A Mideast Valley of Peace

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Equally important, the project is getting a warm reception in parts of the Arab world. Peres says he has received letters of support from both Palestinian President Mahmoud Abbas and Jordan's King Abdullah II. And according to Israeli press reports, Saudi Prince Alwaleed bin Talal—known for his investments in Western icons such as Apple (AAPL) and the Plaza Hotel—recently told Tshuva that he will support the project through Jordan.

The combination of private-sector and regional support could tip the balance. Peres says building the canal could take as little as two years, once the Israeli and Jordanian governments pass the necessary legislation and bids are put out to tender. Another positive factor: The project is intended to be as "green" as possible, in keeping with the current global interest in environmentalism.

Major Desalination Complex

A key component of the project concerns water. In addition to the canal and commercial areas, the Valley of Peace would host a massive desalination complex capable of producing a billion cubic meters of fresh water annually. That would be enough to meet 30% of the water needs of Israel, Jordan, and the Palestinian territories—as well as to make the Arava green on both sides of the border. To minimize the energy impact of producing that much water, the project would include hydroelectric power plants that take advantage of the difference in height between the two seas.

Jordan, which currently runs an annual water deficit of 500 million cubic meters, is especially keen on the desalination. "We will need to urgently consider various options if the Red–Dead Sea canal project is not built," says Professor Mousa Mohsen, a water expert at Hashemite University in Zarq, Jordan. The project also fits into the "Mediterranean Union" concept articulated by French President Nicolas Sarkozy, which focuses heavily on both water production and alternative energy. He plans a visit to Israel in June, and the Valley of Peace is likely to be on the agenda. "Environmental and economic issues force people to ignore borders," says Israeli President Peres.

To be sure, there are environmental concerns about the project—paramount among them, the unknown consequences of mixing the waters from the Red Sea and Dead Sea and the ensuing ecosystem effects. The World Bank has hired outside consulting firms to investigate the environmental impact of the canal, as well as the desalination and power-generation portions of the project. But it doesn't cover the tourism and agricultural elements introduced in the new Tshuva plan.

Reverberations in the Fertilizer Industry

The issue for the Dead Sea is it is slowly dying, dropping by one meter per year due to evaporation and diversions by Israel, Jordan, and Syria. The surface is now about 420m below sea level. But pumping in water from the Red Sea poses problems because the two bodies have different densities. The Dead Sea also is rich in calcium while the Red Sea is rich in sulfate, and mixing the two could create gypsum, which would interfere with the lucrative business of extracting potash from the Dead Sea.

It's not an insignificant worry. Potash is highly sought-after for making fertilizer, and Dead Sea Works, a subsidiary of Israel Chemicals (ICL.TA), and Jordan's Arab Potash Co. (APOT.AM) produce about $3 billion worth every year, plus $1 billion in byproducts such as bromine and magnesium. No wonder, then, the companies are calling for a thorough review before the project gets approved.

Still, most experts think the only way to save the Dead Sea is to pump in water from someplace else—either the Red Sea or the Mediterranean. That's the view of Michael Beyth, former chief scientist of Israel's National Infrastructure Ministry, who served as the head of the Israeli team that helped draw up the tender for the World Bank feasibility study. But Beyth and others oppose adding the ambitious tourism and agricultural projects proposed by Tshuva.

"The saving of the Dead Sea is the goal of the project, not the building of thousands of hotel rooms," says Naama Ela, a lawyer for the Israel Union for Environmental Defense. In the end, Beyth predicts, "the actual scale of the project will be largely determined by the environmental impact on the Dead Sea." Or, perhaps, by the big money that could be made from tourism, recreation, and the sale of water, power, and crops. This canal may really happen, and with some luck peace will follow.

With Neal Sandler in Jerusalem.

Schenker is a BusinessWeek correspondent in Paris.