The Fall of Israel: an interview with Dan Steinbock

World Geostrategic Insights interview with Dr. Dan Steinbock on the structural forces behind the Political, Economical and Military degradation of Israel; the future for this country; the role of Iran, Israel and the U.S. in the escalation of the conflict in the Middle East; the likely approach of Trump towards the Gaza war and the MENA region; how the war in Gaza is connected with the rise of the Global South and if the “Two States” solution is still a valid option to solve the Israel-Palestine conflict.

Dr Dan Steinbock is the founder of Difference Group Ltd, which helps governments, businesses and organizations navigate a new multipolar world economy. Previous affiliations: Research Director of International Business, India, China and America Institute (USA) Visiting Fellow, Shanghai Institutes for International Studies (China) Visiting Fellow, EU Center (Singapore).

Q1 – In your new book ‘THE FALL OF ISRAEL: The Degradation of Israel’s Politics, Economy & Military’, you argue that Israel is implementing a policy of Gaza annihilation facilitated by the confluence of a long-standing set of forces, which you describe in detail in the book. Can you summarize here what these forces are?

DS: Not a purposeful policy, but a net effect of obliteration. In The Fall of Israel, I use the term “great conjuncture” to refer to four structural forces that account for a set of cumulative disasters in Israel/Palestine. Starting with the waves of Palestinian expulsions since the late 1940s, the first force involves the ethnic cleansing of 1947-48, the aftermath of the 1967 war, and the Gaza War of 2023-24, coupled with political, economic and military measures facilitating such expulsions since the 1970s.

The second force underlying the great conjuncture refers to the aggressive expansion of the Jewish settlements in the occupied territories. When in 1974, I met Yael Dayan, the daughter of General Moshe Dayan and one of the future leaders of the Peace Now movement, I joined the protests against the settlers. At the time, there were only a few thousands of them in the occupied territories. Subsequently, when I translated Amoz Oz’s book on the settler divide and we protested the 1982 Lebanese War and the Sabra and Shatila massacre, the number of settlers was almost 100,000. Today, that figure totals nearly 750,000; over 500,000 in the West Bank alone.

The third structural force encompasses half a century of failed American diplomacy, which is mainly about military aid, in the Middle East. The Fall of Israel shows how the US-Israeli ties have moved from hedging under Presidents Truman and Eisenhower and choosing sides under Johnson and Nixon, to strategic partnership under Reagan and eventually a symbiosis under Clinton and Obama, Bush and Trump. Israel is vitally dependent on weapons transfers and financing by the US, and to a lesser degree on arms transfers by Germany, the UK, Italy and other Western countries. By the same token, these ties have made these countries complicit in the obliteration of Gaza and the Palestinians.

Finally, instead of fostering peace in the region, America’s massive military aid to Israel – $18 billion in the past year alone – has amplified Israel’s parallel militarization, degrading its economy, politics and military. The price tag of the Gaza War will exceed $50 billion and, if the ongoing regional escalation prevails, the final tally will be higher.

These forces of the great convergence – ethnic expulsions, occupied territories, US military aid and the consequent distortions in the Israeli economy, polity and military – feed on each other. They account for a vicious and increasingly lethal cycle, intensifying and broadening regional escalation. What has happened in Gaza won’t stay in Gaza.

Q2 – You affirm that Israel operates outside international law, rejecting peaceful co-existence with the Palestinian population and the Arab neighboring states. What is Israel now, what characteristics has it taken on, what future do you see for this country, both with respect to its internal cohesion and international

DS: Reflecting its subtitle, The Fall of Israel shows how the underlying forces of the great conjuncture are degrading Israel’s politics, economy and military. The very nature of the country is at risk. Secular Jewish democracy is threatened by ultra-religious, autocratic forces, as evidenced by the record-large mass protests against the “judicial reforms” since early 2023. These reforms would essentially erode the independence of the judiciary thereby drastically weakening Israeli democracy. These trends have already resulted in the nation-state law – officially, Basic Law: Israel as the Nation-State of the Jewish People – which has effectively violated Israel’s self-defined legal status as a “Jewish and democratic state,” in exchange for an exclusively Jewish identity. By the same token, it has further weakened the citizenship rights of 2.1 million Israeli Arabs.

Social divides are worse than ever before. Labor Zionism, with its more moderate, egalitarian legacies, has been largely crushed by revisionist Zionism, with its harsh-right neoconservatism and “iron wall” security policies. In the past, economic growth has benefited a small economic elite, plus the highly-subsidized settlers. Israel’s income polarization is the highest among all OECD countries. Poverty is climbing. The welfare state is eroding. The economy relies on the expertise of the relatively narrow high-tech sector and the tax revenues of a shrinking middle class that’s over-burdened. As the high-tech “brain drain” has soared, Israel’s economic future is at risk as well. Meanwhile, ultra-orthodox Jewish demographics are soaring, thanks to subsidies and a still very high birth rate. Given the continuance of present trends in the next two to three decades, the pressures will escalate over the middle class, subsidies, and social divides.

It is these long-term trends that are the real challenge. The recent rating downgrades are an early indicator. Without a major change, Israel is heading toward an economic edge.

Q3 – The Middle East is on the brink of a full-scale regional conflict. What is the role of Iran, Israel and the U.S. in such a dangerous escalation?

DS: The Fall of Israel depicts regional escalation as a net effect of the great convergence. Over time, destabilization has spread from Israel and Palestine to the neighboring countries (Egypt, Jordan, Syria, Lebanon) and beyond (Saudi Arabia and the Gulf states, Iraq and Iran, and Yemen). Worse, the potential of regional escalation does not pose just the risks of conventional conflicts. In moments of perceived existential crisis, Israel has resorted to nuclear considerations since the 1967 Six-day War. In the early days of the 1974 Yom Kippur War, defense minister Moshe Dayan green lighted nuclear mobilization until President Nixon began the massive arms flow that heralded the bilateral partnership.

Without effective international diplomacy, a broader Israel-Iran escalation could take the ongoing turmoil to an entirely new level, with global repercussions. Until recently, three basic scenarios prevailed regarding a possible Iranian attack (itself prompted by Israeli escalation). A proportionate Israeli retaliation would signal might without causing widespread economic and human costs. Second, a disproportionate escalation would also target infrastructure. Third, if the aim is to seek regime change, the retaliation would additionally target Iranian nuclear sites and critical military infrastructure, hoping to destabilize Iran for a US-style regime change. In the first case, Iran was likely to contain its further response. In the second, Iran would escalate. In the third, all bets were off in the Middle East and global reverberations will ensue. Unlike Iran which showed restraint, the Netanyahu cabinet didn’t. It flirted with the third scenario until it was torpedoed by the Biden administration. Biden seemed to favor a new nuclear deal with Iran, a sort of JCPOA II.

Trump 2.0 is unlikely to have such preferences. During his first term, President Trump was behind the withdrawal from the original JCPOA and the assassination of Iran’s popular General Soleimani; two strategic moves that destabilized the region contributing to the flames of October 7. Trump 2.0 will try to eliminate the Axis of Resistance; that is, the opposition of Palestinian resistance, Iran, Hezbollah in southern Lebanon, Houthis in Yemen, and various other groups in Syria and Iraq. US unwillingness to contain Israel in Gaza and tacit support of Syrian turmoil are paving the way to Trump 2025. Such moves risk creating new killing fields in the Middle East, as in the Ukraine proxy war.

With the Israel-Iran-US triangle drama, we may be currently witnessing calm before the storm. The headwinds will increase with President Trump’s inauguration on January 20.

Q4 – In your book you argue that the 76 years of Palestinian repression and suffering have been facilitated by unconditional American support for Israel. How do you think Trump will likely differ from Biden in approaching the Gaza war and the MENA region?

DS: In Palestinian view, the Biden administration allowed a year of genocidal atrocities in Gaza, which Trump 2.0 is less likely to permit. But in other ways Trump 2.0 is likely to prove a lot worse.

When the Trump administration arrived in the White House in early 2017, any remaining Palestinian hopes faded as Trump made David M. Friedman, an uber-Zionist and donor if illegal settlements, U.S. ambassador to Israel. Then Netanyahu announced Israel would lift all restrictions on settlement construction in the West Bank, while Trump looked the other way. Subsequently, the U.S. announced its first permanent military base in Israel and Trump recognized Jerusalem as the capital of Israel, moving the U.S. Embassy from Tel Aviv to the Holy City. Decades of U.S. policy toward Israel and the occupied territories, however ambiguous, was reversed almost overnight, as the administration chose to violate several UN resolutions on East Jerusalem.

In May 2018, Trump withdrew the U.S. from the Iran nuclear deal that had taken years to achieve. In fall 2018, he ordered the closure of the PLO office in Washington, D.C. and canceled nearly all U.S. aid to the West Bank and Gaza, plus $360 million in annual aid previously given to the UNRWA. In 2019, the administration unilaterally recognized the Golan Heights as part of Israel, in full violation with UN Security Council Resolution 497 (1981). In August 2020, the U.S., Israel and the United Arab Emirates formalized Israel-UAE relations in a set of bilateral deals, followed by Bahrain, Sudan and Morocco in the “Abraham Accords.” Had Trump defeated Biden in 2020, Palestinians might have faded away from the map.

In the Trump 2.0 administration, early appointments reflect “more of the same” policies. Trump’s initial choice for secretary of defense, Pete Hegseth, believes that Zionism is a sort of American frontline amid anti-Western barbarians. Hegseth has been linked with Temple Mount groups that advocate a new Temple over the Mosque of Omar and al-Aqsa. Such moves could throw the entire Middle East into flames. Reportedly, Trump might replace the controversial Hegseth with Florida governor Ron DeSantis, who oversaw force-feeding of detainees in Guantanamo and considers the two-state solution a “stepping stone” to the end of Israel.

Whoever Trump will pick, the only thing that’s certain is that the next US defense secretary will be a champion for Israel. Similarly, his ambassador to Israel, Arkansas Gov. Mike Huckabee, supports the Christian Evangelical belief that the return of Jews to Israel validates the biblical narrative; and believes Palestinian people do not exist. Trump’s Secretary of State Marco Rubio supports a Netanyahu-style Israel and revisionist Zionism. His Middle East envoy is Steven Witkoff, a real estate mogul, a close golf friend, and a fervent Zionist donor.

So, it would seem that the common denominators feature ardent pro-Israel stances, intimate ties with the Israel lobby and in several cases an extreme theologically-bound view of Israel.

Q5 – The rise of the Global South (including the BRICS) is a turning point in global politics. How does the war in Gaza relate to this phenomenon? Is the conflict further polarizing relations between the countries of the global North and South?

DS: Since 1945, Washington has relied on a dark record of regime change and destabilization in the Middle East, as in most of the Global South. In the past two decades, the post-9/11 wars cost over $8 trillion and the lives of more than 1 million people; before the proxy wars in Ukraine and Gaza. China’s approach builds on peace, stability and development, as reflected by the breakthrough peace deal it brokered between regional rivals Saudi Arabia and Iran last year. The successful intermediation between Fatah and Hamas and the support of Palestinian unity is another example of the Chinese approach.

The White House knows that the status quo is in flux. That’s why the Biden administration has been in talks with Saudi leaders urging Riyadh to establish diplomatic ties with Israel. Saudi Arabia has joined the BRICS alliance, remains one of China’s largest oil suppliers and is selling oil in multiple currencies. But it is also the world’s second-largest arms importer and 75 percent of those weapons come from the U.S. Riyadh has been negotiating a security pact with the U.S., modeled loosely on the US-Japan mutual defense pact, while seeking cooperation in a civilian nuclear program. Preceded by Israel’s peace treaties with Egypt (1979) and Jordan (1994) and the Oslo Accords with the Palestinian Authority (1993-95), the grand bargain is predicated on the Abraham Accords (2020-2021) between Israel and the UAE and Bahrain, and subsequently with Morocco and Sudan, respectively.

However, after October 7, the Palestinians can no longer be sidelined in the name of “normalization.” The US goal in the grand bargain is to sideline China in the Middle East. The administration has tried to limit Riyadh’s cooperation with Beijing on trade, technology and military matters, insisting that the Saudis should trade oil in dollars rather than in local currencies, such as the Chinese yuan. The White House also wants to disrupt Israel’s technology trade with Beijing and Chinese investment in Israel. By contrast, Saudi Arabia and other Arab countries would prefer to foster their economic development, while cooperating with the US in security matters.

The challenge the region faces is that Washington remains its primary architect, thanks to US military supremacy. The Middle East stands at a crossroads where one path promises more genocidal atrocities, impoverishment of the many and enrichment of a few, in line with the dictates of American and Israeli exceptionalism. Another path insists on peace and stability as necessary preconditions of economic development for many, not just a few, in line with multipolarity and the wishes of the Global South. Diplomatically, it is an extremely challenging balancing act without a safety net.

Q6 – How to put an end to the suffering of the people of Gaza and fulfill the aspirations of the Palestinians? Can the two-state option still be valid? What solutions would you propose to solve the Israel-Palestine conflict?

DS: In historical view, there have been four generic options for a one-state solution: a unitary state, Palestinian autonomy, federation and confederation. As I show in The Fall of Israel, the last two – federation and confederation – were largely undermined by Israel’s unilateral declaration of independence and Palestinian Nakba in 1947-48 and the subsequent cross-border wars. Palestinian autonomy under a two-state scenario became a potential scenario after the 1967 war but has suffered one hit after another with the assassination of PM Rabin by an ultra-nationalist Jewish extremist and the subsequent crumbling of the peace process.

In the United States, a two-state solution has been the stated American policy for decades, yet the White House has consistently and systematically failed to take the necessary steps to force Israeli compliance. Intriguingly, during the Gaza War, it has also warned potential whistleblowers in the State Department not to use terms suggesting Palestinian sovereignty. In the absence of a sustained effort by the U.S. to facilitate ongoing talks between Israel and the Palestinians, faith in the two-state peace process, let alone in its outcome, has dwindled in Israel, among Palestinians, in the region and the U.S.

Whatever is left of a two-state scenario may have been buried on July 17, 2024, when the Israeli parliament made its position crystal-clear, voting by 68 to 9 to reject any creation of a Palestinian state. This vote is consistent with Israeli acceptance of the horrific devastation of the Gaza War and its effort to effectively annex the West Bank. The destruction in the former and the anti-Arab violence in the latter share the same strategic objective: i.e., Israeli-annexed territories devoid of Palestinians, or with minimum Palestinian presence. The fact that the Biden administration did nothing before or after the Israeli vote (it could have halted US arms flows into the region); well, it says a lot about how far US administrations are willing to go.

Given the absence of restraint by the Netanyahu cabinet and the Biden administration, and the tacit resignation of the international community, the effective outcome would be a unitary state under Jewish supremacy. From the Palestinian standpoint, it would mean a completed Second Nakba. In the region, it would herald a disaster. Internationally, it would have major, largely adverse repercussions. It would also signify the end of what was once supposed to be or become a Jewish “secular democratic state.”

Steinbock, Dan. The Fall of Israel: The Degradation of Israel’s Politics, Economy & Military. Press (520pp)