between Israeli based companies and Arab firms are becoming
• 8:45
  Speaker 1: more and more intimate. That's right. One of the uh
• 8:50
  Speaker 1: interesting bits of the story that was in Bloomberg Business
• 8:53
  Speaker 1: Week was about one of the biggest defense companies in Israel.
• 8:58
  Speaker 1: It's called Albert Systems, and they're interesting for lots of reasons.
• 9:02
  Speaker 1: For one thing, the shares trade on Nasdack. Just two
• 9:06
  Speaker 1: years ago, one of Elbot's employees from the u S
• 9:09
  Speaker 1: subsidiary went to Saudi Arabia to fix a missile installation. Now,
• 9:15
  Speaker 1: this kind of stuff is usually kept secret. In this case,
• 9:19
  Speaker 1: the Elbot employee was found dead outside his hotel. It's
• 9:23
  Speaker 1: still not certain if he was murdered or jumped out
• 9:26
  Speaker 1: of the window, but it's the most public evidence so
• 9:29
  Speaker 1: far that a big Israeli company like Elbot is active
• 9:33
  Speaker 1: in Saudi Arabia. That this mysterious death peaked our curiosity.
• 9:39
  Speaker 1: So my Blumber colleague Peter Walton, went to Elbert's US
• 9:44
  Speaker 1: facility in New Hampshire and he found some interesting practices.
• 9:48
  Speaker 1: The employees there told him that when Gulf customers come
• 9:52
  Speaker 1: to visit, managers would take down Hebrew signs, maps, and
• 9:57
  Speaker 1: any markings indicating Israeli origins. I called Elbot spokeswoman about that,
• 10:03
  Speaker 1: and she said that's not company policy. I found that
• 10:06
  Speaker 1: anecdote really interesting, Jonathan, because you know, wouldn't these Gulf
• 10:11
  Speaker 1: customers know that Elbot is an Israeli company even if
• 10:14
  Speaker 1: they're visiting the office in the US, whether or not
• 10:17
  Speaker 1: that's officially company policy. That sounds kind of like a
• 10:21
  Speaker 1: um non denial of the of the information you had
• 10:25
  Speaker 1: in the story. But you know, is that really just
• 10:28
  Speaker 1: for show purposes? Just to kind of keep up the
• 10:30
  Speaker 1: fiction that these Arab states are not dealing directly with
• 10:34
  Speaker 1: Israeli Israeli companies, Well, of course, yes, no, um, yes,
• 10:38
  Speaker 1: there's a general sense that um these are that there
• 10:44
  Speaker 1: their relations between two and yes, if you look at Elbot, uh,
• 10:49
  Speaker 1: any serious customer knows that Elbot Systems of America is
• 10:55
  Speaker 1: a branch of the Israeli company. So yes, there's a
• 10:58
  Speaker 1: lot of thinking and nodding, talk about winks and nods.
• 11:03
  Speaker 1: One of the most compelling anecdotes Jonathan, is how is
• 11:08
  Speaker 1: Riley technology almost got used and how the Saudi royal
• 11:13
  Speaker 1: family manages the pilgrimage to Mecca of all things. Yeah.
• 11:19
  Speaker 1: This grew out of a mega project in which a
• 11:23
  Speaker 1: security system that was developed on an Israeli key boots
• 11:26
  Speaker 1: on a farm was installed in the Gulf Emirate of
• 11:30
  Speaker 1: Abu Dhabi. The contract was worth about six billion dollars.
• 11:34
  Speaker 1: That got the company's chairman thinking about how to sell
• 11:38
  Speaker 1: elsewhere in the Gulf, with the ultimate prize being Saudi Arabia.
• 11:42
  Speaker 1: And it took a lot of nerve, you might say,
• 11:44
  Speaker 1: hutzba to pitch this contract. The idea was to root
• 11:49
  Speaker 1: out unauthorized people who try to reach Mecca during the
• 11:52
  Speaker 1: annual Hodge religious pilgrimage. In the end, the deal went
• 11:56
  Speaker 1: to a Saudi company, even though the Israeli technology is
• 12:00
  Speaker 1: said to have been judged to be the best. Now
• 12:03
  Speaker 1: these ties happening as the Saudi Arabian government itself wants
• 12:09
  Speaker 1: to reinventage economy. Talk about that a bit. It's interesting.
• 12:13
  Speaker 1: The guy in charge of overhauling the economy in Saudi
• 12:17
  Speaker 1: Arabia is the Deputy Crown Prince, Mohammed bin Selman. He
• 12:22
  Speaker 1: doesn't come out and say this openly, but some of
• 12:24
  Speaker 1: his aids are very clear that Israel is on their map.
• 12:28
  Speaker 1: There's a Sally lobbyist in Washington we talked to who's
• 12:31
  Speaker 1: close to the Deputy Crown Prince, and he told us
• 12:34
  Speaker 1: there's no question that they're in the market for Israeli
• 12:37
  Speaker 1: technology again in the fields of cyber security, desalination, and agriculture.
• 12:43
  Speaker 1: On the other hand, when we asked for a Palace response,
• 12:46
  Speaker 1: the official position was that Saudi Arabia has no commercial
• 12:50
  Speaker 1: relations with Israel. So the bottom line here is this
• 12:55
  Speaker 1: kind of peace in the business and economic world going
• 12:58
  Speaker 1: to keep extending, keeps breading, deepening, regardless of what happens
• 13:02
  Speaker 1: with the Israel and Palestinian question. Well, you know, it's
• 13:06
  Speaker 1: it's certainly possible, but but heart safe. For sure. The
• 13:10
  Speaker 1: formula of business essentially lubricating the way for political compromise
• 13:15
  Speaker 1: has been out there for decades um. Certainly it's part
• 13:18
  Speaker 1: of the Oslo Piece Accords. There's some strong political forces
• 13:23
  Speaker 1: and strategic interests that are bringing the Gulf States to
• 13:26
  Speaker 1: build ties with Israel. But again, nobody wants to be
• 13:30
  Speaker 1: seen as abandoning the Palestinians. So most people I talked
• 13:34
  Speaker 1: to said that the prospects for public deals with Israel
• 13:38
  Speaker 1: are still pretty dim for now. At the same time,
• 13:42
  Speaker 1: this under the radar business keeps on growing. So with
• 13:45
  Speaker 1: these economic and technological forces bearing down relentlessly on the relationship,
• 13:53
  Speaker 1: is it entirely possible peace could be made among these
• 13:57
  Speaker 1: nations the Palestinians left at the altar. You know, I
• 14:01
  Speaker 1: don't think that that's going to happen. Although it looks
• 14:06
  Speaker 1: like it. Every time that a deal uh looks like
• 14:12
  Speaker 1: it's it's coming together, it doesn't. There have been fifty
• 14:15
  Speaker 1: years since the nineties seven Six Day War, and every
• 14:21
  Speaker 1: time that you have a piece initiative. It just seems
• 14:26
  Speaker 1: to fall through the through the cracks now as far
• 14:30
  Speaker 1: as business happening despite the absence of a deal, as
• 14:37
  Speaker 1: I say, it is growing under the radar um, but
• 14:43
  Speaker 1: I don't think that they're ready to leave the Palestinians
• 14:48
  Speaker 1: high and try like that. Jonathan, this has just been
• 14:51
  Speaker 1: a really interesting talk. The article you wrote is fascinating
• 14:55
  Speaker 1: and I would urge anybody listening to this podcast to
• 14:58
  Speaker 1: go and check out that article in Business Week. Jonathan Ferziger,
• 15:03
  Speaker 1: thanks so much for joining us today. Thank you, Scott,
• 15:06
  Speaker 1: Thanks Dan. Benchmark will be back next week and until then,
• 15:10
  Speaker 1: you can find us on the Bloomberg terminal, Bloomberg dot com,
• 15:13
  Speaker 1: or Bloomberg app, as well as on Apple Podcasts, pocket Casts,
• 15:16
  Speaker 1: and Stitcher. While you're there, take a minute to rate
• 15:19
  Speaker 1: and review the show so more listeners can find us
• 15:22
  Speaker 1: and let us know what you thought of the show.
• 15:24
  Speaker 1: You can follow me on Twitter at at Scott Landman,
• 15:27
  Speaker 1: Dan you are at moss Underscore Echo, and Jonathan you're
• 15:32
  Speaker 1: at at at. Benchmark is produced by Sarah Patterson and
• 15:38
  Speaker 1: the head of Bloomberg Podcast is Alec McCabe. Thanks for listening,
• 15:42
  Speaker 1: so you next time