A faltering marriage – are Washington and Riyadh growing apart?

It’s the year of 2002. The US administration under President Bush, Vice President Cheney and Secretary of State Rumsfeld has ignored the widespread outrage from a vocal international community, bypassed the UN Security Council and unilaterally invaded Iraq, pre-emptively responding to the alleged threat of Weapons of Mass Destruction in the hands of Saddam Hussein – and wrestling control of the third richest oil fields in the Middle East from the Baath socialists’ leader while at it. Up and coming legislator Barrack Obama voices his condemnation of Bush’s hawkish trigger-happiness in a thunderous speech. Referring to the coup as a ‘stupid war’, Obama challenges the commander in chief: “You want a fight, President Bush? Let’s fight to make sure that our so-called allies in the Middle East – the Saudis and the Egyptians – stop oppressing their own people, and suppressing dissent, and tolerating corruption and inequality.”

It is one thing to condemn geopolitical kow-towing from a comfortable front row seat in the opposition. It is another completely to navigate the political and economic realities while pulling the strings oneself while attempting not to cut said strings on the razor-sharp complexities of the Middle East.

Reluctant Partnership – A marriage for mutual benefit

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It looked as if little were to change

Obama’s personal attitude to the Saudi Kingdom has not changed over the course of his presidency – when asked by Australian Prime Minister Turnbull in November whether he considered the Saudi administration friends, Obama replied “it’s complicated”. Complicated indeed. While still morally in-tune with his 2002 speech, the President Elect of 2008 had to accept his countries’ dependence on the Kingdom. In his first years, shale oil still sounded like Sci-Fi and American energy independence was a concept too foreign to imagine. Consequentially, Riyadh was a foreign policy ingredient Barrack Obama (though reluctantly) had to embrace – literally bowing down to King Abdullah in 2009. The gesture of respect went around the world, signalling another term of oil-induced partnership. It was a symbolic appeasement not only out of hunger for hydrocarbons: the relentless Saudi effort to establish economic and military dominance in the Arab world (whether through advisory, financial and military efforts in Yemen and Lebanon, developmental subsidies to the Gulf States or ideological teaching efforts in Egypt) had left the House of Saud as one of the two unchallenged powerbrokers in the region – Israel being the second. With Riyadh effectively ruling the Arab league, the governments under King Abdullah and King Salman were more useful a friend than they would be a foe.

 

 

The mutual benefit stagnates and the marriage turns rocky

These ties of mutual political benefit have been shaken by both economic and geopolitical realities. While seven years ago, Saudi oil monopolistically fuelled the ever-hungry US industry, game-changing shale oil procedures have allowed for a previously unimaginable degree of self-reliance in the United States. The resulting flux in trade deficit between the two countries plays out favourably for the States – and doesn’t look so pretty from a Saudi perspective. As demand for fossil fuel imports drops in the world’s largest economy, so does the price. Subsequently, Saudi export profits drop. Simultaneously, the rich resource havens of Iran (an estimate 150,000 Million untapped barrels of black gold) are accessible to the world again – increasing the available oil supply and additionally introducing further competition, both of which push prices down. With oil accounting for 80% of Saudi budget revenue and 90% of exports, the future doesn’t loopec_ref_price_0809ok all that rosy. The resulting concerns aren’t of purely economic nature, however. The fading energy reliance of the US had long silenced criticism out of Washington and given King Salman’s government a valuable bargaining chip. But this bargaining chip is falling victim to a frightening rate of inflation. The harshest of anti-Iran rhetoric did not deter Kerry, Obama and co. from implementing the Iranian nuclear deal in 2015 – a resounding confirmation that Saudi Arabia, while still influential in Washington, can no longer insist on demands from the White House and can, more importantly, not rely on unconditional US support in the eternal strife between Saudi Arabia and its regional competitor.

Politics and trust – how reliable an ally is the US?

Now Iran emerges with improving international relations and exponentially growing budget revenues, undercutting the Saudi claim to Arab dominance. But even the mere possibility for an Iran nuclear deal has worrying implications for Riyadh, irrevocably provoking uncertainty about the security of US alliances. Bush’s talk of a “reliable partnership” seems increasingly delusional if held against the light of 2016’s realities – and recent US foreign policy has not been very successful at establishing trust. In 2013, when Syrian President Bashar al-Assad crossed Obama’s ‘red line’, allegedly utilising Sarin against civilians, the White House’s reconsideration of said red line sent shock waves through the Middle East. Is the word of the US administration worth as much as it should be? Hosni Mubarak, longstanding President of Egypt and established US ally, did not see stars-and-stripes banners come to his rescue when his government was at its breaking point – another uncomfortable truth for Riyadh to acknowledge. The Wahhabist monarchy is no longer (politically as well as economically) indispensable to the US, and it is highly unlikely that the Pentagon would rush to save the House of Saud if the situation became dire.

Has the US fallen out of love?

The Obama administration is flirting with Teheran and its mutual-benefit relationship with the Saudi Kingdom is becoming increasingly cold. For years, US and Saudi policies in the Middle East had aligned (with the exception of the foreign policy stances toward Washington’s true love in the region, Israel). Now, the United States have made it agenda item number one to destroy the ‘Islamic State’, but the fight against the terrorist group falls short of making it to the top of Riyadh’s priority list. Saudi Arabia sees the emergence of Iran as the predominant threat to stability in the Middle East (one can safely assume that a ‘stable’ Middle East, as seen by Saudi legislators, is one spearheaded by a dominant Saudi Kingdom). Consequentially, King Salman looks to depose of Bashar al-Assad, the unlikely secular friend and ally of Iran’s Khamenei, attempting to bypass all Iranian influence in the region. Meanwhile, the US considers cooperating with Iran to defeat both ISIL and Al-Nusra. While the White House favours a secular, democratic, religiously completely impartial, pro free-trade government in Syria, Saudi Arabia would certainly not say ‘no’ to a Sunni-based, Islamic-oriented rule.

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The 27 missing pages might place Saudi officials in a precarious position. Majority speaker Paul Ryan, among others, backs the release

Diplomatically, the Syrian civil keeps stirring up additional tension – several reports have alleged wealthy and influential Saudi individuals to be closely affiliated or financially supportive of IS. Presidential candidates on both the Republican and the Democratic side of the aisle (Marco Rubio and Bernie Sanders, among others) see anti-Shiite rhetoric from leading Wahhabi clerics as one of the key factors in the ideological rise of Sunni extremism. Saudi Arabia categorically denies any financial or ideological involvement. And the coming elections do not offer any consolation for the Kingdom: there is no winning bet left among the pool of candidates. While the Republican contenders are no fans of the Iranian nuclear deal, looking to strengthen diplomatic ties with Riyadh and cutting those to Teheran, the Elephants simultaneously seek to boost domestic oil production and thereby diminish dependence on Saudi energy. The Democratic side is looking to curb fracking, which would drive the oil price back up – but favour strengthening ties with Iran.

The willingness to criticise the Saudi monarchy has skyrocketed, and accusations have flared up with reinvigorated heat, as the Pentagon is currently withholding, but might release, a 27-page document potentially implicating Saudi nationals in the planning and execution of the September-11 attacks. In response, the government in Riyadh has threatened to drop 750 billion dollars in US assets – a shock that would send stock markets spiralling.

Still tied together

A release of the papers followed by economic Saudi retaliation would be a hard hit for both states – the giants of foreign policy are still deeply entangled through trade and a multitude of aligned ambitions. For one, the Saudi oil supply is a cornerstone of the US industry. Then, Saudi Arabia has been a willing customer of military equiptment: the Pentagon and the State Department have sealed record arms deals under the Obama administration, up from 16 to 60 billion dollars. But further, fighting the ‘Islamic State’, reaching a peace deal in Yemen, stabilizing Libya, deposing of Bashar al-Assad and implementing necessary infrastructure to boost free trade and open up markets are integral elements of Washington’s and Riyadh’s foreign policies. And with the economic and military might of the two superpowers, collaboration is far more attractive than conflict.

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Mohammed bin Salman al Saud is seen as a highly competent reformer, in Saudi Arabia and abroad

Saudi Arabia and the United States still reap the benefits of their mutual strategic partnership. But it is a partnership that has become rocky – rocky enough for Riyadh to realise that it can no longer blindly rely on its reluctant ally by capitalising on the same, blunt but forceful economic bargaining chips. Prince Mohammed bin Salman – seen by many as the likely successor to King Salman despite being second in line – has been pushing an agenda of radical reform at an opportune time. His ambitious economic target is to build a Saudi Arabian economy that no longer depends on fossil fuels – a diversification that would in turn disentangle Saudi Arabia from its own dependence on the US and the high-risk oil industry. Furthermore, the targeted political reform (which encompasses granting women driving rights and easing the stranglehold of the religious police) seems tailored to boost the attractiveness of collaborating with the Kingdom.

 

Prospects for the House of Saud and its royal reserve of black gold

But despite this diversification, Riyadh is not about to yield its dominance on the crude oil market. Throughout 2015, the Kingdom has been drilling for oil at unprecendented rates, accepting the price dive while evoking despair amongst competitors. Saudi Arabia has the second largest oil reserves on the planet, second only to Vene1x-1zuela. With 270,000 Million barrels, Saudi wells hold almost twice that of the Iranian reserves – the Kingdom can keep up a competitive rate of production while competitors have to moderate draining their resources. Consequentially, the state-owned Saudi fossil fuel companies can grow their market share by simply outdrilling the rest of the world. The Kingdom’s officials proved their willingness to keep up this brutally unregulated, free market strategy last week in Doha, walking out of the production-freeze negotiations on the day of signing the treaty. Members of OPEC had been attempting to settle the all-or-nothing oil rush to maximise revenues across the board. Saudi Arabia’s powerplay sacrifices short term profits for market share and influence – a risk-seeking policy that could yield a high return in the long run.

Over all, Saudi Arabian policymakers have become increasingly vocal, proactive and assertive on the international stage in the aftermath of the Iranian nuclear deal. Recent efforts include the formation of a 30+ country coalition to combat terrorism in Syria, negotiations with Israel to keep mutual adversary Iran at bay, pushing domestic reform and bullying competitors on the oil market. Prince Mohammed bin Salman (often referred to as MbS) touted his countries’ capacity to raise the daily output of oil by another million, to 11.5 million barrels a day. The Saudi Kingdom has had decades to develop extensive drilling infrastructure, boosting the acessability of the already easily available crude oil. Neither Iran, which has had neither the time nor the galactic financial resources of its regional rival nor the United States, which have to apply sophisticated and complex procedures simply to access domestic oil wells can dream of keeping up.

And yet, the economic and geopolitical resurgence of Iran may have introduced some much needed competition to the effective Saudi monopoly as a powerbroker in the Middle East. As in any monopolistic market, Saudi Arabia has been able to dictate its terms – but in light of flourishing competition, the Kingdom is now forced to, beyond offering competitive oil prices, paint and prove itself as a beacon of stability and cooperation in the Middle East. The pressure may drive Riyadh precisely toward what Obama hoped to achieve in 2002 – the peaceful transition towards an increasingly ‘westernised’ Saudi Arabia. The ‘Arab spring’ lies mere years in the past, and its message still resonates – through Northern Africa, the Levant, the Gulf States: no matter how secure a God-given autocracy may seem, popular uprisings don’t lose traction with time, they gain it. And it is in the Kingdom’s interest to avoid such an uprising at all costs. It is more apparent than ever: a regime has to be utterly indispensable for Star-Spangled Banners to be seen rushing to its aid when worst comes to worst. And if Saudi Arabia is no longer economically indispensable to Washington, Riyadh will have to prove its worth politically.

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