Saudi Arabia has abandoned its pursuit of an ambitious defence treaty with Washington in return for normalising relations with Israel and is now pushing for a more modest military cooperation agreement, two Saudi and four Western officials told Reuters.

In a drive to get a wide-ranging mutual security treaty over the line earlier this year, Riyadh softened its position on Palestinian statehood, telling Washington that a public commitment from Israel to a two-state solution could be enough for the Gulf kingdom to normalise relations.

But with public anger in Saudi Arabia and the wider Middle East at fever pitch over Israel’s military actions in Gaza, Crown Prince Mohammed bin Salman has again made recognition of Israel conditional on it taking concrete steps to create a Palestinian state, two Saudi and three Western sources said.

Israeli Prime Minister Benjamin Netanyahu is still eager to secure normalisation with the Saudi powerhouse as a historic milestone and a sign of broader acceptance in the Arab world, Western diplomats said.

However, he faces overwhelming opposition at home to any concessions to the Palestinians following the October 7, 2023, Hamas attacks and knows any gesture in the direction of statehood would fracture his ruling coalition, they said.

With both leaders shackled for now by their domestic powerbases, Riyadh and Washington hope a more modest defence pact could be sealed before US President Joe Biden leaves the White House in January, the sources said.

A full-blown US-Saudi treaty would need to pass the US Senate with a two-thirds majority — and this would be a non-starter unless Riyadh recognises Israel, the six sources said.

The pact now under discussion would involve expanding joint military exercises and drills to address regional threats, mainly from Iran. It would foster partnerships between US and Saudi defence firms, with safeguards to prevent collaboration with China, the sources said.

The agreement would promote Saudi investment in advanced technologies, especially drone defence. The US would increase its presence in Riyadh through training, logistics and cyber security support, and may deploy a Patriot missile battalion to enhance missile defence and integrated deterrence.

But it would not be the kind of binding mutual defence treaty that would oblige US forces to protect the world’s biggest oil exporter in the event of foreign attack.

“Saudi Arabia will get a security deal which will allow more military cooperation and sales of US weapons, but not a defence treaty similar to that of Japan or South Korea as initially sought,” said Abdelaziz al-Sagher, head of the Gulf Research Institute think-tank in Saudi Arabia.

The Trump dilemma

The picture is complicated further, however, by the impending arrival of Donald Trump in the White House. While Trump’s plan to resolve the Israeli-Palestinian conflict excludes any provisions for Palestinian statehood or sovereignty, he is a close ally of the Saudi crown prince.

Palestinian and some Arab officials worry that Trump and his son-in-law Jared Kushner — architect of the “Deal of the Century” and also a close ally of the crown prince — may ultimately persuade him to support the plan.

How the prince reconciles Saudi priorities with this shifting diplomatic landscape will be pivotal, defining both his leadership and the future of the peace process, diplomats said.

The current US administration has not given up hope for a deal on security guarantees before Biden leaves office in January, but a number of obstacles remain. One person in Washington familiar with the talks said there was reason to be sceptical about whether there was enough time to strike a deal.

US officials are mindful that the kingdom is still interested in formally cementing the guarantees it has been seeking, especially to gain access to more advanced weapons, but are uncertain whether it would prefer to get it done under Biden, or wait for Trump, the source said.

“We continue to discuss and have many lines of effort on the table [with the Saudis],” the US official said.

The White House National Security Council declined to comment when asked about efforts toward reaching a deal on US security guarantees for Saudi Arabia.

A defence treaty giving Saudi Arabia US military protection in exchange for recognising Israel would reshape the Middle East by uniting two long-time foes and binding Riyadh to Washington at a time when China is making inroads in the region.

It would allow the kingdom to shore up its security and ward off threats from Iran and its Houthi allies, to avoid a repeat of the 2019 strikes on its oil facilities, which Riyadh and Washington both blamed on Tehran. Iran has denied any role.

A senior Saudi official said the treaty was 95 per cent complete but Riyadh opted to discuss an alternative agreement, given it was not doable without normalisation with Israel.

Netanyahu’s office did not comment when asked about the Saudi position on Palestinian statehood.

Depending on the format, a scaled-down cooperation agreement could be approved without going through Congress before Biden leaves office, two of the sources said.

There were other stumbling blocks in the negotiations to secure a mutual defence treaty. For instance, there was no progress in the talks about civil nuclear cooperation because Saudi Arabia refused to sign a so-called 123 Agreement with the US that would have denied Riyadh the right to nuclear enrichment, the six sources said.

Saudi objections to articles related to human rights proved to be another area of disagreement, one Saudi source close to the talks told Reuters.

‘The big prize’

While the Saudi leadership strongly advocates Palestinian statehood, it remains uncertain, according to diplomats, how the crown prince would respond if Trump revives the deal he floated in 2020 to resolve the Israeli-Palestinian conflict.

The plan marks a dramatic shift in US policy and international agreements by overtly aligning with Israel and deviating sharply from the long-standing land-for-peace framework that has historically guided negotiations.

It would allow Israel to annex vast stretches of land in the occupied West Bank, including Israeli settlements and the Jordan Valley, and recognise Jerusalem as the “undivided capital of Israel” — effectively denying Palestinian claims to East Jerusalem as their capital, a central aspiration in their statehood goals and in accordance with UN resolutions.

By legitimising Israeli annexations, the Trump plan is viewed by many as a severe blow to the two-state solution and Palestinian hopes of statehood. Saudi officials insist that the creation of a Palestinian state in accordance with previous international agreements, including East Jerusalem as its capital, remains an essential condition for long-term regional peace and stability.

Without it the cycle of violence will continue to jeopardise any normal relations, they say.

“How can we imagine a region integrated if we sidestep the Palestinian issue?” a senior Saudi official said. “You can’t prevent the Palestinian right to self-determination.”

In some of the harshest criticism of Israel since the start of the Gaza conflict, Crown Prince Mohammed called Israel’s military actions in Gaza “collective genocide” in his address to an Arab and Islamic summit in Riyadh this month.

The potential for Saudi normalisation with Israel, however, could be revisited in the future, perhaps once the dust settles after the Gaza conflcit — and possibly under a different Israeli government, diplomats said.

Fawaz Gerges, a Middle East expert at the London School of Economics, said Trump would leverage all possible avenues to secure historic normalisation between Saudi Arabia and Israel. “For Trump, Saudi Arabia is the big prize,” said Gerges.

“As to how normalisation could happen despite repeated Saudi leaders’ insistence they will not recognise Israel until a real path to a Palestinian state is set, Trump could promise a ceasefire in Gaza in return for normalisation and tentative promise to support a Palestinian state, without obliging Israel to make any real concessions to the Palestinians.”