Photo Credit: The White House
By Yan Graf
On October 5th, OPEC, the world’s largest oil cartel, announced it would cut oil production by 2 million barrels per day, sending economic shock waves worldwide. While the move has clear short-term implications for the world economy, long-term implications reflect deeper tensions that threaten the existing global, geopolitical order. In particular, OPEC’s production cut indicates the breakup of one key alliance that has anchored the global economy for decades: the U.S.-Saudi alliance.
Saudi Arabia, OPEC’s definitive heavyweight, explained that the production cuts resulted from economic necessity. But this story fools few geopolitical experts. Biden’s tough stance towards Saudi Arabia, coupled with the European energy crisis, has strained the longstanding U.S.-Saudi alliance, forcing Saudi Crown Prince Mohammad Bin Salman to seek new allies. Given Saudi Arabia and OPEC’s immense power over the global petroleum supply, a pivot towards new allies will cause Western leaders headaches for years to come. But Saudi Arabia abandoning its key ally could prove catastrophic.
Saudi Arabia’s long list of human rights violations, its brutal war in Yemen, and its support for jihadist organizations have long been a thorn in the U.S.’s side. President Biden has made it a priority to reign in Saudi Arabia’s behavior. In February 2021, Biden announced the United States would stop supporting Saudi Arabia in Yemen, the site of a laundry list of Saudi war crimes committed with American aid. The Saudis view Yemen as a top security concern, so American refusal to help fight in Yemen has caused Saudi Leaders to question U.S. commitment to the alliance. After Biden’s withdrawal from Yemen, Saudi Arabia refused to cooperate with U.S. attempts to isolate Russian oil exports by importing and reselling massive quantities of discounted Russian oil. In a further show of spite, Mohammed Bin Salman (M.B.S.) rebuffed Biden during his trip to Saudi Arabia, where Biden pleaded for production increases. Despite Biden making a 180-degree policy turn toward Saudi Arabia, the nation has refused to accede to U.S. pressure. By ignoring American demands, OPEC’s production cut represents another Saudi-U.S. rift.
The evidence for a Saudi pivot away from the U.S. goes deeper than OPEC’s recent oil announcement. Recently, South African president Cyril Ramaphosa visited Saudi Arabia, announcing there that Mohammed Bin Salman expressed interest in joining BRICS, a key western-alternative economic bloc formed by Brazil, Russia, India, China, and South Africa. Saudi Arabia’s recent announcement that it is boosting energy cooperation with China proves that M.B.S. is seeking new allies.
It has become clear that Saudi Arabia, for the first time in 50 years, is seriously considering abandoning its relationship with the United States. While such a move brings temporary benefits, it will prove disastrous for Saudi Arabia. By abandoning the U.S., Saudi Arabia cuts itself off from desperately needed Western investment, isolates itself militarily, and damages its long-term financial leverage.
A pivot away from the United States and Europe will have important ramifications for Mohammad Bin Salman’s ambitions to make the Saudi economy less oil-dependent, which is crucial for the country’s survival. With a heavily oil-dependent economy, Saudi Arabia remains vulnerable to volatility in global oil prices. To counteract this concern, M.B.S. has announced the Saudi 2030 plan: an investment plan pouring trillions into new megaprojects, tourism, and the development of new sectors. But such plans will only succeed with the cooperation of foreign capital. By alienating the West, Saudi Arabia cuts itself off from the world’s largest investment markets. China, the only other nation capable of supporting M.B.S.’s Saudi 2030 plan, is unlikely to fill the gap. Shifting Chinese domestic priorities and harsher debt controls limit Chinese support for Saudi megaprojects. Thus, by abandoning the West, M.B.S. plunges his signature economic project into serious jeopardy.
Saudi Arabia’s souring U.S. ties will also worsen its fragile security situation. It is no secret that Saudi Arabia and Iran have waged a decades-long Middle Eastern cold war. From Iraq, Syria, Lebanon, and Yemen, Saudi Arabia has relied on American military support to keep Iran’s influence in check. Over the course of 50 years, Saudi Arabia has built its entire military around American cooperation, buying tens of billions of dollars of U.S. equipment. However, if U.S. support were to evaporate, the Kingdom could lose its proxy wars with Iran. Despite forging closer ties with China and Russia, these nations are unlikely to abandon their long-standing friendship with Iran in favor of Saudi Arabia. In particular, Russia has received support from Iran for its war in Ukraine. China is similarly unlikely to abandon Iran, a long-standing ally that provides it with vast quantities of steeply discounted oil. By spiting the United States, Saudi Arabia significantly weakens its military position.
Saudi Arabia’s pivot from the west weakens its stranglehold on global petroleum markets. OPEC’s recent production cuts have highlighted Saudi Arabia as an unreliable energy partner, emphasizing the Western need for energy diversification. Higher energy prices increase renewable investment, accelerating the irreversible decline of fossil fuels. Furthermore, high oil prices and Western demand have led other countries to capitalize on Western desperation by increasing oil exports. The EU recently announced that its gas inventory is 90% full, with increased domestic production and American exports preventing an acute energy crisis. Long-term, higher production in Brazil, Guyana, Venezuela, and the USA will decrease OPEC’s leverage. Thus, by refusing to comply with US demands, Saudi Arabia is shooting itself in the foot.
It has become clear in recent months that the U.S.-Saudi Arabia relationship, a cornerstone of the world’s economy, has taken a serious hit. While the future may bring stronger relations, the October 5th production cut has damaged U.S.-Saudi affairs. Biden announced that he was looking to “reconsider” U.S.-Saudi relations after the production cut, something unlikely to change even after his administration ends. While Saudi Arabia will reap immense short-term windfalls from record oil prices, the long-term consequences for the Kingdom may prove disastrous. A future without strong U.S. backing will bring stagnant diversification, military uncertainty, and serious damage to long-term Saudi power. The risk Riyadh is taking cannot be understated.