Chronicle of the Middle East and North Africa

Saudi-U.S. Ties Deteriorate: Diverging Interests and Priorities

Saudi-U.S. Ties Deteriorate
US President Joe Biden (L) and Saudi Crown Prince Mohammed bin Salman (R) during the Jeddah Security and Development Summit (GCC+3) in Saudi Arabia’s Red Sea coastal city of Jeddah on July 16, 2022. MANDEL NGAN /AFP

Ali Noureddine

This article was translated from Arabic.

Following the decision by the OPEC + coalition, led by Saudi Arabia and Russia, to cut oil output by 2 million barrels per day starting November 2022, ties between the United States and Saudi Arabia appear to have further deteriorated. With this decision, the alliance has disregarded US President Joe Biden’s repeated requests for Saudi Arabia to increase its oil output in an effort to lower global oil prices.

Disappointed, Biden issued a harsh warning to Saudi Arabia of the consequences that would result from pushing the OPEC + alliance toward this decision. Furthermore, White House spokeswoman Karen John-Pierre charged that the OPEC + coalition supported Russia in this decision, giving the Saudi-American rift a strategic dimension related to the fallout from the invasion of Ukraine and the ensuing energy war.

The diplomatic escalation reached the point where White House National Security Adviser Jake Sullivan announced that Biden had no intention of meeting with Saudi Crown Prince Mohammed bin Salman during the upcoming G-20 summit. Sullivan also made it clear that Biden planned to reevaluate relations with Riyadh in light of the recent OPEC + decision.

The Saudi diplomatic response to Sullivan was not lacking in severity, as illustrated by leaks to the German news agency, DPA, claiming that the crown prince had never sought or intended to meet with Biden. The fact that bin Salman was willing to meet with the leaders of China and Russia during the summit raised the stakes even further, according to the sources.

Simply put, Saudi-American ties have reached their lowest point since the Arab oil embargo crisis of 1973. Riyadh has evidently already started to take preventative measures against further deterioration in relations with the United States. It is now attempting to reevaluate its international relations by looking to forge a variety of agreements and partnerships beyond the West and the United States.

U.S. President Joe Biden’s priorities

The interests and priorities that currently guide each of the two countries, particularly with regard to global energy markets, shed light on the reasons of the divide between the U.S. and Saudi Arabia. The U.S. administration’s economic factors appear to be primarily motivated by skyrocketing domestic inflation, which over the past 12 months has hit 8.2%, the highest level since 1981.

The rise in the global energy prices, which are contingent on the international price of a barrel of oil, is one of the factors behind rising inflation rates, especially since the cost of energy is an integral part of the manufacturing and shipping costs of various goods and services. Consequently, the Biden administration is wary of any fluctuations that could lead to an increase in international oil prices, including the OPEC + alliance’s decision to reduce production, i.e. the root of the dispute with Saudi Arabia.

As the United States prepares for its midterm elections on November 8, which will determine who controls the U.S. Congress, state legislatures, and offices of state governors, the matter of inflation targeting and global oil prices has also become doubly as important for the Biden administration.

For two years, Congress has been under the control of the Democratic Party, greatly reducing the restrictions that Republicans could place on Biden’s (Democrat) administration through Congress. However, this state of affairs could be completely reversed if the Republicans gain control of one of the two houses of Congress, i.e. the Senate and the House of Representatives.

The Biden administration has made reducing inflation, which is the top issue for American consumers, its top objective in an effort to win over American voters and shift public opinion in favor of the Democratic Party, which Biden is a member of. In light of this, the OPEC + decision, which is likely to cause an increase in oil prices, represents a betrayal at this pivotal time for the U.S. government and underscores its severe response to the Kingdom of Saudi Arabia.

The strained relationship between the two nations may have been compounded by the Biden administration’s initial lack of cordiality toward bin Salman, in contrast to the former president of the United States Donald Trump’s amicable connection with the Saudi crown prince. Because of this, it was inevitable that the U.S. administration would view these events as Saudi collusion against the country, a viewpoint that the White House had already alluded to in several statements.

In addition, the U.S. administration is aware that any rise in international oil prices will lead to an increase in revenues for the government of Russian President Vladimir Putin, its rival in the Ukraine war. Despite the sanctions imposed on Russia, Moscow still manages to sell its crude oil in global markets by creating shell companies and purchasing new fleets of oil tankers to disguise the source of oil as Russian and sell it internationally. Consequently, most statements by U.S. administration officials highlight how the decision taken by the OPEC + alliance will prove greatly beneficial to Russia.

Saudi Crown Prince Mohammed bin Salman’s priorities

On the other hand, Saudi Arabia has entirely different priorities. The 2023 budget for the Kingdom is predicated on the assumption that the price of a barrel of oil would stay above $76. Saudi Arabia’s earnings from the sale of crude oil, on which the Kingdom significantly relies, will decline with any dip in the price of a barrel on global markets.

The Kingdom noted a drop in the price of a barrel of Brent crude oil to levels that reached $84 per barrel in September, down from $127 per barrel in March 2022, before deciding to reduce production in OPEC +. This decline was brought on by economic pressures that threaten the world’s demand for oil. Despite the rise in gas prices as a result of the repercussions of the war in Ukraine, crude oil prices have continued to witness frequent declines since the middle of 2022 due to the decrease in global consumption and production.

Any significant drop in the price of a barrel of oil to below $76, the expected price on which its budget is based, in the coming year would be risky for Saudi Arabia. A situation like that would imperil the crown prince’s grandiose initiatives, which were based on the assumption of high crude oil prices, and place the Kingdom in a financial deficit.

Despite pressure from the current U.S. government, which had no particularly strong ties with the crown prince, bin Salman prioritized the Kingdom’s interests and strategic initiatives. Prior to taking office, Biden pledged to isolate Saudi Arabia for the killing of journalist Jamal Khashoggi, which prompted bin Salman to defy American pressure on the country’s oil production.

The two parties reshuffle their cards

Saudi Arabia started reevaluating its foreign economic relations when its ties with the United States turned sour. It has already begun to rearrange its deck, becoming less dependent on the West and the United States as strategic allies and more open to relations with a variety of other parties.

This position makes it easier to comprehend Saudi Arabia’s desire to join the “BRICS” Forum, which stands as an alternative to Western economic alliances and blocs and consists of China, Russia, India, Brazil, and South Africa. It’s important to note that the creation of a multipolar world order, which would counteract Western domination of the unipolar global economy, has been the “BRICS”‘ most prominently stated objective.

To thwart any legislation that could be passed by Congress against OPEC, Saudi Arabia began readying its own tactics to pressure the Americans, starting with investments within the U.S. itself. Saudi officials are already prepared to potentially sell off $100 billion in U.S. Treasury bonds that they own, which would immediately hit the U.S. debt market.

The Biden administration, meanwhile, is looking for ways to counter the repercussions of the OPEC + decision, including pumping oil into the markets from its own strategic stockpile. These steps, however, will only have a short-term impact and will not lead to any long-term shifts in market balances.

The United States will continue to exert pressure on Saudi Arabia most effectively through its military presence in the Arab Gulf, in addition to the weapons and ammunition it supplies to the Kingdom to help maintain a balance between the Gulf states and their adversary Iran in the region.

As their differing priorities continue to push them in separate ways, it does not appear that the divide between these two countries will be bridged any time soon. Therefore, the cycle of pressure and counter pressure will continue for the foreseeable future. However, the crucial question is how these developments will affect the structure of regional alignments and alliances, as well as Saudi Arabia’s capacity to advance in its regional rivalry with Iran across various arenas, including Yemen.

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