The fading light of liberal democracy

Pluto-populists’ strategy of using identity issues to convince voters to act against their economic interests is working

Martin Wolf

© Ellie Foreman-Peck

“For the first time this century, among countries with more than 1m people, there are now fewer democracies than there are non-democratic regimes.” This sobering sentence is by the Oxford university historian Timothy Garton Ash in an essay on “The Future of Liberalism”. 

The observation reflects what Stanford University’s Larry Diamond labels the “democratic recession”. The election of Joe Biden as US president is a relief. But this story is not yet over.

To understand what is happening, one must connect politics to economics. 

Branko Milanovic, an expert on inequality, did this in Capitalism Alone, published last year. Capitalism has triumphed, he argues. 

He is right: the market economy is indeed triumphant. But, he adds, capitalist economies go with two distinct political systems in leading economies: the “liberal” model of the US and its allies, which is the concern of Messrs Garton Ash and Diamond, and China’s “political” model.

Mr Milanovic argues correctly that liberal democracy is a good in itself and also allows peaceful self-correction. People do desire freedom and US voters have disposed of Donald Trump. The Chinese cannot do the same with Premier Xi Jinping. The argument for “political capitalism” is instrumental: it works. 

The rise of China has indeed been extraordinary. Many have noticed, too. 

A recent survey by the Pew Research Center shows that far more Europeans now think China is the leading economy than believe the US is, though the Japanese and South Koreans disagree.

Mr Milanovic’s dichotomy is useful but simplistic. A third political version of capitalism exists: demagogic authoritarian capitalism. This can arise out of collapsed communism, as in today’s Russia, or out of enfeebled democracy, as in Brazil or Turkey. 

Demagogic authoritarian capitalism is a hybrid. As in the Chinese system of bureaucratic authoritarian capitalism, the ruler is above the law and democratically unaccountable — elections are a sham. 

But power is personal, not institutionalised. This is corrupt gangster politics. 

It rests on the personal loyalty of sycophants and cronies. Often the core consists of the family members, viewed as most trustworthy of all. This is the political system Mr Trump wished to install in the US.

Such rulers are like wasp larvae that eat the spider from within. They manage to win an election and then erode the institutional and political bulwarks against indefinite personal rule. 

Mr Trump has all the relevant characteristics: the truth is what he says it is; a fair election is one he wins; and a good official is one who is loyal. He wants to be an autocrat. 

This is distinct from saying that he wants to govern. Nero was not very interested in governing either. But he definitely was tyrannical.

Events in the US have shown two crucial things. First, core American institutions including the courts have resisted his effort to overthrow the elections. Second, a huge proportion of the Republican party has abetted his lie that the election was rigged. 

This has underlined another reality of the past four years: the Republican leadership showed absolute obedience to their leader, almost to the last gasp.

This is no accident. It is the logical outcome of the political and economic strategy of the “pluto-populist”. Mr Trump is a natural outcome of the strategic goal of the donor class — tax cuts and deregulation. 

To achieve this end, they have to convince a large proportion of the population to vote against its economic interests by focusing on culture and identity. This strategy has worked and will continue to work: Mr Trump may have gone; Trumpism has not. 

Not entirely dissimilar patterns can be seen in Brexit Britain. The focus of the university-educated left on their form of identity politics plays into the hands of their rightwing counterpart.

Mr Biden is a decent man. What he wants to do domestically and internationally makes evident sense. But he will confront an opposition determined to make him fail. 

Indeed, making government fail is the core of rightwing politics — that and stoking the rage of the base. One has to be blind not to see where this is leading. 

The donors would not be the first rich and powerful people to believe, mistakenly, that they can control demagogic demons they have helped create.

As the Pew survey shows, the reality of Mr Trump’s US has eroded the world’s confidence in its competence and decency. Mr Biden will find it very hard to regain that trust, not because people do not believe in him, but because they do not believe in his country. 

And, with the US’s future as a liberal democracy still uncertain, the cause remains in grave trouble worldwide.

Liberal democracy does have one big advantage: its main opponent. As Harvard’s Samantha Power notes, China’s approval rating in Gallup polling is a median of 32 per cent among over 130 countries. 

It has hardly budged in 10 years. People respect China, but do not like it. 

China also confronts the challenge of sustaining economic dynamism without a credible rule of law.

None of today’s dominant systems is working well. 

Capitalism is innovative, but creates huge social, political and environmental challenges. 

Liberal democracy is corroded, even at its core. 

But the authoritarian politics that challenge it are vastly worse. Unaccountable rule by gangsters or brutal bureaucrats is deeply depressing, even if the latter are much less incompetent. 

Those of us who continue to believe in freedom and democracy hope Mr Trump was the warning we all needed. 

But I doubt it. There is none so blind as rich egotists who will not see.

Health care and technology

The dawn of digital medicine

The pandemic is ushering in the next trillion-dollar industry

Last january Stephen Klasko, chief executive of Jefferson Health, which runs hospitals in Philadelphia, chatted to a bank boss. 

The financier told him that 20 years ago health care and banking were the only industries yet to embrace the consumer and digital revolutions. “Now”, Mr Klasko recalls him adding, “you are alone.”

The banker had a point. The McKinsey Global Institute, the in-house think-tank of the eponymous consultancy, reckons that when it comes to digitisation, health care has indeed lagged behind not just banking but travel, retail, carmaking and even packaged goods. 

Some 70% of American hospitals still fax and post patient records. The ceo of a big hospital in Madrid reports virtually no electronic record-sharing across Spain’s regions when the first wave of covid-19 washed over the country this spring.

By exposing such digital deficiencies, the pandemic is at last spurring change. Confronted with shutdowns and chaos, doctors have embraced digital communication and analytics that have been common in other industries for years. 

Patients are growing more comfortable with remote and computer-assisted diagnosis and treatment. And enterprising firms, from health-app startups and hospitals to insurers, pharmacies and tech giants such as Amazon, Apple and Google, are scrambling to provide such services.

McKinsey estimates that global digital-health revenues—from telemedicine, online pharmacies, wearable devices and so on—will rise from $350bn last year to $600bn in 2024 (see chart 1). 

Swathes of America’s $3.6trn health-care market are in for a digital makeover. The same is happening in China, Europe and most other places where doctors ply their trade.

The groundwork for what looks poised to be the next trillion-dollar business has been accelerated by the pandemic. Money is pouring in. 

According to cb Insights, a research firm, a record $8.4bn of equity funding flowed into privately held digital-health darlings in the third quarter of 2020, more than double the amount a year ago (see chart 2). 

The industry’s unlisted “unicorns”, worth $1bn or more apiece, have a combined value of over $110bn, according to Holoniq, a research firm. In September AmWell, a telemedic in which Google has invested $100m, raised $742m in an initial public offering (ipo); its market capitalisation is $6bn. 

On December 2nd jd Health, a digital pharmacy affiliated with, a Chinese online emporium, raked in $3.5bn in Hong Kong’s second-biggest ipo this year.

No wonder investors are giddy. Demand for digital medicine is surging. 

Doctolib, a French firm, says its video consultations in Europe have shot up this year from 1,000 to 100,000 a day. Ping An Good Doctor, a Chinese online health portal viewed by some as the choicest part of its insurer parent, is expanding to South-East Asia in a joint venture with Grab, a Singaporean ride-hailing giant.

As with many technology fads, some of this will turn out to be hype. Sober analysts at Gartner, a research firm, pour cold water on exaggerated claims made by proponents of individualised “precision medicine” and medical artificial intelligence (ai). But even they admit there are reasons to think that not all the excitement is overblown.

Technologies such as sensors, cloud-computing and data analytics are becoming medical-grade just as the risk of contracting covid-19 in hospitals and clinics makes their adoption look more enticing than ever. Specialist firms like Livongo and Onduo make devices to monitor diabetes and other ailments continuously. 

A study by Stanford University found that nearly half of American doctors surveyed used such devices. Of that group, 71% regarded the data as medically useful. 

In June the Mayo Clinic, a prestigious non-profit hospital group, teamed up with a startup called Medically Home to provide “hospital-level care”, from infusions and imaging to rehabilitation, in patients’ bedrooms. Even the Apple Watch has been shown to predict a medical problem known as atrial fibrillation in a clinical trial.

Patients are keen. A study of some 16m American ones just reported in jama Internal Medicine, a journal, found that their use of telemedicine surged 30-fold between January and June. American consumers surveyed in May by Gartner were increasingly using internet and mobile apps for a variety of medical needs (see chart 3).

Critically, regulators around the world are pressing health-care providers to open up their siloed systems—a precondition for digital health to flourish. The eu is promoting an electronic standard for medical records. 

In August the Indian government unveiled a plan for a digital health identity with interoperability at its core. Kuantai Yeh of Qiming, a vc firm, says that China’s government, too, is trying to overcome resistance to electronic records from hospitals fearful of losing patients to rivals. 

Yidu Cloud, a big-data platform for hospitals, may already be the world’s largest health data set, thinks Lee Kai-fu of Sinovation Ventures, another vc firm.

All this is helping medicine evolve from “a clinical science supported by data to a data science supported by clinicians”, argues Pamela Spence of ey, a consultancy. Does this make health care big tech’s for the taking? Amazon wants Alexa, its digital assistant, to be able (with your permission) to analyse your cough and tell you if it is croupy or covidy. 

In November the online giant, which already sells just about everything else, launched a digital pharmacy to take on America’s drug-distribution coterie of pharma firms, middlemen and retailers. AliHealth, a division of Alibaba, China’s e-commerce champion, is disrupting its home pharmacy market. 

Its revenues leapt by 74% in the six months to September, year on year, to $1.1bn. Apple has its watch and nearly 50,000 iPhone health apps. Google’s parent company, Alphabet, has Verily, a life-sciences division.

Tech giants’ earlier forays into health care flopped, argues Shubham Singhal of McKinsey, because they had gone it alone. Medicine is a regulatory minefield with powerful incumbents where big tech’s business models, particularly the ad-supported sort, are not a natural fit. 

But the pandemic has also highlighted that existing providers’ snazzy hardware and pricey services too seldom genuinely improve health outcomes. If the new generation of digital technologies is to thrive it must “improve health, not increase costs”, thinks Vivian Lee of Verily. 

Her firm is moving away from fee-for-service to risk-based contracts that pay out when outcomes improve (eg, if diabetics get blood sugar under control or more people get eye exams).

That points to a hybrid future where Silicon Valley works more closely with traditional health-care firms. Epic is using voice-recognition software from Nuance, a startup, to enable doctors to send notes to outside specialists; it has also teamed up with Lyft, a ride-hailing firm, to ferry patients to hospitals. 

Siemens Healthineers, a big German health-tech firm, is working with Geisinger, an American hospital chain, to expand remote patient monitoring. Patients of India’s Apollo Hospitals can use an app to get drug refills, tele-consultations and remote diagnoses—and even secure a medical loan through Apollo’s partnership with hdfc Bank.

Dr Klasko, keen to prove the banker wrong, is embracing the hybrid approach with gusto. “You must have partnerships with providers, not just hundreds of unconnected apps.” 

He has brought bright sparks from General Catalyst, a vc firm that made early bets on many digital-health startups including Livongo, to work alongside his innovation team in Philadelphia. 

“Moving fast and breaking things does not work well in health care,” observes Hemant Taneja of General Catalyst. But nor does standing still.

The Search for a Coronavirus Pill

Researchers Explore Promising New Therapies for COVID-19

All eyes are on coronavirus vaccines at the moment. But efforts to find successful treatments against COVID-19 are rapidly moving along as well. Initial laboratory tests have been encouraging.

By Jörg Blech

Virologist Meike Dittmann: "I believe the inhibitor is quite promising in the medium term." Foto: Celeste Sloman / DER SPIEGEL

Effective in 70 percent of cases, in 90 percent, even in 95 percent: The recent triumphant announcements from AstraZeneca, BioNTech and Moderna, rooted in preliminary results from ongoing clinical trials, make it look as though a vaccine against the coronavirus could soon be approved.

But there is another pharmaceutical footrace going on – one which will be just as crucial in the fight against SARS-CoV-2 and other, similar viruses. Largely under the public radar, researchers around the world are searching for a drug therapy to help those who have already contracted the virus. 

The hope is that patients will be able to take an inhibitor that binds to an important virus enzyme and paralyzes it. That, researchers hope, would then prevent the virus from replicating.

The German virologist Meike Dittmann of the New York University School of Medicine has tested a solution from Pfizer in her laboratory in Manhattan. In a petri dish, it was able to significantly reduce SARS-CoV-2 replication. "I believe the inhibitor is quite promising in the medium term," Dittmann says.

Other laboratories have also reported encouraging findings. The University of Tübingen is conducting research similar to Dittmann's, and the German biochemist Christoph Nitsche at Australian National University in Canberra has assembled a team to figure out how to block the important enzyme. The number of experiments with the same focus has exploded around the world.

But what should be the focus of such an agent? SARS-CoV-2 forces its way into host cells and takes control. The cells are reprogrammed and forced to produce viral genetic material and viral proteins – the building blocks of more viruses. A certain enzyme known as a protease, which has the ability to break down proteins, plays a key role here (see graphic).

It is possible to interrupt viral replication at a number of different stages in the process, but many researchers believe that protease present the best target. "It is my favorite target in the life-cycle of the virus," says Meike Dittmann. "The virus needs the protease immediately after entering the cell, and if the protease is deactivated, the life-cycle is stopped before the virus can even begin to replicate."

There are other advantages as well. The viral protease is significantly different from proteases found in humans, meaning an inhibitor would likely only bind the correct target. That would make undesirable side effects extremely unlikely. 

Furthermore, the coronaviruses that have thus far been identified all possess proteases that are more or less identical. That means that an inhibitor developed for SARS-CoV-2 could also be effective against other members of this family of viruses.

Plastic Balls and Sticks

Biochemist Rolf Hilgenfeld of the University of Lübeck saw all of this coming more than 20 years ago. He has always been particularly interested in proteases, he said during a March visit with him at his laboratory. "Back then, hardly any work was being done on coronavirus proteases. I thought: I'd really like to see one of these proteases in 3-D."

It took a while, and it required the assistance of a Ph.D. student and a cooperation partner. Relying on biotechnology, Hilgenfeld and his team produced the protease of a harmless coronavirus. Then, the researchers were able to crystallize it, and they then exposed the crystals to X-rays. The rays were bent, creating a pattern from which a 3-D structure could be calculated. They were then able to examine the structure to determine which part could best be targeted with an inhibitor.

At his laboratory, Hilgenfeld proudly showed off a large model of the protease. Students of his had assembled it using plastic balls and sticks.

When the genetic sequence of SARS-CoV-2 was published on Jan. 11, 2020, Hilgenfeld immediately examined the sequence for the relevant protease. As expected, it was almost identical to the proteases of previously known varieties of coronavirus. There were, however, a couple of differences. Together with researchers Linlin Zhang and Xinyuanyuan Sun, Hilgenfeld got to work.

Just a few weeks later, the team from Lübeck submitted a manuscript to the journal Science, which was then published in March. In the article, they and other scientists from additional research institutes in Germany and China described in precise detail how the SARS-CoV-2 is constructed. Not only that, they were able to identify the site on the protease where it could best be inhibited. And they presented a possible compound for doing so.

Even as biochemist Hilgenfeld, who turned 66-years-old in April, was receiving his retirement certificate from the University of Lübeck, experts around the world pored over his paper. 

It provided a perfect manual for producing an inhibitor.

A physicist from the German Electron Synchrotron (DESY) in Hamburg came to Lübeck to pick up the protease gene. Together with scientists from other research institutions, the DESY physicist initially produced a large number of the protease. 

They then tested out 5,575 previously developed medical substances and allowed the preparations to crystallize. 

Using X-rays, they were then able to determine which of the substances had bonded with the protease. Ultimately, Alke Meents, one of the researchers who took part in the effort, says that six of the substances had formed a bond. She says that the project is currently in talks with a large pharmaceutical company about establishing a cooperation.

"The Most Promising Agent"

Meanwhile, the companies Novartis and Takeda are participating in the COVID R&D Alliance, a collaboration involving more than 20 of the most experienced medical drug researchers in the world. According to Takeda, there are seven different working groups, including one for "novel, small molecule antivirals."

The researchers are hoping to "curb potential outbreaks in the future by developing a bespoke, antiviral therapy that can be used against any coronavirus that poses a threat in the future," says Jay Bradner, president of the Novartis Institute for Biomedical Research. Some interesting inhibitors have already been found in cooperation with a university, he says.

Virologist Meike Dittmann has also joined a research alliance. She quickly realized that many companies don't even have a virology department any longer. Dittmann, though, had access to a laboratory with a safety level of BSL-3 and offered to help. "We then chose what from our point of view was the most promising agent," she says.

They opted for a substance called PF-00835231, which Pfizer had developed several years earlier for proteases, but then stopped pursuing because of a lack of demand. Following the successful experiments in Dittmann's lab, Pfizer even apparently began testing the substance on people.

But PF-00835231 has a disadvantage: It has to be administered via injection. 

"Intravenous administration has to be done in a hospital, likely over the course of several days, which means it isn't universally available," says Dittmann. On top of that, the inhibitor has to be administered at the very beginning of an infection, when the virus is multiplying fastest.

The hurdles of availability and timing are most easily cleared with an inhibitor that can be administered orally. As such, most researchers are targeting such a drug.

"More and More Parameters"

The active agent must be able to find its way to the protease in the watery environment found in cells. But the protease is protected by a lipid membrane, meaning the substance cannot be too water soluble. 

"Otherwise, it wouldn't be able to penetrate the membrane," says the biochemist Hilgenfeld. "But it also can't be too liposoluble, otherwise it will get stuck in the membrane."

The next problem: Many cells seek to defend themselves against foreign substances. 

They are equipped with a kind of pump (P-glycoprotein), which pushes the undesirable substance back out of the cell. To counteract that reaction, it could be possible to combine the protease inhibitor with a P-glycoprotein inhibitor, Hilgenfeld says with a sigh. "But then, of course, you end up with more and more parameters."

Researchers, of course, are no strangers to such complexities, and for much of his career, Hilgenfeld frequently faced an uphill battle in securing funding for his seemingly exotic research into coronaviruses. 

He led the Institute for Biochemistry in Lübeck for 17 years before he was sent into retirement – right at a time when he was suddenly in greater demand than ever before. 

The China Pharmaceutical University in Nanjing, for example, sought to recruit him and offered him an entire research group if he came to China. The Max Planck Institute of Molecular Physiology in Dortmund also wanted Hilgenfeld.

At the last moment, though, the Ministry of Education, Science and Cultural Affairs in his home state of Schleswig-Holstein found a way to continue paying him a salary. As a senior professor, he is now in the process of moving his protease laboratory into a new building on the university campus in Lübeck. 

He has also joined a consortium for the development of coronavirus therapies, which is financed to the tune of 77.7 million euros by the European Union and 11 different pharmaceutical companies.

The project will come to an end after five years, as will Hilgenfeld's professorship. Does he believe that the first protease inhibitor will have been approved by then? 

"I certainly hope so," says Hilgenfeld. 

"So much effort is being invested in the project that something has to come out of it." 

Cinema will survive the pandemic apocalypse

Studios cannot rely on streaming alone to fund costly blockbusters

The editorial board

There is strong reason to assume film theatres will survive Covid-19 even if some indebted owners go bust © Henry Nicholls/Reuters

All the best happy endings have a plot twist. So it is in the real-life film business. 

Cinemas battered by forced closures, nervous consumers staying home, and Hollywood studios delaying the blockbuster releases they depend on, had hoped miracle drugs could save them from extinction. 

Good news on coronavirus vaccines recently sent shares soaring in debt-laden cinema groups such as AMC, Cineworld and Cinemark. But they plunged last week after Warner Bros said it would debut its films in the US next year simultaneously in cinemas and, for a month, on its HBO Max streaming service.

The Warner Bros move is the most dramatic yet by a Hollywood studio to break with the usual playbook for blockbuster releases and bring them more rapidly into living rooms. Cinema chains have spent years resisting studios’ attempts to reduce the time they can offer new films exclusively — and fighting off demands from Netflix to stream them at the same time. 

It gives a boost to online viewing and dents cinemas’ narrative that, once vaccine rollouts were well under way, audiences would rapidly rebound — enticed by a backlog of blockbusters such as the Bond movie No Time To Die, delayed from November to next April.

Warner Bros said its move was a one-year plan reflecting the likelihood cinemas would “operate at reduced capacity throughout 2021”. It also seems designed to boost disappointing sign-up rates to HBO Max, which launched in May. 

Either way, it is a serious blow to film theatre chains. AMC, which also filed last week to raise up to $844m by selling stock to keep it afloat, said it would not allow Warner to boost HBO at the cinema group’s expense.

If vaccines work out as hoped, Warner Bros’ public pessimism on cinemas may prove misplaced. The rebound in audiences in China suggests film-goers are happy to return once they feel safe. 

Studios also have an interest in seeing them come back. Only cinema networks can generate the kind of revenues needed to make blockbusters costing hundreds of millions of dollars viable.

Hollywood arguably needs cinemas even more next year as it is sitting on a stockpile of big-ticket releases. Even in the age of high-definition TV, moreover, blockbusters are still made for the big screen, and best seen on them. 

Industry insiders speculate Warner Bros may reverse its HBO Max move — which angered some film-makers — if life returns to normal by summer.

There is strong reason, then, to assume film theatres will survive Covid-19 even if some indebted owners go bust. Buyers, likely to include private equity companies that are used to handling similar restructurings, will surely be found. 

But cinema numbers are set to fall, especially in the oversupplied US market. 

Though global box office revenues hit a record $42.5bn in 2019, this was mainly due to increasing ticket prices; audience numbers have largely fallen since a peak in 2002.

The balance of power between the studios, aggressively expanding their streaming services, and cinema operators will also continue to shift. The three big cinema groups have all recently agreed to shorten their fiercely guarded windows for showing films exclusively in cinemas. 

Even for blockbusters, the window may shrink from months to weeks. Warner Bros’ HBO move is further muscle-flexing.

In the best traditions of the Hollywood disaster movie, cinemas find themselves facing a foe more devastating than any they have encountered before. 

Bruised and bloodied, and in reduced numbers, they will make it through to fight another day.

Saudi Arabia on the Brink of a Breakthrough

Its economy in trouble and its regional leadership challenged, Riyadh is in talks that would reshape the Middle East.

By: Caroline D. Rose

In the final weeks of November, Saudi Arabia’s foreign policy machine went into overdrive. Riyadh announced a series of defense and commercial agreements strengthening bilateral ties with Egypt, Iraq and the United States. 

But while Saudi diplomats were traveling around to increase Saudi Arabia’s influence in the Greater Middle East, recent meetings between Saudi and U.S. officials may well lead to a breakthrough closer to home in the Gulf.

A U.S. delegation visit to Riyadh during the first week of December seeks to hit two birds with one stone: putting an end to the more than three-year crisis between Gulf countries and Qatar, and starting the process of diplomatic normalization between Saudi Arabia and Israel. 

While the United States has had success getting countries like Bahrain and the United Arab Emirates to adjust their regional diplomatic policy, the Saudis have been the hardest to budge. 

The kingdom considers itself the natural, de facto leader of the Gulf and Sunni Arab world, and for some time reckoned it could not afford to lose political credibility by realigning itself with a historical rival (Israel) and a neighbor (Qatar) whose brand of religious ideology and independent foreign policy are considered a threat to Saudi regional influence. 

But a breakthrough is more likely than ever, as a combination of waning regional influence, financial constraints and shifting fault lines in the Middle East push Saudi Arabia to explore normalization with Israel and Qatar.

Leadership Contest

Saudi Arabia has traditionally been considered the effective ideological and religious leader of the Sunni Arab world. The country’s vast oil wealth, combined with its custodianship over Islam’s holiest cities, Mecca and Medina, and location at the crossroads of Red Sea and Persian Gulf trade routes, make it a natural Gulf power. 

Saudi Arabia was at the forefront of the Middle East’s modern political rifts, considering itself the moral and religious guardian of the Arab world in opposing Israeli annexations, upholding the Palestinian cause, taking the reins of the Arab League and Gulf Cooperation Council, and later, in the years after the 1979 Iranian Revolution, leading its Sunni allies in countering Iran’s Shiite Crescent strategy.

But Saudi Arabia’s star is dimming. The kingdom’s over-reliance on its oil industry (where prices are stubbornly low due to COVID-19 and oversupply), demographic challenges, and a 2030 Vision reform program on shaky ground have chipped away at its regional credibility and relative strength with its neighbors. 

Additionally, the al-Saud royal family’s record on human rights and the country’s war in Yemen have alienated traditional partners like the U.S. and the EU. All the while, the UAE – a country less than 4 percent the size of Saudi Arabia – has made a series of ambitious foreign policy moves that have begun to overshadow Saudi Arabia as regional leader. 

The UAE has taken the lead in the ideological battle on political Islamism: Abu Dhabi has reportedly funded mercenaries and has armed the Libyan National Army against the Turkish- and Qatari-backed Government of National Accord in Libya; has been at the forefront of strengthening Gulf ties through the Eastern Mediterranean Gas Forum against Turkish expansionism in the Mediterranean; and, notably, was the first among its Gulf neighbors to initiate peace with Israel this year. Gone are the days when Riyadh could depend on its cultural soft power to maintain its Gulf hegemony and regional leadership.

While the Saudis have been on the sidelines, their Gulf peers have seen a flurry of economic and political opportunities from normalizing ties with Israel. In the four months since Israel and the UAE reached their agreement, they have signed a string of memorandums of understanding on banking and finance, commerce and trade infrastructure, and even an oil pipeline deal worth as much as $800 million that would transport Emirati oil to Europe via Israel’s ports of Eilat and Ashkelon. 

Bahrain, which also normalized ties with Israel, hasn’t been far behind, inking business cooperation deals with Israel’s Chamber of Commerce and aviation agreements. Both countries have proved that normalization can bring economic rewards at a time when most Gulf economies, particularly Saudi Arabia, desperately need diversification.

Riyadh is therefore in discussions with Washington about rapprochement with Israel. At first, Saudi Arabia worried that normalization with Israel would risk its regional legitimacy, but now it’s considering that the reverse may be true An Israeli-Saudi peace deal could help Saudi Arabia catch up to its Emirati neighbor with a series of investment, commercial and infrastructure agreements that would create new regional trade and financial hubs between the Red Sea and the Mediterranean. 

The U.S. and Israel have also reportedly hinted that joint custodianship over Jerusalem’s Al-Aqsa Mosque would be on the table – something that would enhance Saudi Arabia’s reputation as the Islamic world’s religious guardian (but could also cause tensions with Jordan, the current sole custodian of Al-Aqsa). 

And, importantly, Riyadh would look to use normalization to position itself as a mediator for an Israeli-Palestinian peace deal, which would score it major points among regional partners, the U.S. and the international community. For the kingdom, the political short-term and economic long-term payoffs are worth the risk of changing its traditional stance.

Countering Iran and Turkey

Political credibility and economic opportunity aside, the kingdom has another significant reason for normalization. By realigning with Israel and Qatar, Saudi Arabia and its Gulf partners would be able to further isolate two of their primary rivals in the region: Iran and Turkey.

For Israel and Saudi Arabia, Iran is a common enemy. As Iran has augmented its strategic depth in the region over the years, building a proxy network that extends from the Zagros Mountains to the Red Sea and Mediterranean, Saudi Arabia and Israel have found greater incentive to work together. 

Over the past two decades, the two countries expanded cooperation and intelligence-sharing behind closed doors, keeping relations ice-cold only on the surface But as the Gulf begins to open up toward Israel, Saudi Arabia has an opportunity to expand its coalition against Iran beyond traditional Sunni Arab lines and include one of the top military powers in the region in its circle.

The same logic applies to the Gulf Cooperation Council’s broadening campaign against Turkish influence in the region. As Turkey has gotten more deliberate about expanding its influence and control, Saudi Arabia and its Gulf counterparts are recognizing that they share an interest with Israel in opposing Turkish expansionism. 

Saudi Arabia, the UAE, Egypt and their Gulf partners (excluding Qatar, of course) have been vocal opponents of Turkey, accusing the ruling Justice and Development Party of supporting political Islamist movements like the Muslim Brotherhood. And for Saudi Arabia in particular, Turkey’s neo-Ottoman approach and brand of Islamic identity politics is seen as a challenge to its leadership over the Sunni Muslim world. 

Meanwhile, Israel has had hostile relations with Turkey since the 2010 Gaza flotilla incident and has become engaged in an ideological war of words with Turkish President Recep Tayyip Erdogan over the status of Palestine. 

Israel has resented Turkish attempts to take up the torch of the Palestinian cause over the years; Ankara in September hosted mediation discussions between rival Palestinian factions, Hamas and Fatah, to encourage unity against Israel, and has been a vocal opponent of Israeli annexations and Israeli peace deals with Arab Gulf states. 

Israel is also a member of the Eastern Mediterranean Gas Forum, an emerging regional coalition that Saudi Arabia, the UAE and Gulf partners have begun to align with to amplify opposition to Turkish moves over maritime territory. When strategizing its next step against Turkey, Saudi Arabia is beginning to accept Israel as a natural partner.

Then there is the question of Qatar. Normalization with Qatar offers a different, but more delicate, opportunity for Saudi Arabia. Doha has a relatively positive relationship with Iran and an intimate partnership with Turkey, as well as a Sunni ideological platform that runs counter to Saudi domestic interests. 

Saudi Arabia and its Gulf partners have criticized Qatar for alleged support of Islamist groups like the Muslim Brotherhood and have framed Qatar as an agent of foreign efforts to thwart regional stability through Islamist infiltration. 

Of course, intra-Gulf tensions infamously came to a head in 2017 when Gulf states severed diplomatic relations with Doha and enacted an air, sea and land blockade, isolating Qatar from its former Gulf allies. The ideological rivalry has by no means abated, particularly as Saudi Arabia and the UAE have countered Qatari influence in new theaters like Libya and have continued to accuse Doha of supporting Islamists. 

Shortly after the 2017 blockade, Qatar normalized relations with Iran and enhanced bilateral trade in gas and shipping. And since the diplomatic crisis, Qatar has become Turkey’s most reliable regional ally, offering Ankara financial relief through currency swap deals, investing in joint defense projects abroad and boosting trade relations. 

Unlike Israel, Qatar does not seem like a natural partner in broadening the regional coalition against Iran and Turkey. However, it could serve as a useful agent to isolate Saudi Arabia’s rivals.

As the sun sets on the current U.S. administration and Trump’s Middle East team scrambles to assemble a series of legacy-sealing deals before Jan. 20, 2021, Riyadh sees space for maneuver. By extending an olive branch and lobbying the U.S. to apply pressure on Doha, Saudi Arabia and its Gulf partners are working to rein in Qatari influence and convince it to end its engagement with Iran and Turkey. 

While the exact details of what a deal would look like are uncertain, Gulf countries have insisted since 2017 on a 13-point ultimatum that includes demands to close a Turkish military base on Qatari soil, sever all ties with the Muslim Brotherhood and other Islamist groups, shut down diplomatic posts in Iran and limit Iranian-Qatari ties to trade and commerce that strictly complies with U.S. sanctions. 

Though Qatar has been reluctant to yield to these demands, the incentives for re-initiating relations with its Gulf neighbors are increasing. Thanks to Qatar’s mammoth-size gas reserves (the third largest in the world), ramped up domestic production, and boosted economic ties with the U.S. and Turkey, the 2017 blockade didn’t entirely devastate the Qatari economy. 

However, the logistical issues remain as Qatar is cut off from the countries where 60 percent of its imports (namely food and supplies) transit through. While Turkey and Iran have served as alternative supply routes, resolving the crisis with the Gulf Cooperation Council countries would ease these logistical conundrums as well as reintroduce Qatar into the Gulf’s expanding financial and trade hubs. 

If Doha was pressured to concede to such a deal, Turkey and Iran would be further isolated in the region. Of course, a snap decision on the Gulf crisis will likely not be ironclad, as tensions between Gulf states and Qatar linger beneath the surface, but it would put restrictions around Qatar’s foreign engagement – threatening to deprive Turkey of its sole regional ally, and weakening Iran’s foothold in the Gulf.

As meetings between U.S., Israeli, Qatari and Saudi officials continue into December, an opening between the Gulf’s de facto leader and its traditional rivals becomes more likely. 

With a precarious long-term economic outlook, waning religious and political credibility, and a fragmented regional campaign against Turkey and Iran, Saudi Arabia is indicating it no longer wishes to wait when it comes to peace with Israel and Qatar.