Startups (Page 23)

Hubris begets nemesis, as the ancient Greeks opined. It is thus incredibly telling that in early October, a Jewish-American woman destroyed a statue of a griffin holding a wheel of fate, representing the Roman god Nemesis, on the basis that it was “idolatrous and contrary to the Torah.”

The very next day, Hamas launched its murderous incursion into Israel.

Israelis, having recently basked in a glow of technological prowess and presumed military dominance, have now been painfully reminded that pride cometh before the fall. But it is hard to say that this was unforeseen: Numerous high-level Israel Defense Force generals warned for years that a slaughter was coming.

Yitzhak Brick, the IDF’s former ombudsman, has long argued that the Israeli army “is not ready for war,” declaring as recently as August that “the army is disintegrating. After the volunteering is stopped it will be crushed. Our enemies are waiting for the right moment, they will not wait much longer.” A few months ago, he ominously and specifically predicted that a massacre was practically inevitable.

Brick was not the only general who recognized Israel’s faltering security apparatus, its unhealthy reliance on technology and even a certain arrogance. Yehuda Vach, commander of the IDF’s Officer Training School, noted in 2019 that reliance on a high-tech border fence provided a false sense of security while handing Hamas the initiative.

Even Herzl Halev, the IDF’s former military intelligence director and now commander in chief, warned in 2015 of Israel’s declining technological prowess.

The failure of Israel’s military and intelligence apparatus to foresee this attack is only a symptom of a deeper malaise. The uncomfortable reality is that the essential political, diplomatic, economic, demographic and cultural conditions that enabled the founding and maintenance of the Jewish state have weakened. The country’s future is in doubt, and it is clear that a new national strategy is necessary.

An analysis of the situation leads to a troubling conclusion: For Israel to survive, it must pursue broader economic integration with its neighbors, carefully positioning itself as an essential node in the evolving trade corridors of the twenty-first century.

Three conditions

Israel has, since its inception in 1948, depended upon a trifecta of conditions to secure its survival. These are internal unity, external disunity and Western support.

The first is the most obvious: The bedrock of Israel’s resilience has been its ability to maintain a semblance of domestic demographic cohesion coupled with a united political culture adept at adjusting to the fluid nature of geopolitical threats.

This unity has been pivotal for Israel to leverage its limited resources with maximum efficiency. However, the Israel of today reveals cracks in this foundation.

Demographic shifts, such as the growing numbers and influence of the ultra-Orthodox community, who often eschew secular education and military service (along with being wards of the state), and the increasing assertiveness of Arab-Israeli political groups, have started to strain the fabric of national consensus.

Politically, the country is in a constant state of flux, as seen in the revolving door of general elections, each failing to produce a stable and decisive government. This constant political instability, worsened by the country’s still-ongoing constitutional crisis over reforms to its Basic Law, undermines the nation’s capacity for long-term strategic planning.

A state facing mass protests and even the prospect of civil war cannot survive a dangerous neighborhood, much less fight a multi-front war with full force.

This brings us to the second condition necessary for Israel’s existence: the relative weakness and fragmentation of Israel’s neighboring adversaries. This external disunity has historically provided the country with a buffer of security. Indeed, the Jewish state’s military victories and diplomatic strategies often capitalized on inter-Arab rivalries and the lack of a cohesive threat.

Now, however, we are witnessing a regional realignment. Many Arab states, once embroiled in internal turmoil, are gradually stabilizing and becoming more assertive.

The Abraham Accords, which opened new diplomatic doors for Israel and signified the waning of Arab leaders’ animosity towards Israel, means that Israel now has a significantly reduced ability to play its neighbors against one another, particularly if many of them are united as a bloc in engaging the Jewish state.

Meanwhile, the ascent of Shia Iran, with its nuclear ambitions and proxy networks across Lebanon, Syria, and Yemen, consolidates a new kind of threat that is far more unified in its enmity towards Israel than the fragmented Sunni Arab states of yesteryear.

Third, and most crucially of all, Israel’s qualitative geopolitical and military edge has been underwritten significantly by Western, particularly American, support. The geopolitical dimension is based on diplomatic assistance either at the United Nations or in dealing with Arab states. America’s longstanding relationship with Saudi Arabia, for example, helped provide cover on more than one occasion over the years.

The military dimension is even more important: between 1951 and 2022, Israel received $225.2 billion in U.S. military aid, which is approximately 71 percent of its aid from all sources. Moreover, according to the U.S. Congressional Research Office, since 2000 around 86 percent of annual US aid to the Jewish state has funded military endeavors, funding about 16 percent of the Israel military budget.

This, along with various research & development collaborations, intelligence sharing, economic aid, and other measures has allowed Israel to field a military establishment that is disproportionate to its financial base and available natural resources.

Moreover, this doesn’t include billions in non-governmental economic and political support from Jews in both Europe and the United States, particularly the latter.

However, there are increasing signs that this critical support is no longer a given. The inward-focused populist movements, the frustration with decades of wasteful nation-building engagements and wars abroad, the declining economic conditions – all have sapped Western leaders’ political capital.

Calls for disengagement with the Middle East, including Israel, abound. The United States’ ties with Saudi Arabia have been strained, especially in light of increasing Saudi engagement with China.

Likewise, the once ironclad support for Israel is weakening in the United States and the West. Demographically, younger generations (including Jews) in the United States are less attached to Israel.

Politicization is also having an effect, with significant voices on the left growing increasingly critical of Israeli policies, particularly over the Palestinian issue. Democratic administrations’ engagement with Iran, culminating in the 2015 JCPOA, was perhaps the most apparent manifestation of this, up until October 7.

Regional conditional collapse

Hamas’s attack and the now-ongoing Simchat Torah War have not only brought all three of these weakened conditions to the fore but also illustrate how these conditions seem likely to only worsen.

Domestically, though the conflict has temporarily weakened the Israeli left and united the country in confronting Hamas, underlying tensions and problems persist.

The constitutional crisis, the divide between conservative and liberal Jews, the matter of Arab participation in the political system, and other issues remain. Worse, Hamas’ attack has shattered the sense of peace and stability upon which Israel’s economy depended.

Tech workers and startups, already unnerved by the country’s political and culture wars and besieged by the effects of rising interest rates, are increasingly considering relocation. Economist Adam Tooze lists some of the war’s more onerous effects on the national economy:

The tech lobby in Israel estimates that a tenth of its workforce has been mobilized. Construction is paralyzed by the quarantining of the Palestinian workforce in the West Bank. Consumption of services has collapsed as people stay away from restaurants and public gatherings are limited. Credit card records suggest that private consumption in Israel fell by nearly a third in the days after the war broke out. Spending on leisure and entertainment crashed by 70%. Tourism, a mainstay of the Israeli economy, has come to an abrupt halt. Flights are canceled and shipping cargo diverted. Offshore the Israeli government ordered Chevron to halt production at the Tamar natural gas field, costing Israel $200 million a month in lost revenue.

These economic effects are producing political repercussions that may only further divide the country politically. In other words, Tooze says, the conflict over Gaza’s future is

entangled with inner-Israeli anxieties about the division of Jewish society between the Ultra-orthodox and non-ultra-orthodox Jews…. The war provides the growth-orientated Israeli mainstream with the chance to argue that the funding for ultra-Orthodox educational institutions that imposes no obligation to teach the core curriculum, should be slashed. The ultra-orthodox are of course dramatically underrepresented not only in the workforce but also in the ranks of the IDF. The war thus sharpens the resentment at funding their carve outs.

The world ought to expect further acrimony in Israeli politics over demographic changes, cultural attitudes, and budget allocations, all of which will hamper domestic unity in the face of mounting threats.

Speaking of mounting threats, regionally, the war only highlights Israel’s relative isolation. Shia Iran manifestly has built something akin to an empire in the Middle East via proxy networks and client states — including significant militias and forces in Lebanon, Syria, Iraq, and Yemen. The Houthis in Yemen are particularly active; as of the time of writing, they have launched ballistic missiles at Israel, fired upon U.S. naval vessels, and seized and continue to hold an Israeli-owned cargo ship.

Sunni Arab countries, meanwhile, are more divided in their attitude to the Jewish state. Qatar and Kuwait, for their part, are openly supportive of Hamas and Palestine. Saudi Arabia, the UAE, and Bahrain, meanwhile, would love nothing more than for Hamas — essentially the Palestinian branch of the Muslim Brotherhood — to cease to exist, opening the door for improved ties with Israel and access to valuable Israeli technology and expertise.

Yet support for the Palestinian cause is incredibly strong with these countries’ publics, and thus national governments are obligated to recall ambassadors, issue loud condemnations, and threaten this and that while waiting to see how matters play out in the immediate term. Jordan, Turkey, Algeria, and others have also adopted a similar stance for these reasons.

Finally, Egypt and Jordan are in a challenging position: not only is there significant domestic support for the Palestinian cause, but the two nations’ leaders perceive the current conflict and rhetoric emanating from Jerusalem as setting the stage for the expulsion of Palestinians from Gaza and the West Bank into their territories.

Overall though, Israel faces a much more united neighborhood than in recent years. The much-vaunted Abraham Accords, which laid the foundation for regional integration, are — at the very least — on hold. A recent Chinese-brokered detente between Iran and Saudi Arabia, though more a product of cold calculation rather than an enthusiastic desire for peace and friendship, is nonetheless significant and dampens Israeli options for stoking regional divisions.

At the end of the day, Israel is surrounded by tens, if not hundreds, of millions of Arab Muslims who believe the Jewish state to be a colonizer entity that lacks any legitimate roots in the region. These populations are not going anywhere, and this deeply held, widespread view cannot be addressed by military or otherwise forceful means.

The Western problem

Most visible and perhaps shocking to both Israeli and Western Jews has been the question of support from the West. Polling demonstrates that while support for Israel remains relatively high among older generations, younger generations are far more antipathetic to the Jewish state (if not openly against it). This significant gap in generational attitudes is having enormous consequences. As one Politico headline put it, the political left is tearing itself apart over the matter of Israel.

In the United States in particular, the picture is grim: The Biden administration is facing significant dissent within the US foreign policy apparatus. Rumors abound of tensions within nonprofit groups and think tanks, with younger program assistants, associates, and managers rebelling against organizational leadership.

Things aren’t much better within government institutions, from the State Department to USAID. Even within the White House extraordinary sessions are being held to address the separate concerns of Jewish and Muslim staffers. Of particular concern to Israel’s supporters is the realization that many of the pro-Palestinian staffers will eventually replace their superiors as the latter retire in the coming years, opening the door for a significant reorientation of US foreign policy towards Israel.

Meanwhile, quite literally outside of the building, massive pro-Palestinian rallies are taking place in Washington DC and other American cities, with some protestors yelling “Allahu Ackbar” and calling President Joe Biden “Genocide Joe.”

Biden’s support among Arab Americans and Muslims has cratered, and the country’s National Muslim Democratic Council issued an ultimatum.

More broadly, polling shows significant drops, especially amongst Democrats, who “believe Israel has gone too far in its military action in Gaza, and among voters ages 18 to 34, with a whopping 70% of them disapproving of Biden’s handling of the war. This is visible on college campuses and in the media, particularly a tidal wave of unexpected and often vociferous criticism that has shocked Jews, especially when most of it is coming from liberal friends and colleagues.

Across the Atlantic, Jews in Europe are facing “extraordinary levels” of antisemitism, with targeted attacks surging.

In the Middle East itself, American military bases and outposts have been attacked throughout the region. US diplomats, including Secretary of State Antony Blinken, are receiving cold receptions. The war is doing “profound reputational damage” to America’s reputation in the region, with a leaked diplomatic cable warning that the White House’s support for Israel’s war “is losing us Arab publics for a generation.”

As one unnamed senior official told the Washington Post, “We’re taking on a lot of water on Israel’s behalf.” The war, in short, is having a profoundly negative effect on American diplomatic efforts at a time when policymakers are worried about Iran, Russia, and China making gains in the Middle East. Strategically and diplomatically speaking, this is a disaster for US national interests.

On top of a shift in generational attitudes and damage to diplomatic efforts, with a looming recession, rising inflation, record levels of debt, populist politics oriented toward pulling back from global affairs, multiple other geopolitical challenges (particularly Russia and China), and a visibly weak industrial base, it is clear that Western support for Israel cannot be counted on in perpetuity.

A new direction

Given this gradually worsening situation, the challenge for Israel lies in its ability to forge a new foundational basis that does not depend on the aforementioned and increasingly tenuous three conditions. It must seek innovative paths to national cohesion, regional integration and international alliance-building in an era marked by rapid and unpredictable change.

To a certain extent, Israeli policymakers and strategic planners have long recognized their reliance on Western support and their broader national predicament. If anything, much of Israel’s economic transformation in the past twenty-odd years has been a concerted effort to pivot away from such dependence and towards broader global economic integration.

Israeli economist Arie Krampf has cogently argued that, following the collapse of the peace process in the early 2000s and the resulting Second Intifada, Israel shifted from an economic strategy of consumption-led growth to export-led growth. He writes:

In April 2003, a month after his appointment as minister of finance, Netanyahu announced the Economic Recovery Plan, which included a budget cut, a lowering of government deficits, and severe reductions in social spending and allowances. He also reduced government subsidies to the private sector. For Netanyahu, private sector growth was a means to improve Israel’s economic power in a globalized world…. Privatization and liberalization were processes designed to improve Israel’s capacity to withstand external political pressure and pursue an independent foreign policy…. By late 2003, Israel’s current account had become positive and was growing, indicating that foreign currency was pouring into the economy. This change, which went unnoticed by the Israeli public, was nothing less than a transformative moment, a revolution in Israel’s economic history…. Ben-Gurion’s doctrine assumed dependency on foreign capital. This dependency … was a key element in the national vision and identity: the dependence of the state-building project on foreign assistance. By becoming a “surplus country” … Israel had become less vulnerable than it had been before.

In short, as Adam Tooze summarizes,

Netanyahu’s strategy was to make the modern segment of Israel’s economy so competitive that it would enable not just independence from American (or European) pressure, but turn Israel into a magnet for regional economic interests, above all of the Gulf…. Developing better relations with the growing Arab economies of the region would allow an ‘economic peace’ (one of Netanyahu’s favorite slogans) to be built over the heads of the Palestinians whose resentment and frustration would be contained through a strategy of divide and rule.

Up until the October 7 attacks, this approach appeared to be working. The Abraham Accords established the diplomatic foundations upon which economic integration with Arab states, particularly the Gulf States, could be built.

Israel Katz, Israel’s minister for energy, openly advocated for the country’s transformation into a regional transport hub through the construction of railways, ultimately creating “an Asian-European cargo link as an alternative to the Suez Canal.”

Distant Asian states, particularly China and India, have gotten into the action as well; Beijing has invested around $12.9 billion in Israeli infrastructure projects by 2020, including the Carmel tunnels and the Northern Haifa Bayport Terminal. Many of these projects have laid the foundations for a new logistical connection between the Red and Mediterranean Seas.

More broadly, improving Israeli diplomatic, defense and trade ties with China and India — essential to a long-term strategy of regional trade, along with diversifying away from economic dependency on the West — have yielded substantial results. To quote a recent report:

China’s bilateral trade with Israel grew from US$50 million in 1992 to US$15 billion in 2020, making it Israel’s largest trading partner in Asia and its third largest trading partner in the world after the European Union and the United States. From 2011 to 2021, the share of Israeli exports to Asia going to China rose from 25% to 42%. India’s trade with Israel too has grown, rising from US$200 million in annual trade in 1992 to US$7 billion in 2022, and these figures do not include India’s important but more secretive defense purchases from Israel.

Though the United States has expressed concern over improving relations with China, much of this has been offset by deepening ties with India. Moreover, the G20’s September proposal for an “India – Middle East – Europe Economic Corridor” (IMEC) — effectively a Western-backed effort to support a Belt and Road Initiative alternative — depends greatly upon Israel’s participation. If anything, IMEC could be interpreted as the Netanyahu administration’s crowning economic achievement, securing Israel’s place in the developing multipolar economic order.

Moreover, as a consequence of this effort, Palestinians would not only be diplomatically sidelined but turned into relatively accessible but geopolitically impotent low-cost labor that could support the Israeli economy. It could very well be argued that one of the objectives of Hamas’s assault was to derail Israel’s diplomatic outreach with Saudi Arabia and other Gulf states, thereby ultimately throwing the aforementioned geoeconomic strategy off course. This appears to have succeeded: normalization of ties is on indefinite hold, if not worse.

The Gaza problem and the two options

Israel thus is in a fiendishly complex situation: it cannot advance toward regional integration with its neighbors until the Palestinian issue — or at very very least, the current crisis over Gaza — has been resolved.

There are two ways this could occur.

The first is as simple as it is grim: completing the regional population transfer that was begun in 1948 by expelling Palestinians from Gaza, ultimately resulting in the de facto destruction of Palestine with the eventual annexing of Gaza and, in due time, the West Bank.

The logic here is as simple as it is merciless: Israelis regard the presence of an independent Palestinian entity, potentially liable to turn towards extremism like Hamas, as an existential threat to Israel.

Akin to how Russia invaded Ukraine in full force in 2022 rather than accept a Ukraine headed towards NATO membership, Israeli policymakers might decide that it is better to risk broad international condemnation, sanctions, and perhaps even setting off a regional war — with not just Iran and its proxies, but also potentially given that neighboring Egypt and Jordan — rather than let the situation continue.

Israeli leaders may be calculating that now is perhaps the best and only chance they will have. Future Western assistance will likely not be as strong as it is now. The United States is already redirecting supplies originally meant for Ukraine to Israel, cutting back on the former’s budget in Congress.

Such support cannot be assumed to continue given the myriad of other challenges that Washington faces on the horizon, from economic problems to strategic competition with China. As if to prove this point, on November 28 the Pentagon warned that, due to political and budgetary reasons in Washington, it lacked the funding for a Middle Eastern military build-up.

Meanwhile, in the region itself, support for the Palestinian cause was already relatively weak among the region’s leaders, with no one stepping up to pursue an alternative solution or serious support aside from calls for a return to the two-state peace process. The fact that the Abraham Accords were signed was, in itself, evidence of such.

Moreover, none of the region’s Arab countries particularly would want a war, and many simply cannot afford it. All four of Israel’s primary neighbors, for instance, face severe economic crises and have fragile domestic politics. Egypt and Jordan depend greatly on US military and economic support, which grants Washington significant leverage (especially for Egypt in light of the scandal involving US Senator Bob Menendez). Even regional archnemesis Iran has little appetite for a full war.

And furthermore, Israeli strategists may wager that a fait accompli may not necessarily have permanent repercussions. Diplomatic normalization with the Gulf states could be set back by half a decade or so, for example, but there are still too many political, military, and economic incentives for a permanent cessation of ties. Untapped gas reserves off of Israel’s coast are too tempting a bounty for European states and firms to ignore, especially in the context of rising energy prices, deindustrialization, and expected long-lasting energy sanctions imposed on Russia. The list goes on.

In short, many international leaders may make the cold calculation that the end of Palestinian statehood is a tragedy but ultimately an inevitable one given the changing geopolitical and economic environment. Better to loudly condemn Israel, let it catch diplomatic hell for its actions, but ultimately do little and return to business once the heat wears off.

The second option is the one that has always been on the table: a return to pursuing a two-state solution, likely along the 1967 border lines.

The resulting Palestinian state would be controlled by the Palestinian Authority, replacing Hamas in Gaza, and supported by the Arab League. Security for the new state, along with assurances, could be provided in the medium term by peacekeepers from Arab League nations, led by Jordan and Egypt.

There are, unfortunately, enormous hurdles to this approach that make it impossible in the immediate term and fiendishly difficult in the short, medium, and long term: the continued existence of Hamas, which will never recognize Israel; the transfer of Gaza back to the control of the Palestinian Authority; the Palestinian Authority itself, as it is even less popular than Hamas among Palestinians and widely regarded as an ineffective political authority (ruled by a leader whose time has come and gone); the enormous economic costs associated creating a Palestinian state and rebuilding Gaza, a part of which Israel would presumably be obligated to cover; the presence of Israeli settlements within the West Bank; and more.

But far and away the largest issue is that, following the October 7 attacks, a large number of Israelis (and some Western Jews) will refuse to ever countenance the existence of a Palestinian state. Given Israeli operations in Gaza right now, it is quite likely that many Palestinians feel the same finality about Israel. Frankly speaking, there is a reason why polling for a two-state solution was particularly poor amongst both Israelis and Palestinians even before the recent conflict.

The final chance?

In an early November interview with ABC News, Prime Minister Netanyahu declared that Israeli forces would handle security in the Gaza Strip for an “indefinite” period. His foreign minister, Eli Cohen, further indicated that Israel “has no desire to impose a civilian administration on Gaza after the war is over” and will seek to “turn over responsibility for governing the Palestinian enclave to an international coalition, including the US, the European Union and Muslim majority countries, or to local political leaders in Gaza.”

In effect, this may be the final chance for Palestinians to pursue a two-state solution. Hamas has always been the primary uncontrollable factor in negotiations. To quote a former US envoy to the Middle East, “Talk of a Marshall Plan for Gaza has never been credible because international donors and investors know that whatever is built is likely to be destroyed the next time Hamas decides to trigger a new conflict with the Israelis.”

Though the group’s removal won’t eliminate popular resistance attitudes toward Israel, it will create a brief window in which negotiations could be pursued.

Moreover, the Netanyahu government (or at least many of its cabinet ministers) may soon leave the stage. Government mismanagement over how the October 7 attacks were handled has sparked significant political outrage, meaning that Netanyahu — assuming he survives politically — will need a new coalition government that includes more progressive, left-wing parties and partners. These tend to be far more amendable to a two-state solution, negotiating with the Palestinian Authority, and restraining (if not pulling back) Israeli settlers in the West Bank.

Ultimately, it still may be possible to fulfill the hope of the late Palestinian leader Yasser Arafat: to turn the Gaza Strip into the Singapore of the Middle East and the crown jewel of the Palestinian state, a mirror version of Israel’s own Tel Aviv. The fulfillment of this vision could finally put the Palestinian issue to bed – at least for a sufficiently long period of time for Israel to integrate into the region’s economy and security architecture, along with addressing its demographic challenges.

Should this final effort at peace fail, however, then it is likely that Jerusalem will opt to finish what was begun in 1948. We should hope it need not come to that.

Carlos Roa is a Visiting Fellow at the Danube Institute. He is the former executive editor of The National Interest and remains a contributing editor of that publication. Follow him on Twitter (X) @CarlosRoa92.

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