Regional Geo-Politics and Economic Interests

One of the casualties of the escalation in Gaza has been the recent India-Middle East- Europe Economic Corridor (IMEEC) was announced during the G20 meeting in India. The first step to this plan was the normalization of relations between Israel and Saudi Arabia.

The Hamas attack on Israel on the 7th of October 2023, put a break on the normalization process. Thus, the improved relationship between the regional powers of Israel ana Saudi Arabia is delayed. This means that the IMMEEC corridor from India to UAE and Saudi Arabia and then on to Isreal and the Eastern Mediterranean is also put on hold.

The US has focused its efforts on keeping additional proxy groups such as Hezbollah from opening a second front in the north of Israel. Tehran has provided training, weapons and money to Hezbollah and groups such as Hamas. In the case of Hezbollah, they posses a significant missle capability.  In addition to disrupting shipping in the strait of Hormuz, this can be seen as insurance for Iran in case Israel desides on stiking Iran with nuclear weapons for example.

As part of the effort to contain this conflict, the US and the west have not implicated Iran as directing the attack with some analysts stating that both Iran was surprised by the success (if you can call it that). This was also mentioned in the case of Hamas, thus it one view is that Iran is reacting to events now.

In contrast, the other view is that it was planned deliberately to destroy Netanyahu’s effort at normalizing relations with Saudi Arabia. Since this would weaken the position of Iran and strenghten its enemies – Israel and Saudi Arabia. By diverting attention to the Palestinian issue, the changing geoeconomics would fail and Iran would keep the status quo.

We think the truth lies somewhere in the middle. Iran was aware and was just hoping that the attack will refocus attention on the Palestinian cause thus preventing the normalization of relations. Failure on the part of Israeli security probably was a surprise to both leading to the current situation. It should be noted that Iran and Hezbollah have not escalated the situation and in our opinion the chances are low but rising on the this end. Two US aircraft carrier groups in the Eastern Meditterean are a detterent to not escalate.

The Economic and Security Fallout to Israel and Saudi Arabia

The ongoing conflict with Hamas has had significant economic consequences for Israel. The country has experienced disruptions in its tourism, trade, and investment sectors, leading to financial losses. In addition, the tech sectors of Israel looses in the short-term.

Finally the US security pact and acquisition of nuclear power technology by Saudi Arabia are now put on hold. Of course this benefits Iran.

Role of Russia and China in the Israel-Hamas War

Russia and China have shown interest in the Israel-Hamas conflict due to their geopolitical interests in the region. Their stance and involvement can complicate the course of the conflict and impact global geopolitical balance.

For China, they are caught in the middle. They get a substantial amount of energy from Saudi Arabia but also have a strategic relationship with Iran. This strategic relationship is shared by Russia too.

Both benefit since the US will now be distracted in the Middle East and hopefully weaken US involvement in supporting Ukraine and defending Taiwan.