Biden, Bibi agree Saudi mega-deal must include steps to keep two-state solution alive

President Biden and Israeli Prime Minister Benjamin Netanyahu agreed last week that the mega-deal with Saudi Arabia should be based on the principle of preserving the prospect for an Israeli-Palestinian peace deal in the future, an Israeli official and a source briefed on the meeting told Axios. But the specifics must still be worked out.

Why it matters: The Biden administration is pushing to get a mega-deal with Saudi Arabia and Israel before the 2024 presidential campaign consumes Biden's agenda.

• The White House made it clear to the Israeli government that it would have to make significant concessions to the Palestinians as part of a deal with Saudi Arabia that includes normalization between the kingdom and Israel.
• Secretary of State Tony Blinken claimed Saudi leaders told him the Palestinian issue would play a central role in any future deal with Israel.

Behind the scenes: White House Middle East czar Brett McGurk and senior Biden adviser Amos Hochstein held a preparatory meeting with Netanyahu's aides the night before the two leaders' meeting, two U.S. and Israeli officials said.

• McGurk and Hochstein asked Netanyahu's aides what the prime minister was going to tell Biden about the concessions he is willing to make for the Palestinians as part of the mega-deal with Saudi Arabia.
• According to the U.S. and Israeli officials, Netanyahu's aides refrained from getting into details and said the prime minister would talk about it in private with the president.
• The White House and the Prime Minister's Office declined to comment.

When Biden and Netanyahu met, a significant part of their one-hour meeting focused on the Palestinian component of the deal, the U.S. and Israeli officials said.

• Biden didn't give Netanyahu a list of demands for concessions to the Palestinians but told the prime minister that he wants Israel to take steps that would keep the option for a two-state solution with the Palestinians open, according to an Israeli official and a source briefed on the meeting.
• The Israeli official and source briefed on the meeting said Netanyahu agreed with the concept of taking steps to keep the door for a future peace agreement with the Palestinians open.

Yes, but: The discussion on the Palestinian component of the Saudi mega-deal is just beginning, an Israeli official said. It will focus on the question of how to translate the general concept that Biden and Netanyahu discussed into practical steps.

• The main challenge is that each side can interpret the broad concept of keeping the two-state solution alive very differently — a reality that may create significant gaps between the parties when they start to go into details.
• Netanyahu also told Biden last week that Palestinian officials should be part of the process of getting a mega-deal that includes Saudi Arabia-Israel normalization, but they shouldn't have the power to veto parts of it, according to a senior Israeli official.

The big picture: The Palestinian component of the deal is a politically charged issue for the U.S., Saudi Arabia and Israel.

• The White House needs Israel to make significant enough concessions to the Palestinians in order to convince Senate Democrats to support other parts of the mega-deal like a U.S. defense treaty with Saudi Arabia.
• Saudi Crown Prince Mohammed bin Salman needs Israel to take steps toward the Palestinians in order to get support for a normalization agreement at home and across the Arab and Muslim world.
• Netanyahu wants the Saudi deal badly. But making significant concessions to the Palestinians would likely anger the extreme-right parties in his coalition and could bring down his government.

Zoom in: The Palestinian Authority has laid out a set of deliverables it would like to see as part of any deal, including gaining more control over parts of the occupied West Bank, full membership at the UN and the reopening of the U.S. Consulate in Jerusalem.

State of play: The new Saudi ambassador to the Palestinian Authority visited Ramallah on Tuesday and met President Mahmoud Abbas.

• The ambassador said Saudi Arabia would work for the establishment of a Palestinian state with East Jerusalem as its capital.
• Separately on Tuesday, the Israeli minister of tourism arrived in Riyadh to participate in a conference of the World Tourism Organization. This was the first-ever official and public visit by an Israeli minister to the kingdom.

Go deeper: Inside the Biden-Netanyahu meeting