Cash-strapped Jordan may yet fully embrace Israel peace dividend
Apr 16, 2018 | Ahron Shapiro
Nearly a quarter-century since signing a peace agreement with Israel, there are increasing signs that Jordan is ready to fully embrace the economic dividend the peace agreement promised but has, until now, failed to fully deliver to its economy.
An unfulfilled promise of the agreement – a free-trade park along the border – is quietly nearing completion in the Beit Shean region, south of the Sea of Galilee, while both Jordan and Israel have built freight rail networks that are naturally symbiotic and attuned for linking Arab markets with Europe through the Israeli port of Haifa.
All that’s missing is a golden spike.
In January 2017, unnoticed by the foreign press, there was a feature-length article that appeared in the Israeli business daily Globes about the construction of “Jordan Gate”, a revolutionary free trade zone located halfway between Haifa and Amman.
The trade zone would include factories on both sides of the Jordan River that could build products that could move – duty free – in either direction, while workers from either country operating in the zone would not need to use their passports to work in factories anywhere in the zone.
The park’s central edifice – a massive bridge, built to hold heavy freight and withstand severe earthquakes (quite possible in the Syria-African Rift seam region where the Jordan Valley sits), is scheduled to be completed next month.
Meanwhile, on the planning boards since last year is what Israeli Transportation Minister Yisrael Katz called the “Regional Peace Railway” plan, which would benefit Israel, Jordan and the Palestinian Authority.
According to Katz:
“At the heart of the initiative, two main elements are proposed: Israel as a land bridge from Europe and the Mediterranean to Jordan and the countries to the east; and Jordan as a continental railway transport conduit,” through which goods will travel to Iraq and the Persian Gulf.
At the heart of the plan is two projects. Firstly, extending the Valley Railway line eastwards from Bet Shean to the Jordanian border, and secondly linking the Palestinian Authority to the line with a branch running southwards to Jenin in the West Bank.
Katz noted that his rail plan would only capitalise upon an existing phenomenon that had arisen since the outbreak of the Syrian Civil War. Israel, he explained, has been serving as a conduit for thousands of trucks of goods to and from the Gulf States and other trading partners, primarily Turkey.
Finally, much has been written about the long-planned water pipeline that would bring the briney byproduct of desalination from a planned Jordanian plant on the Red Sea and use it to replenish the rapidly shrinking Dead Sea.
As of now, this on-again, off-again project seems likely to move forward in some form, although we’ve heard this before.
Parched Jordan, for its part, seems determined to building the desalination plant, at least, with or without Israel.
Why these projects are being planned or actualized only now, years after the agreement, appears to be due to a confluence of Jordanian and Israeli interests – albeit for different reasons.
The question of whether the various plans will follow through is harder to answer, due to instability in Middle East along with Jordan’s tendency to be influenced by Israeli-Palestinian flare-ups and anti-Israel sentiment endemic in Jordanian society.
Jordan’s benefit analysis
According to an analysis by Ha’aretz‘s Economics Editor David Rosenberg on April 11 (subscription required), Jordan, under stress from an influx of refugees from wars in Syria and Iraq, is under the pump economically, its debt load raising red flags for global financial analysts.
Jordanian public debt has swelled to 95% of gross domestic product, from 71%, in eight years…
To its credit, Jordan is trying to grapple with its debt problem. In February, it unveiled an austerity budget in line with IMF recommendations that raises taxes and cuts subsidies, boosting the price of bread, tobacco and public transportation. Actually, the kingdom had no choice because the Gulf powers have not renewed their aid program. The U.S. has stepped in with some extra money, but not enough to make up the difference.
Indeed, the eight-year timeframe referred to by Rosenberg coincides with a general economic slump that ended a relative boom era for the Hashemite Kingdom that had started with its peace agreement with Israel in 1994, accelerated in the late 1990s and hit its stride through the 2000s, according to a report last month for for Mitvim-the Israeli Institute for Regional Foreign Policies entitled “Cooperation between Israel and Jordan: A historical opportunity that can still be corrected”, written by Yizhak Gal, a financial and business advisor specializing in the Arab markets. (Gal’s fascinating report is available in Hebrew only, although Gal’s overview of key points in the report was published in English as an op-ed by Ynet on March 30.)
Israel’s benefit analysis
In his report, Gal writes that Israel sees opening up trade with Jordan through the prism of opening up trade with the Arab world, particularly the Gulf States, where Israel is gaining increased acceptance. Israeli estimates massive gains from this trade route.
Gal writes (emphasis added):
From the Israeli perspective, the importance of bilateral economic relations with the relatively small Jordanian economy is secondary. However, Jordan is very important as a bridge to Israeli trade with the big markets of the Gulf states and other Arab markets. According to a series of comprehensive work done in recent years, the opening of the Arab markets to Israel (as part of the process of [improved] political arrangements with the Arab world) will create a new and powerful growth engine for the Israeli economy. This growth engine will enable an increase of one-quarter to one-third of GDP per capita in Israel, compared with the projected growth path today. The addition of this growth will bring Israel within a decade to the group of 15 richest countries in the world, and will create an increase of nearly 75 percent in the number of jobs compared with the number of jobs that the Israeli economy produces every year. The Arab [market] will become Israel’s most important, alongside the European market.
Regarding the Dead Sea-Red Sea scheme, there is a somewhat different benefit analysis. Israel’s interest largely lies in saving the rapidly-evaporating, iconic Dead Sea, although some environmentalists warn the plan wouldn’t reverse that and might even harm ecosystems.
A problematic partner
While Jordan and Israel each have renewed interest in economic cooperation for different reasons, it therefore remains unclear whether this opportunity will be realized. While Gal’s report identifies some obstacles from the Israeli side – largely bureaucratic – the lion’s share of the obstacles is on the Jordanian side, and is more political.
Israel’s relationship with Jordan has been subject to many setbacks over the years – most recently last July, when Israeli Embassy security guards killed two Jordanians, one of whom was said to have attacked them with a knife. Instead of regarding the deaths as legitimate self-defence, Jordanians called for the guards to be jailed. While the guards were eventually returned, Israel was forced to close its Embassy in Amman for several months, with Jordan only approving a replacement diplomat last month.
Jordan’s demographically dominant Palestinian population is viscerally opposed to closer ties with Israel, and any perceived escalation in the conflict between Israel and Palestinians in Jerusalem, the West Bank or Gaza is mirrored to a significant degree in Jordan.
Whether out of genuine sympathy or out of political expediency, King Abdullah largely panders to their populist demands, even at the risk of jeopardizing foreign aid.
To give two examples, the Kingdom not only refuses to allow the extradition of convicted terrorist Ahlam Ahmad al-Tamimi – who masterminded the 2001 bombing of the Sbarro pizzeria in downtown Jerusalem, killing 15 people including Australian-American Malki Roth, in defiance of existing extradition treaties and despite her being on the FBI’s Ten Most Wanted list. It also has allowed her to live the life of a celebrity, hosting television programs on the Hamas-run Al-Quds channel.
Last year, a former Jordanian soldier who massacred seven Israeli schoolgirls in 1997 at a border park known as the “Island of Peace” was released from prison after serving 20 years and welcomed as a hero in his hometown. This, in stark contrast to King Hussein’s memorable response at the time, when he humbly paid condolence calls to the mourning families at their homes in Israel.
Twenty-four years after the peace treaty, Israel’s peace with Jordan, like that it has with Egypt, is a cold one. Yet there is no doubt that, out of the public eye, Jordan’s top levels of government continue to work closely with Israel on many projects important to Jordan’s interests, particularly on defence, water and energy – in quiet but resolute defiance of the Jordanian street.
The Syrian civil war has increased Jordan’s role as a conduit for trade between the Gulf and Europe. Without fanfare, thousands of truckloads of goods from the Gulf currently shuttle from Jordan through northern Israel to Haifa. A rail link near Beit Shean, which would have the potential of increasing the trade flow by significant orders of magnitude, now only a plan, seems only to be waiting for the right moment.
The Jordanian leadership, the Gulf States and Israel are moving the pieces into place for a transformed Middle East economic ecosystem. The Palestinians can benefit also, but even Jordan – the country most heavily influenced by Palestinian discontent – may well be unwilling to put its own national interests on hold for the Palestinians.
This was true in 1994, when King Hussein made peace with Israel without waiting for the Oslo process to conclude. It may also be true of Hussein’s son when it comes to current and pending joint projects with Israel that benefit the Kingdom.