On March 2nd, Israel will hold its third general election in twelve months, following two deadlock results in the Knesset. This latest round is set to be a close run battle between the two main centre-right parties, with neither party particularly likely to win a majority. As a result – save for a shock result – the political uncertainty that has paralysed Israel since early 2019 is likely to continue, and although the country remains stable, risks are emerging in policy areas neglected by an increasingly long-term interim government. In this piece, Lewis Tallon examines the geopolitical and domestic challenges facing Israel should the nation produce another indecisive election on Monday.

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Current polling suggests that little has changed since Israel’s last election in September 2019. The Kahol Lavan party, led by Benny Gantz, is expected to take around 30-35 seats, as is Incumbent Prime Minister Benjamin Netanyahu’s Likud party. Meanwhile the recently-created alliance of the left-leaning Labour, Gesher and Meretz parties will likely peak at around 10 seats, while the right-leaning Yisrael Beiteinu, Yamina and Orthodox parties are likely to return to the Knesset with a similar number of seats as last year. The Arab Joint List will likely maintain its 13 seats, but this will change little given that no Arab party has ever been invited into a governing coalition in Israel. This will likely once more result in a frustrated Parliament as seen during both of 2019’s elections, in which neither party can seize the needed 61-seat majority. Despite this paralysis, a unity government is unlikely, as it has been deemed unacceptable by Gantz as it would entail sitting alongside Netanyahu, who has now been formally indicted on sweeping corruption charges and is due to stand trial on 17 March.

Initially, it was hoped that Netanyahu’s court battle would swing opinions in Gantz’ favour, however, with Netanyahu having survived a leadership challenge within his Likud party in December, the unprecedented potential scenario of a sitting prime minister being charged for corruption has not provided a boost to Gantz. As a result, another indecisive outcome looks almost certain at this point, which comes at a geopolitically-precipitous moment for Israel. As a result, analysts are already considering the implications of continued paralysis and a fourth Israeli election at some point in late 2020.

Geopolitical Implications

Political deadlock comes at an uncomfortable moment of Israel. In January 2020, U.S. President Donald Trump announced his highly questionable “peace plan” for Israel-Palestine, which was perceived across the region as being overwhelmingly favourable to Israel and saw a sharp increase in tensions across the Middle East and a low-level pattern of fresh attacks in Jerusalem, Gaza and along its borders. The plan’s support for Israeli annexation of territory within the West Bank has drawn condemnation from neighbouring states, such as Jordan and Lebanon, and has driven protests globally. Despite initial speculation that Netanyahu would begin a formal annexation prior to the election in order to further cement right wing support, this was delayed by Washington’s insistence that a joint committee first sit to consider Israeli proposals. As a result, any formal annexation has been delayed until Netanyahu (or a successor) can form a formal government. As this does not look likely in the immediate future, this can be considered an indefinite postponement at present.

Despite being overshadowed somewhat by tensions around the Trump peace plan, there have been improvements between Israel and Palestine in other areas in recent months. Most notably, agricultural trade between the two restarted last week after the Palestinian Authority ended a ban on cattle imports from Israel. Concurrently, Israel withdrew a number of restrictions on the Gaza territory, including increasing the number of work permits available to Palestinians and expanding Gaza’s offshore fishing zone. This appears to be designed to keep alive the prospect of a ceasefire with Hamas, which has been a key point of Egyptian-mediated talks throughout the last year.

Further political uncertainty in the wake of the upcoming election will ensure that any Israel-Palestine developments remain in question. If Netanyahu succeeds in forming a government, there is a strong possibility of him pushing ahead with some form of formal annexation in the West Bank, which would almost certainly result in a violent response in Palestinian territory, as well as a breakdown in relations with key neighbours.

Outside of Israel-Palestine relations, one of the region’s most interesting developments – improving bilateral relations with the Gulf Arab States – is likely to continue regardless of the election outcome. Diplomatic relations with the Gulf states have been strengthened significantly in recent months due to increasing uncertainty over Iran. Earlier this month, Israel announced that it would allow Israeli Arabs to travel to Saudi Arabia to perform the Hajj, and reports continue to circulate that the Gulf States are purchasing further series of Israeli military technology.

Despite this, if the March 2nd election produces a shock victory for Netanyahu and subsequently his formal annexation plans are launched, the outrage of ordinary Arabs will be difficult for their governments to ignore, thereby undermining their rulers’ desire to improve relations with Israel as a counterbalance to an unreliable U.S. and an increasingly-hardline Iran. That said, if the Knesset remains in deadlock, the pattern of improving diplomatic relations is likely to continue.

Another area of likely continuity is likely to be the development of the East Mediterranean gas basin. An agreement signed by Greece, Cyrus and Israel will see the construction of a gas pipeline from Israeli gas fields to Europe over the next decade. The potential returns for Israel and her partners are significant, not only boosting revenue, but ensuring long-term energy security in a part of the Middle East that has not previously shared the region’s hydrocarbons benefits. The potential returns of this agreement are too significant for any election victor to ignore, and as such the country’s energy policy can likely be considered set. Israel’s Ministry of Energy has made the move away from coal to a mix of gas and renewables a key objective for 2030, while the financial, diplomatic and security benefits from the development of an integrated Eastern Mediterranean gas system are significant.

Domestic Implications

2019 demonstrated that despite a paralysed Knesset, Israel can function without a formal government. Despite this, Netanyahu’s stalled premiership has seen a period of policy stagnation, with the exception of responses to security threats (a key election policy point of the Prime Minister). During the last year, Israel has seen 3.3% annual economic growth, which represents its slowest rate since 2015, and the Finance Ministry and Central Bank issued warnings in January that the continued failure to pass a budget was endangering the country’s economic stability. Investment and government spending have dwindled and will likely remain depressed until the Knesset can approve a budget. Given the outlook for the elections, this looks unlikely before the middle of the year.

Growth projections are likely to be revised even lower in the face of continued uncertainty (and the impact of Coronavirus on global markets). Further delays to the much-needed budget approval will compound this, while deferring critical policy decisions needed to address the rising deficit.

Conclusion

Despite having demonstrated that the nation can remain functional and secure despite a paralysed Knesset, at a time of global and regional geopolitical uncertainty, Israel is approaching a critical moment where it will no longer be able to continue without decisive governance without suffering major economic, geopolitical and security setbacks. Netanyahu’s groundbreaking corruption trial will take the nation into unexplored territory if he remains in power during his trial, and will bring further policy paralysis at a dangerous moment. For now, it looks like the title of the Middle East’s sole democracy is less prestigious than it once was.

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Lewis Tallon is a former British Army Intelligence Officer with extensive experience working and living in the Middle East and North Africa region and Asia Pacific in security, geopolitical, armed conflict risk and threat intelligence roles. Lewis currently specialises in providing MENA-region geopolitical intelligence support to the oil & gas industry, and the financial & technology sectors.

For an in-depth, bespoke briefing on this or any other geopolitical topic, consider Encylopedia Geopolitica’s intelligence consulting services.

Photo credit: Official White House Photo by D. Myles Cullen