The US-Saudi Relationship After Khashoggi

The US-Saudi relationship has been a rocky one, and its setbacks and scandals have mostly played out away from the public eye. This time, too, common interests and mutual dependence will almost certainly prevail over the desire to hold the Saudis to the standards expected of other close US allies.

.. But significant damage to bilateral ties, let alone a diplomatic rupture, is not in the cards, even if all the evidence points to a state-sanctioned assassination. Saudi Arabia is simply too crucial to US interests to allow the death of one man to affect the relationship. And with new allies working with old lobbyists to stem the damage, it is unlikely that the episode will lead to anything more than a lovers’ quarrel.
.. Saudi Arabia’s special role in American foreign policy is a lesson that US presidents learn only with experience. When Bill Clinton assumed the presidency, his advisers were bent on distancing the new administration from George H.W. Bush’s policies. Among the changes sought by Clinton’s national security adviser, Anthony Lake, was an end to the unfettered White House access that Saudi Arabian Ambassador Bandar bin Sultan enjoyed during the Reagan and Bush presidencies. Bandar was to be treated like any other ambassador.
.. when Clinton needed a quote from the Koran to go alongside those from the Old and New Testament for a ceremony marking an Israeli-Palestinian accord, he turned to the Saudi ambassador.
.. Before Donald Trump assumed office, he frequently bashed the Saudis and threatened to cease oil purchases from the Kingdom, grouping them with freeloaders who had taken advantage of America. But after the Saudis feted him with sword dances and bestowed on him the highest civilian award when he visited the Kingdom on his first trip abroad as US president, he changed his tune.
.. Even the terror attacks of September 11, 2001, could not damage the relationship. Though al-Qaeda leader Osama bin Laden, himself a Saudi national, recruited 15 of the 19 hijackers from the Kingdom, senior Saudi officials dismissed the implications. In a November 2002 interview, the Saudi interior minister simply deemed it “impossible,” before attempting to redirect blame by accusing Jews of “exploiting” the attacks and accusing the Israeli intelligence services of having relationships with terrorist organizations.
.. Bandar provided key insights and advice as President George W. Bush planned the 2003 Iraq invasion.

.. But Saudi Arabia wears too many hats for America to abandon it easily. Though the US no longer needs Saudi oil, thanks to its shale reserves,

  • it does need the Kingdom to regulate production and thereby stabilize markets.
  • American defense contractors are dependent on the billions the Kingdom spends on military hardware.
  • Intelligence cooperation is crucial to ferreting out jihadists and thwarting their plots. But, most important,
  • Saudi Arabia is the leading Arab bulwark against Iranian expansionism. The Kingdom has supported proxies in Lebanon, Syria, and Yemen to contain Iran’s machinations. Any steps to hold the Saudis responsible for Khashoggi’s death would force the US to assume responsibilities it is far more comfortable outsourcing.

.. When the United Kingdom, the region’s colonial master and protector, decided that it could no longer afford such financial burdens, US leaders ruled out taking its place. Policymakers were too focused on Vietnam to contemplate action in another theater. Instead, Secretary of State Henry Kissinger conceived a policy whereby Iran and Saudi Arabia, backed by unlimited US military hardware, would police the Gulf. While Iran stopped playing its role following the 1979 Islamic Revolution, the Saudis still do.

.. It is not only defense contractors who are going to bat for the Saudis. Before Khashoggi became Washington’s topic du jour, the Saudis paid about ten lobbying firms no less than $759,000 a month to sing their praises in America’s halls of power.

.. Former Saudi bashers such as Prime Minister Binyamin Netanyahu’s confidant Dore Gold now meet with the Kingdom’s officials. Following the 2013 military coup that toppled Egypt’s democratically elected government, Israeli leaders urged US officials to embrace the generals. They are likely to do the same today if US anti-Saudi sentiment imperils their Iran strategy.

.. in the wake of Khashoggi’s disappearance, common interests and mutual dependence will almost certainly prevail over the desire to hold the Saudis to the standards expected of other close US allies.

The American president is stirring up trouble in a volatile oil market

If he cannot arm-twist OPEC, he may unleash America’s Special Petroleum Reserve

.. markets are being buffeted by three countervailing forces unleashed by President Donald Trump:
  1. his geopolitical agenda, particularly sanctions on Iran;
  2. his domestic political agenda, to lower American petrol prices before the mid-term elections; and
  3. his looming trade war with China.

If he does not get his way, he may have a dangerous weapon up his sleeve—America’s Strategic Petroleum Reserve (SPR). His meddling risks making OPEC, the oil cartel that is a focus of his wrath, look like a paragon of predictability.

.. adding fuel to the price rally is the Trump administration’s pressure on America’s allies to cut oil imports from Iran to zero by November 4th, or face punishment for violating American sanctions. This is more draconian than expected.

.. on July 2nd that more than 50 international firms, including energy ones, had agreed to pull out of Iran. Though America may allow some countries—possibly Turkey, France and others—to reduce imports rather than cut them completely, it will not grant any waivers.

.. a “zero-barrel” response could see between 800,000 and 1.05m b/d of Iranian crude come off the market, with the squeeze starting in September, 60 days of shipping time before the sanctions kick in.

.. In an interview on Fox TV aired on July 1st, he ordered OPEC to stop manipulating the market, threatening some of its members with the loss of American protection if they do not.

.. the highest level of production Saudi Aramco, the state-owned oil giant, has tried out for any length of time is 11m b/d (it is about 10.3m b/d at the moment). But keeping production at that level for several months would damage its reservoirs. Pumping 12m b/d would also take spare capacity in the global oil market to uncharted lows, exposing it dangerously to supply shocks.

.. Complicating things is the imminent risk of an America-China trade war. China has threatened tariffs on American oil imports if retaliation meets more retaliation.

.. China may pay no heed to American sanctions on Iran, which would further stoke tension between the two.

.. These factors, some bullish for oil prices, some bearish, may offset each other. But they have already had the unfortunate consequence of putting Mr Trump alongside the rulers of Saudi Arabia and Russia in the driving seat of global oil policy. Shale producers, who cannot respond to price signals anything like quickly enough to please Mr Trump, are sidelined

.. Analysts predict that if petrol prices continue to rise ahead of the mid-terms, Mr Trump will use a release of up to 30m barrels from the SPR to flood the market. That would be tantamount to launching an oil war against OPEC and Russia, in addition to the trade war. But it cannot be ruled out.