The United States has an interest in lessening, not perpetuating or increasing, tensions in the Persian Gulf region. Improved Saudi-Israeli relations run contrary to that.
In an ongoing diplomatic dance involving Israel and Saudi Arabia, the Biden administration appears to have lost awareness of where U.S. interests do and do not lie. The administration has made clear that it would love to see those two countries expand their ties, preferably to include full diplomatic relations, and evidently is partly shaping its policy toward Saudi Arabia with that objective in mind. But Israel and Saudi Arabia already cooperate extensively, including on sensitive security matters. Whatever practical benefits might derive from such cooperation are already to be had. The significance of any upgrading to normal diplomatic relations would mostly be symbolic leading to the question of exactly what such upgrading would symbolize.
The sole reason that most Arab countries have not established full diplomatic relations with Israel already is the persistence of the Israeli-Palestinian conflict, including Israel’s occupation and colonization of Palestinian territory and its denial of self-determination and political rights to the Palestinians. It remains the official position of the Arab League that normal relations between Arab states and Israel will follow a just resolution of that conflict. Although some states have departed from that consensus, Saudi Arabia has not. This issue evidently is one aspect of Saudi policy on which the aging King Salman bin Abdulaziz Al Saud has continued to assert his authority and not defer entirely to his son, Crown Prince Mohammed bin Salman.
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