What Talks With Jordan's Trade Minister Mean for Israel's Economy

After a decade of relatively quiet yet cool relations, Jordan and Israeli ministers met in early November to strengthen diplomatic and financial ties. Jordan is another addition to the list of Arab countries that seek to communicate with Israel and create partnerships. Not only do these meetings enhance hopes for peace in the region, but can improve the health of Israel’s economy and Israeli investments.

Since the landmark agreement in 1994 that made Jordan the second Arab country to seek peace with Israel, the two countries that share a border have been diplomatically rather distant. Although the nations need to have agreements in place regarding water, territory, and exports, disagreements concerning the Palestinian Authority and the increased building in Israeli settlements have created quiet tension.

The purpose meeting in November 2021 was to strengthen ties through an agreement to facilitate Jordanian exports through the Palestinian territories and increase the number of types of items including construction materials, apparel, electronics, and fabrics. The expansion of exports is significant, from $150 million to $700 million.

Water Remains a Pivotal Issue

Israel’s economy minister Orna Barbivai and Jordan’s counterpart Yousef Alshamali met in Jordan also to discuss improvements in diplomatic relations and water agreements. Jordan is one of the most parched countries on Earth and droughts caused by global climate change fuel an even greater dependency on water imports.

Maintaining healthy ties with Israel is therefore beneficial for Jordan. As part of the agreement between the two finance ministers, Israel agreed to double its freshwater imports to Jordan. This was a confirmation of an agreement made in the summer of 2021 that Israel would agree to sell 50 million cubic meters of water to Jordan, and is the largest sale of water between the two nations.

The issue of water supply was pivotal in the historic 1994 Israel and Jordan pact and continues to be a tie between the two countries even as they may disagree on many other issues. Even as many other Arab nations remain aloof from Israel, Jordan recognized early on that it was in the economic and diplomatic interest of Jordan to at least keep the lines of communication open with the Jewish State.

A New Chapter in Relations Between Israel and Jordan

This summer, Israeli Prime Minister Naftali Bennett met with King Abdullah II in Jordan, which signaled the first time since the heads of state of these countries met in three years. Under the Netanyahu administration, Jordan and Israel clashed, but there was hope that Israel’s new government would start a new chapter in Jordan-Israel relations.

In addition to water supply and exports to the Palestinian Authority, Economy Ministers Barbivani and Alshamali discussed other trade issues and tourism.

In a video statement, Orna Barbivani said, according to Times of Israel, “The trade benefits agreed upon today between the Israeli government and Jordan are an important dimension in the strengthening of diplomatic relations between the two countries. Deepening civilian and economic ties contributes to bilateral relations, national security, and the protection of Israel’s longest and most quiet border.

How Diplomacy Affects Israeli Investments

The first meeting of Israeli and Jordanian ministers in ten years is yet another step towards diplomatic progress that was initiated by the Abraham Accords in 2020. Since the normalization of relations between Israel and the UAE and Baharain and later Morocco and Sudan, trade has blossomed.

Between September 2020 and July 2021, trade between the UAE and Israel reached $600 million. This development bore fruit for Israeli investments. The recent talks with Jordan are likely to continue to benefit Israeli investments and have a favorable effect on the economy of both countries.

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