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Summary:

• Saudi nuclear talks delinked from diplomatic normalisation with Israel, two sources say, in what would be a concession by Washington
• Saudi Arabia resists U.S. '123' nonproliferation criteria, seeks uranium enrichment
• Gaza war has made normalisation of ties with Israel politically toxic for the kingdom
• On May 13 visit, Trump to discuss economic deals, including potential $100 billion arms package

The United States is no longer demanding Saudi Arabia normalise ties with Israel as a condition for progress on civil nuclear cooperation talks, two sources with knowledge of the matter told Reuters ahead of U.S. President Donald Trump's visit next week.

Dropping the demand that Saudi Arabia establish diplomatic relations with Israel would be a major concession by Washington. Under former President Joe Biden, nuclear talks were an element of a wider U.S.-Saudi deal tied to normalisation and to Riyadh's goal of a defence treaty with Washington.

The kingdom has repeatedly said it would not recognise Israel without a Palestinian state, frustrating Biden administration attempts to expand the Abraham Accords signed during Trump's first term. Under those accords the United Arab Emirates, Bahrain and Morocco normalised relations with Israel. Progress towards Saudi recognition of Israel has been halted by fury in Arab countries over the war raging in Gaza. The nuclear talks had also stumbled over Washington's non-proliferation concerns.

In a possible sign of a new approach, U.S. Energy Secretary Chris Wright said that Saudi Arabia and the United States were on a "pathway" to a civil nuclear agreement when he visited the kingdom in April. "When we have something to announce, you will hear it from the President. Any reports on this are speculative,” U.S. National Security Council spokesman James Hewitt told Reuters in response to a request for comment.

Saudi Arabia's government media office did not immediately respond to a request for comment.

Even without the normalisation requirement for civil nuclear talks to progress, and despite unpacking the issue from a wider defence treaty, a deal is not yet in close reach, one of the sources said.

One sticking point is Section 123 of the U.S. Atomic Energy Act that allows cooperation with other countries developing civil nuclear capabilities but specifies nonproliferation criteria including limiting uranium enrichment.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman has said that the kingdom would seek to enrich uranium and sell the product.

One of the sources said the kingdom was still not willing to sign a so-called 123 agreement, which would prevent enrichment or reprocessing of plutonium made in reactors - two routes that have the potential to culminate in nuclear weapons. Secretary Wright previously told Reuters a 123 agreement would be a prerequisite to any deal.

However, there are several ways to structure a deal to achieve both countries' objectives, Wright has said.

"One solution being discussed is a "black box" arrangement where only U.S. personnel would have access to a uranium enrichment facility on Saudi soil, the same source said.

SELL MORE OIL Riyadh wants to build nuclear generation capacity as it seeks to diversify its economy away from oil. Nuclear power could also help free up more crude barrels for export.

Arms control advocates have previously expressed concern about a Saudi nuclear programme because de facto ruler Crown Prince Mohammed bin Salman has said the kingdom would seek to quickly develop nuclear weapons should its regional rival Iran do so.

The U.S. and Iran are currently holding talks over Tehran's nuclear programme, which Washington and Western allies say is geared towards producing weapons. Iran insists it is purely for civil purposes.

U.S. Vice President JD Vance on Wednesday described the talks with Iran as "so far, so good" and said there was a deal to be made that would reintegrate Iran into the global economy while preventing it from getting a nuclear weapon.

Saudi Arabia and the United States are set to discuss a number of blockbuster economic deals during Trump's visit next week, with the U.S. poised to offer Saudi Arabia an arms package worth well over $100 billion, sources have told Reuters.

Trump has said Riyadh should "round up" a planned investment package in the U.S. to $1 trillion from an initial $600 billion.

The trip is Trump's second visit abroad, after a short trip to Rome for the pope's funeral, since he returned to office in January. In his first term a lavish trip to Saudi Arabia marked his first overseas stop.

Trump fostered close ties with Gulf states including Saudi Arabia during his first term. The country invested $2 billion in a firm formed by Jared Kushner, Trump's son-in-law and former aide, after Trump left office, and there are plans to build two Trump towers in Jeddah and Riyadh.