WI: Israel annexes the Sinai and settles Jewish settlers there?

Israel tried that in the period thy held the Sinai, establishing settlements there and partial annexation was actually discussed IIRC. They decided that doing that (meaning continued conflict with Egypt and the costly maintenance of a revamped Bar-Lev line on top of all other commitments) was no really worth it. It was controversial but very sensible in removing a powerful player from the already very long list of sworn enemies.
This would probably stop cold any Egyptian approach to the Western Bloc, keeping them pretty firmly Moscow-leaning, unless, of course, the Americans don't decide that Israel wants too much and is not a reliable ally; this, in turn, is most undesirable to Tel Aviv, which would be isolated and in worse overall strategic position, havig to deal with Egypt, Syria, the PLO. Invasion of Lebanon is probably not happening here, but conflict in Galilee will still occur.
I doubt Israel is going to do an alternate Camp David with Syria (returning the Golan Heights) which would make them quite overstreched. Arabism is a stronger ideology for longer (as oposed to Islamism) as Sadat's policies would be very different in this world.
The Lebanese civil war will probably still occur and be even more of a confused mess.
Hmmm... I doubt it would really be sustainable. Unlikely, and too many variables.
 
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A demilitarized Sinai, the current situation, is a better deal for Israel than holding on to it. Putting aside the issues around a Suez Canal with one bank being Egyptian and one Israeli, the main asset for Israel is strategic depth. As long as Egypt cannot station serious forces in the Sinai and close the Straits of Tiran (the causus belli for the 1967 War) and Israeli ships or ships for Israeli ports can use the canal, all goals are accomplished. The loss of the limited oil is a nuisance, but overall a formal peace treaty with Egypt is worth giving up the Sinai. Excluding Gaza, the population of the Sinai is basically Bedouin, and the Israelis and the Bedu get along fine by pretty much leaving the others alone. If the alternatives are giving the Sinai back to Egypt who then can remilitarize it or keeping it, then Israel keeps it. OTL that was not the case and they got a good deal out of it.
 
Israel tried that in the period thy held the Sinai, establishing settlements there and partial annexation was actually discussed IIRC. They decided that doing that (meaning continued conflict with Egypt and the costly maintenance of a revamped Bar-Lev line on top of all other commitments) was no really worth it.

Right but this decision was only made after the '73 war, which (in contrast to '67) showed that Egypt could be a formidable opponent.

I doubt Israel is going to do an alternate Camp David with Syria (returning the Golan Heights) which wouldmake tem quite overstreched.

Considering that by 1973 Syria was relatively stronger than it had been previously, so it was roughly on a par with Egypt, this would not in theory have been a bad approach. For a rather minor territorial sacrifice, much less in economic and buffer terms than Sinai, Israel could've bought peace not only with Syria but essentially even Iraq, which had committed forces to the Golan front in '73.
 
A demilitarized Sinai, the current situation,

Well, not quite. For many years (post peace treaty) Egypt held maneuvers in Sinai which identified Israel as the enemy. Lately they've been preoccupied with "Sinai province" but I assume that'll be wrapped up and it has eroded the provisions of the peace treaty, as Egypt had to bring more forces into eastern Sinai than the original deal permitted.
 
But holding the Golan is vital for the defence of the Israeli coastal plain - Syrian artillery set up there would be extremely damaging. Not to mention the large amount of water beneath those heights, an increasingly crucial resource. Golan is worth keeping with or without Sinai.
 
But holding the Golan is vital for the defence of the Israeli coastal plain - Syrian artillery set up there would be extremely damaging.

I'd assume any peace deal would include imitations on armaments, such as those in Sinai, but even more strict. Even if the Syrians were allowed to mass armor on Golan, look what happened in the OTL. They didn't get very far...

Not to mention the large amount of water beneath those heights, an increasingly crucial resource. Golan is worth keeping with or without Sinai.

A treaty would take that into account too. In any event, the Israelis stymied a diversion attempt prior to '67.
 
I remember at the time of Camp David some pro-Begin sources were justifying the withdrawal from Sinai by saying that unlike Judea and Samaria, Sinai was not really part of the Land of Israel, because the "river of Egypt" referred to in the Bible was not the Nile but the El-Arish River only a few miles into Sinai. Obviously, I am not saying that this is the reason for Israel treating Sinai differently from the West Bank, but it did make it easier to sell a policy distinguishing the two to religious Jews...
 
A costly and diplomatically disastrous idea that probably wouldn't succeed anyway. Just a really bad idea all around.
I'd assume any peace deal would include imitations on armaments, such as those in Sinai, but even more strict. Even if the Syrians were allowed to mass armor on Golan, look what happened in the OTL. They didn't get very far...
That was because the Assads are glorified comic-book villains and their military culture is hilariously incompetent.

Syria actually ripped up Israeli defenses just fine in '73, the problem was that they focused on killing entrenched pockets of Israeli forces instead of moving on to seize strategic objectives, which slowed the advance.
 
The Sinai is mostly desert. Where are they getting the water for the settlers from?
Wells, mostly. As now. Piped water (for the Northern settlements on the Mediterranean) and desalination (for the areas on the Red Sea) could become an option later, if needed; the first desalination plant in Israel went online in the late 1990's, in Eilat on the Gulf of Aqaba.
 
Oh dear, there would be a heck of a lot of more coast to patrol. Though of course a bit of coast is what Israel wanted, with part of the invasion because of the Egyptians seeming to be trying to close off the Strait of Tiran. I can see Israel wanting to keep Sanafir Island, as a base as and place to settle, but the rest would be tough. Loads of Bedouins there and, while relations might be tolerable in Israel, it is mostly because there are not too many and they keep to Negev. If Israel tried to settle the area, they might end up taking areas with fresh water, which is going to raise some hackles. Speaking of which, how would settlement go in the West Bank? I still see some settlers preferring that lusher area. Though it is becoming a bit less lush as everyone drains the aquifers and the Jordan River.
 
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