- Tomasz Rydelek
The Saudi Gambit.
The war in Ukraine is a catalyst for many events and has become a moment of verification. It has verified the Russian army, hitherto considered second best in the world, it has verified the state of alliances in Europe, and it is also verifying the relationship between the United States and Saudi Arabia. The recent decisions of the OPEC+ cartel, which in the midst of the global energy crisis decided to cut production, hit the main architect of the current system – the US. This makes relations between Riyadh and Washington the worst in years. In this episode, we will take a closer look at the Saudis' latest gambit.
Obama, the Arab Street, and the Beginning of the Crisis
In October, representatives of the 24 countries that make up OPEC+ met in Vienna. The format was created in 2016, when Saudi Arabia, which leads the OPEC cartel, decided to join forces with Russia and other unaffiliated oil producers. Due to Saudi-Russian cooperation since 2016, OPEC+ has had a huge impact on oil price formation.
The October 5th summit, during which it was decided to cut oil production by 2 million barrels a day, was no different. OPEC+'s decision caused a huge outcry in Washington and U.S. politicians began outright accusing the Saudis of conspiring with Russia in trying to create a global energy crisis. Are the Sauds really on Russia’s side? And where are US-Saudi relations at the moment?
For several years, relations between Riyadh and Washington have not been the best, to say the least. Mohammed bin Salman, the heir to the throne of Saudi Arabia, is often pointed to as the main culprit for this state of affairs. However, the genesis of the crisis is more complicated and goes back at least to the presidency of Barack Obama.
In 2009, during a visit to Egypt, Obama gave his famous "New Beginning" speech, which signaled his desire to reset America's relationship with the Islamic world. When a wave of protests, later dubbed the "Arab Spring," swept through the Middle East a year later, Obama broke with the previous American policy of supporting authoritarian - but pro-American - governments in the region and unequivocally sided with the "Arab street," including personally calling on Egyptian President, and close American ally, Hosni Mubarak to give up power.
Obama's policy was very badly received in the Persian Gulf where Saudi Arabia was just forming an alliance of states aimed at suppressing the Arab Spring protests and preserving the status quo in the region.
In 2011, the Saudis intervened militarily in Bahrain, in 2013 they financed a military coup in Egypt together with the Emirates , and in 2015 they entered the war in Yemen.
The Saudis also disliked the warming American relations with Iran, which culminated in the 2015 nuclear deal (JCPOA) and the lifting of sanctions. The Saudis claimed that the Iranians would use the financial boost - which was the lifting of the embargo on oil and gas exports - to sponsor pro-Iranian militias in Iraq, Syria, or Yemen.
Further Saudi distrust of Washington was also aroused by the Obama administration's announced pivot to the Pacific and the gradual reduction of US military involvement in the Middle East.
All of this has led the Arabs to lose confidence in US security guarantees and start looking for alternative partners. As early as 2013, Prince Bandar, then head of Saudi intelligence and former longtime ambassador to the US, predicted that the future would see a loosening of the alliance with America.
Saudi Joker
Mohammed bin Salman appeared on the political scene when relations on the Washington-Riyadh line were already severely strained. With his adventurous policies, the young prince added fuel to the fire and further aggravated this crisis.
In 2015, MbS, then holding the post of defense minister, was the main proponent of military intervention in Yemen. In 2017, meanwhile, he sparked a crisis in relations with Qatar and Turkey.
The adventurous foreign policy was accompanied by an equally turbulent domestic policy. In 2017, MbS conducted a purge of the royal family in a very specific way. He imprisoned his relatives in the luxurious Ritz Carlton Hotel in Riyadh and then forced them to surrender their assets and positions.
Thanks to the purge of 2017, MbS neutralized all competitors in the Saudi "game of thrones" and began to assume de facto power in the Kingdom in the following months. His father, the 87-year-old King Salman, is already too old and ailing to run the state.
Despite his adventurous politics, paradoxically, the prince initially had many allies in America. All thanks to the Saudi Vision 2030 project presented by MbS, which calls for the liberalization of the Kingdom and rapid economic development of the country. Americans believed that MbS could become a leader they hoped to bring the Middle East region into the 21st century.
MBS also found a strong ally in the White House. President Trump's confrontational policies, denunciation of the nuclear agreement, and sanctioning of Iran brought MbS very close to the American president.
However, the "love affair" with America did not last long. In 2018, Jamal Khashoggi, a Saudi journalist, was killed in the Saudi consulate in Istanbul. Leaks from U.S. intelligence agencies quickly appeared in the press that it was MbS that had issued the verdict on Khashoggi.
Congress pressed the White House to take action against the Saudi prince. However, President Trump did not want to do so, fearing how it would affect relations with Saudi Arabia.
The crisis in relations between the U.S. and Saudi Arabia was already a reality, and the issue of holding MbS accountable even became one of the themes of the 2020 presidential campaign. Joe Biden, then still a presidential candidate, announced a change in policy toward the Saudis and turning the Kingdom into a "pariah."
The New Generation
Mohammed bin Salman is a model example of a new generation of Arab leaders who want to break away from their status as America's "vassal" and, using their wealth of natural resources, pursue an independent foreign policy, juggling between Washington, Moscow, and Beijing.
The Saudis no longer believe in US hegemony in the Middle East. The Iranian shelling of the US Al Asad base in Iraq or the humiliating retreat from Afghanistan are for the Saudis further evidence of the weakness of the American colossus. Riyadh is also raising doubts about US security guarantees.
In this situation, the Saudis are trying to pursue their own - independent of Washington - foreign policy. Instead of orienting themselves exclusively toward America, the Saudis are diversifying their relations and expanding contacts with Russia and China.
Since the Russian military intervention in Syria, there has been a steady strengthening of relations between Riyadh and Moscow. The most glaring example of this cooperation is the OPEC+ format, established in 2016, which has a key influence on global oil prices.
Saudi Arabia's relations with China are growing at an even faster pace. Between 2010 and 2020, the value of trade between the Saudi Kingdom and China increased from 42 up to 72 billion dollars. Also in 2020, China became Saudi Arabia's main trading partner. The beginnings of military cooperation can also be seen. For example, US intelligence believes that the Saudis - in cooperation with the Chinese - are conducting an advanced ballistic missile program.
However, one must be aware of Saudi policy goals. Riyadh is not expanding relations with Beijing and Moscow to completely abandon its alliance with Washington. The Saudis are only concerned with showing the Americans that they have alternative partners. Relations with China or Russia are used instrumentally by the Saudis to put pressure on the US.
Thus, for example, when Congress demanded that sanctions be imposed on MbS for the assassination of Khashoggi, the Saudi heir to the throne traveled to Beijing to meet with Xi Jinping and promised to invest $10 billion in China. This quickly cooled the mood on Capitol Hill.
Riyadh believes that this maneuvering between Washington, Moscow, and Beijing strengthens Saudi Arabia's position as an independent player. At the same time, it should be emphasized that Saudi behavior is by no means unique. The United Arab Emirates is also pursuing a similar policy in the region.
The War in Ukraine and the Potential Energy Crisis
In the end, Biden took no steps to punish MbS for Khashoggi's murder. However, the crisis on the Washington-Riyadh line continued. An opportunity to mend relations arose with the outbreak of war in Ukraine. In March, oil prices jumped to $120 per barrel, which triggered fuel price hikes in America.
Fearing a potential energy crisis, Washington began to soften its stance on MbS and probed the Saudis about a possible increase in oil production to stabilize world markets.
In July, Joe Biden himself traveled to Riyadh. One of the topics was increasing oil production by the OPEC cartel. However, the results of the visit were not very satisfactory. MBS was very direct, he stated that the Kingdom was producing oil using all of its "production capacity" and that increasing this capacity to 13 million barrels per day would not be possible until 2027. He was echoed by Energy Minister Prince Abdulaziz, who stressed that any increase in production must be a joint decision by OPEC+ countries and thus must gain Russia's approval.
If Americans had mixed feelings after Biden's visit to the Kingdom, the real shock came during the OPEC+ summit in October, where it was decided to cut oil production by 2 million barrels per day from previous production plans.
The OPEC+ decision was very badly received in the US and American Congressmen began outright accusing the Saudis of conspiring with Russia to cause a global energy crisis. A bill emerged in Congress to withdraw US troops from the Kingdom and ban arms exports to Saudi Arabia. The White House was also in turmoil and President Biden again began to talk about the need to review relations with the Saudis.
Moscow-Riyadh Axis
Can the Saudis really be called Moscow's allies in the current geopolitical confrontation? It is not so obvious. The Saudis are cooperating with the Russians on many levels, especially when it comes to OPEC+.
After the Russian invasion, good relations with Russia have also become critical for Riyadh in terms of the food security of the entire Middle East. Individual countries in the region, such as Egypt and Lebanon, depend on food imports from Russia and Ukraine. The blockade of the Black Sea ports by Russia during the first phase of the war led to record food prices in the Middle East, as for example, the price of wheat jumped by about 60%. There are fears in Riyadh that the food crisis could lead to Arab Spring 2.0, which would again threaten Saudi-friendly regimes such as Egypt. Admittedly, an agreement between Turkey, Ukraine, and Russia allowing the export of Ukrainian grain has improved the situation, but this is only a temporary solution.
The Saudis cooperate with Russia, but, as already indicated, this relationship is often used instrumentally by the Saudis to put pressure on America as can be seen very well in the recent OPEC+ decision. However, the broader context of the whole matter is important here.
In September, the G7 countries decided to impose a price cap on Russian oil starting this December. In practice, this means that it will be more difficult to sell Russian oil above a certain price and Moscow's oil export revenues will shrink. The G7 decision has raised suspicions in Riyadh. The Saudis have begun to fear that this is just the beginning and that in subsequent years, the G7 countries will also want to place a similar price cap on Saudi oil.
Thus, OPEC+'s oil production cuts are not about supporting Russia (although Russia is a beneficiary of the cuts), but rather about thumbing their nose at the G7 countries and securing OPEC+'s position as the player that dictates terms in the oil market.
The relationship between Saudi Arabia and Russia is complicated. The two countries cooperate, but it's hard to call it an alliance, if anything it’s only a tactical one. Moreover, this cooperation is not without periodic tensions. For instance in 2020, OPEC+ almost fell apart when Moscow and Riyadh went at each other's throats and waged an oil price war for over a month.
Winter and Energy Prices
In the discussion of Russian-Saudi cooperation, it should not be forgotten that the situation in the energy commodities market is a great unknown. The recent production cuts by OPEC+ are just one of several factors affecting oil prices.
OPEC+ cuts have been in effect since November. Theoretically, they amount to 2 million barrels per day, but since the cuts refer to production plans that OPEC+ is not implementing anyway, in practice, only about 1 million fewer barrels of oil will hit the market.
The EU's ban on Russian oil imports will go into effect in December and will be extended to Russian oil products from February as well.
Meanwhile, there are signs from Beijing that the authorities are willing to lift some Covid restrictions, which could boost the Chinese economy and increase the demand for energy resources.
At present, the situation is partially stabilized by the release of oil from the US strategic reserves. This has brought about 1 million more barrels of oil to the market every day since April. However, these transfers will soon have to be stopped. The filling of US reserves in mid-October oscillated around 55%, the worst since 1984.
All of this could drive oil prices above $100 per barrel in the winter and significantly increase fuel prices. However, this is not the only scenario. A global recession could just as well break out, leading to a collapse in oil demand.
The future of Relations with the US
Regardless of how we judge Mohammed bin Salman's conduct or Russian-Saudi cooperation, one thing is certain: Riyadh-Washington relations are currently at their worst in years.
In addition to accusations of an alliance with Russia, suspicions are being leveled against the Saudis for trying to interfere in US domestic politics. OPEC+ production cuts will go into effect on November 1 with US Congressional elections being held a week later. Some commentators suggest that in this way, the Saudis are trying to improve the ratings of the Republicans in the home stretch to the elections. After all, it is no secret that the Saudis have very good contacts with representatives of the Republican Party and Mohammed bin Salman himself has established a close relationship with President Trump. From Riyadh's perspective, a Republican takeover of Congress followed by Donald Trump's return to the White House in 2024 would be a dream scenario.
The current Biden administration theoretically has a wide range of tools it can use to pressure Riyadh: imposing sanctions on MbS for the murder of Khashoggi, the possibility of withdrawing US troops from Saudi Arabia or banning arms exports to the Kingdom. The real nuclear option would be to pass the NOPEC bill, which would allow individual OPEC countries to be sued in US courts for monopolistic practices.
However, there are fears in Washington of a confrontation with Riyadh. This is because US actions could accelerate the expansion of Saudi relations with China and Russia. The Saudis could also announce further cuts in oil production, thereby pushing up the price of "black gold." Riyadh also has its own "nuclear option," which is the possibility of an embargo on oil exports to Western countries - as OPEC did in 1973.
From Washington's perspective, a better solution than confronting Saudi Arabia would be to increase domestic oil production. US production is currently at 11.8 million bpd, a far cry from the record 13 million bpd of 2019. For this, however, there is a need for increased investment in domestic oil production, which has sometimes been marginalized in favor of green energy in recent years.
The example must come from the top. On the first day of his presidency, Joe Biden blocked the Keystone XL project, another oil pipeline by which Americans were to import up to approx. 800,000 barrels of oil per day. To put it mildly, the first two years of Biden's presidency were not the best time for the US oil sector.
Extra oil can also be sought outside of America. Lifting sanctions from Iran could give markets at least an additional million barrels of oil per day. However, negotiations for the reactivation of the have remained deadlocked since March 2022 and recent transfers of Iranian arms to Russia have pushed the prospect of a US-Iranian deal even further away.
Thus, the Saudis and Americans are, so to speak, doomed to each other. Despite the increasing independence of Saudi foreign policy and Riyadh's rapprochement with Moscow and Beijing, the interdependence between the US and Saudi Arabia means that the current crisis is unlikely to go beyond threats and accusations, and even if the Americans reach for sanctions against the Saudi s, they will be largely symbolic.
The Washington-Riyadh crisis shows that the Americans need to work out a new formula for cooperation - and not just with the Saudis, but with the entire Middle East. As bad as relations with Saudi Arabia are with Turkey, Ankara also remains closely tied to Russia. In addition, there are problems on the horizon regarding the United Arab Emirates' cooperation with China, which was the main reason for blocking the sale of F-35 aircraft to the Emirates.
If there is no new formula for cooperation, then, as Prince Bandar predicted in 2013, Saudi Arabia and the US will distance themselves from each other while China and Russia will benefit.
