Axios from Tel Aviv

U.S.-Israeli relations are in full crisis mode less than three months after Benjamin Netanyahu returned to the Israeli Prime Minister's Office.

Driving the news: The U.S. summoned Israeli Ambassador to Washington Mike Herzog yesterday to protest an Israeli law passed earlier that day that repeals the 2005 Israeli disengagement from the northern occupied West Bank.

• The rare U.S. rebuke of one of its closest allies came after weeks of bubbling tensions between the two countries.

How we got here: Biden administration officials told me they knew a crisis with the Israeli government was going to happen at some point, but they tried to postpone it as much as possible.

• The administration had expressed concerns even before Netanyahu was sworn in, including over the ministerial posts the prime minister was set to give to certain far-right coalition partners. But at the time, U.S. officials say, the Biden administration wanted to avoid confrontation so it could directly work with Netanyahu on countering Iran and expanding the Abraham Accords.
• Netanyahu also sought to reassure international concerns about his government, telling U.S. news outlets that he "will have his hands on the wheel" and not his far-right extremist coalition partners.

Still, tensions began to bubble just weeks after the Israeli government was sworn in when the ruling coalition presented its plan to weaken the Supreme Court and other democratic institutions. U.S. officials, including President Biden, expressed concerns over what the plan would mean for Israel's democracy.

• Tensions also bubbled over several incidents in the occupied West Bank, including Israeli Finance Minister Bezalel Smotrich's call to "wipe out" the Palestinian village of Hawara — a call he has since tried to walk back.

Then, on Tuesday, those tensions boiled over when the Israeli Knesset repealed the 2005 disengagement law. The move allows Israeli citizens to enter the area between the cities of Jenin and Nablus, which Israeli settlers had evacuated in 2005.

• The move could dramatically increase the potential for friction between settlers and Palestinians in the most sensitive and volatile area of the occupied West Bank.
• The U.S. called the move a "provocation" and a violation of commitments given to the U.S. by the Israeli government.

What they're saying: The summoning of Herzog was "a result of the Israelis going too far — the judicial overhaul, Smotrich and now this law — it was just too much," a U.S. official told me.

• An Israeli official claimed the summoning wasn't a sign of a crisis but just a way for the State Department to reiterate its concerns.

Netanyahu pushed back today on the Biden administration’s criticism, saying the new law “brings to an end to a discriminatory and humiliating law that barred Jews from living in areas in northern Samaria, part of our historic homeland."

• At the same time, the Prime Minister’s Office stressed that the government has no intention of establishing new settlements in the parts of the West Bank the new law addresses.

What to watch: Netanyahu is a veteran of dealing with tensions and crises with a Democratic president after eight years of working with the Obama administration.

• Some of his aides recently started using a phrase reminiscent of the Obama-era days. “Let's talk again in 2024," one aide told me, hinting to the next U.S. presidential election.

A group of Jewish Democratic members of Congress held a tough meeting with Israeli Ambassador to Washington Mike Herzog two weeks ago and expressed grave concern about the Netanyahu government’s plan to weaken the Supreme Court, two Israeli officials briefed on the meeting and two members of Congress who attended the meeting told me and Axios' Andrew Solender.

Why it matters: The private meeting reflected the high level of anxiety among Democrats who are staunch supporters of Israel and represent large Jewish constituencies about the judicial overhaul plan and how it could affect the U.S.-Israel relationship.

• It also echoed similar concerns expressed by the Biden administration over what the plan could mean for Israel's democracy. President Biden expressed concerns to Netanyahu earlier this week.

Behind the scenes: The meeting, which included more than 20 Democrats, included harsh criticism over the plan, according to the two Israeli officials with direct knowledge of the meeting.

• Two members of Congress who attended the meeting told Axios that the discussion was “frank and candid” with all the attendees expressing concerns that reflected what many are hearing from their Jewish constituents.
• "I would describe it as a very frank conversation among friends and among allies. It was not argumentative. All the members were very candid about what they're hearing and how they feel," said one lawmaker who asked to remain anonymous to candidly discuss what was said at the meeting.

Rep. Brad Schneider (D-Ill.), who helped organize the meeting, described it as "emotional."

• "We did raise the specter that some of the changes being discussed, if taken to their extreme, could have an adverse impact on Israeli democracy," Schneider said, stressing that those who attended the meeting have a very close connection to Israel and a strong commitment to the U.S.-Israel relationship.
• Schneider added that the members of Congress didn’t give the Israeli ambassador an “if, then” threat but stressed that if the judicial overhaul plan is implemented without changes, it will be harder “to talk about Israel in the same way."

Rep. Jake Auchincloss (D-Mass.) stressed during the meeting that he has heard concerns from every corner of the Jewish community in his district and added that his constituents are alarmed by these reforms and their potential harm to Israeli democracy, a congressional aide with knowledge of the meeting said.

• Another member of Congress who attended the meeting said the attendees raised concerns that the judicial plan would hamper the independence of the Israeli Supreme Court and, as a result, there will be fewer protections for the rights of minorities.
• "The ambassador listened very carefully and committed that he would take all of our concerns back directly to the prime minister," said the member of Congress, who asked to remain anonymous to discuss the details of the private meeting.

The Israeli Embassy in Washington declined to comment.

The Israeli government sees the recent agreement between Saudi Arabia and Iran not as a threat, but as an opportunity for Israel’s efforts to normalize relations with the Saudi kingdom, a senior Israeli diplomatic official directly involved in the efforts told me.

Why it matters: Netanyahu said in his inauguration speech three months ago that his main foreign policy objective is to broaden the Abraham Accords and reach a peace agreement with Saudi Arabia.

Driving the news: The senior diplomatic official said the war in Yemen has been a major "irritant" in U.S.-Saudi relations in recent years, hampering efforts for Israel-Saudi normalization steps.

• If the Saudi-Iran agreement leads to the end of the war, "this irritant will go away and relations between Saudi Arabia and the U.S. will improve," the official said. "The more relations between the U.S. and Saudi Arabia improve, the easier it will be to work on promoting normalization between Saudi Arabia and Israel."

Behind the scenes: The Israeli Foreign Ministry’s Center for Political Research last week issued a classified report analyzing the Saudi-Iranian deal, a Foreign Ministry official who read the report said.

• The report concludes that the Saudi-Iran agreement will not block the normalization process between Gulf countries and Israel, the Foreign Ministry official told me.
• “The experience of the last two years proves that a dialogue between the Gulf countries and Iran doesn’t mean suspending the contacts with Israel," the official quoted the report as saying.
• The Israeli Foreign Ministry declined to comment.

The big picture: The White House also doesn’t think the Saudi-Iran deal will hamper the Biden administration's efforts to push for normalization between Saudi Arabia and Israel nor will it lead countries that have signed on to the Abraham Accords, like the United Arab Emirates and Bahrain, to cool their relations with Israel, as I previously reported.

Yes, but: The efforts to push for normalization between Israel and Saudi Arabia appear to be facing significant hurdles from other directions, including the ongoing escalation of tensions in the occupied West Bank and the policies of Israel's right-wing government.

• The Saudi Foreign Ministry has issued at least five condemnation statements against Israel since the new Israeli government was sworn in less than three months ago.
• The Saudis have escalated their rhetoric and public criticism against the Israeli government and started to again refer to it as "the occupation government."

Israel told the Biden administration and several European countries that Iran would be entering dangerous territory that could trigger an Israeli military strike if it enriches uranium above the 60% level, a senior Israeli official told me.

The big picture: Increasingly concerned about advances in Iran's nuclear program, Israel has in recent months ramped up its private and public threats of military action against Tehran in an apparent attempt to deter the country from escalating its nuclear program even further, according to Israeli officials.

State of play: Iran has amassed 87.5 kilograms of 60% enriched uranium, according to an International Atomic Energy Agency report from late February. Experts say that if that uranium is enriched to 90% weapons grade, it would be a sufficient quantity to produce at least one nuclear bomb.

• The IAEA is continuing to investigate Iranian activity in its underground nuclear facility in Fordow, which included enriching at least small amounts of uranium to 84% purity.
• Israel, however, doesn't consider the small amounts of uranium enriched at 84% purity as meaningful because Tehran didn't amass any of the material at that level, the Israeli official said.
• A top U.S. defense official told lawmakers last month that Iran will need only 12 days to enrich enough weapons-grade uranium to build one nuclear bomb, though the U.S. has also said it doesn't believe Iran has made the decision to resume its weaponization program.

Behind the scenes: The Israeli government is not defining a public “red line” at the moment as Netanyahu did in his UN speech in September 2012, the senior Israeli official said.

• The official added that Israel didn’t want to set 90% enrichment as a “red line” because officials believe Iran will feel it can begin enriching and amassing uranium at a level just short of weapons grade.
• That is why Israel is telling U.S. and European countries that any Iranian progress above 60% enrichment would be a step that could trigger military action against Tehran's nuclear program, the Israeli official said.
• Israeli officials believe that Netanyahu's message on the issue has been passed on to Iranian officials, according to a second senior Israeli official, who recently spoke to reporters on background. “The Iranians totally internalized our position and they know what our [red] line is," the official said.

What to watch: The Israeli government is continuing to prepare for a possible military strike in Iran, Israeli officials said.

• Two Israeli officials said Netanyahu and Defense Minister Yoav Gallant asked U.S. Defense Secretary Lloyd Austin during his recent visit to Israel to expedite the delivery of the four KC-46 tankers that Israel had purchased from the U.S. last year.
• The officials said Israel needs the tankers, which are used for air refueling, to prepare for a possible military strike in Iran.
• The officials said Austin told Netanyahu and Gallant that the U.S. will try to deliver the planes earlier but stressed it will be difficult due to U.S. military needs.

The Pentagon declined to comment.

The Lebanese pound, or lira, sank to a new low this week, worsening conditions for people already struggling to cope with Lebanon's unprecedented economic crisis, Hanna Davis reports for Axios from Beirut.

Why it matters: The economic meltdown has plunged the vast majority of the population into poverty. For those who are still paid in pounds, their salaries are only worth a fraction of their value before the crisis hit in 2019, leaving many unable to afford basic necessities.

• The crisis has also degraded the quality of public services. The country’s public schools have been closed for the past three months, as teachers strike against their no-longer-livable salaries.

Driving the news: The Lebanese currency hit another all-time low on Tuesday of 140,000 pounds to $1, losing more than 15% of its value in one day.

• “The Lebanese lira is dead,” said Layal Mansour, an economist who specializes in dollarized countries, “It has no value, it has no trust, and people are not attracted to use it."
• For months, banks have been imposing strict restrictions on withdrawals, angering depositors.
• Meanwhile, the government recently allowed supermarkets to begin pricing in dollars, a sigh of relief for many shop owners who couldn't keep up with the spiraling currency.

The big picture: Unsustainable borrowing and financial mismanagement by Lebanon’s sectarian elite coupled with virtually nonproductive economic growth has fueled one of the worst economic crises the world has seen in centuries, economists say.

• The International Monetary Fund has offered a $3 billion bailout package to Lebanon, conditional on a host of structural and financial reforms. But with the country in a double executive vacuum since October — without a president or a fully empowered Cabinet — no progress has been made on the reforms that could help revive the deteriorated economy.