Scoop: Officials ironing out deal between Israel, Saudi Arabia, Egypt on Red Sea islands

• But because Saudi Arabia and Israel don’t have diplomatic relations and can’t sign official bilateral agreements directly, the countries involved are trying to use creative legal and diplomatic solutions to try to indirectly finalize a deal.

Catch up quick: Under the 1979 Israeli-Egyptian peace treaty, the Red Sea islands of Tiran and Sanafir must be a demilitarized zone and have the presence of a force of multinational observers led by the United States.

• Despite public protests in Egypt, the Egyptian parliament in June 2017 and the country's supreme court in March 2018 approved a deal to transfer sovereignty back to Saudi Arabia.
• But the deal needed buy-in from Israel because of the 1979 peace treaty. Israel gave in principle its approval to transfer the islands back to Saudi Arabia pending an agreement between Cairo and Riyadh on continuing the work of the multinational force of observers who are in charge of patrolling the islands and ensuring that freedom of navigation in the strait remains unhindered.

Where it stands: The Biden administration for months has been quietly mediating among Saudi Arabia, Israel and Egypt on a deal that will finalize the transfer of the islands from Egypt to Saudi control.

• At the center of the mediation efforts is the issue of how to meet the Saudi demand that the U.S.-led multinational force leave the islands while maintaining the same security arrangements and political commitments the Israelis need, as Axios previously reported.
• Israeli officials want to make sure any commitment the Egyptians made in their peace agreement with Israel is still binding for the Saudis, especially the agreement to allow Israeli ships through the Straits of Tiran.
• Two senior Israeli officials said the Saudis agreed to uphold Egyptian commitments including freedom of navigation.

Behind the scenes: Israeli officials said outgoing Prime Minister Naftali Bennett, incoming Prime Minister Yair Lapid and Defense Minister Benny Gantz were briefed in recent days about the proposed approach.

• Under the approach, Saudi Arabia would sign an agreement with Egypt and send a letter to the U.S. as the guarantor stating its commitments, two senior Israeli officials told me. The U.S. would then give Israel a letter with guarantees, mainly on the issue of freedom of navigation.

• An Israeli official stressed the approach has not been finalized, but the parties are getting close to an agreement.
• A spokesperson for the White House National Security Council said that the U.S. "has long played an important role in promoting Red Sea security and stability. We have no comment on these particular reports.”
• The Saudi and Egyptian embassies in the U.S. did not respond to requests for comment.

State of play: Gantz and the Israeli defense establishment feel comfortable with the proposed approach and think Israel’s security interests will be guaranteed, a senior Israeli official told me.

• "The trick here was how Saudi Arabia can sign an agreement with Israel without signing an agreement with Israel. There is no disagreement of substance," a senior Israeli official told me.
• "The key issue is how to do it in a way that everybody feels comfortable with politically," the official added.

The big picture: Separately from the island deal, Saudi Arabia is expected to allow Israeli airlines to use Saudi airspace for eastbound flights to India and China, as Axios reported last week.

• Another issue that is still under discussion ahead of Biden’s visit is the possibility of direct charter flights to Saudi Arabia for Muslim Israeli pilgrims, the officials added.