Saudi-U.S. Relations: New Priorities in a Changing World

Saudi Arabia’s relationship with the United States has long been described as a partnership based on a fundamental “deal”: the promise of a stable oil supply to the global market from Riyadh in exchange for weapons sales and security guarantees from the United States. Although this bargain has experienced hiccups, it has by and large functioned as originally formulated for nearly eight decades. Saudi oil production remains a linchpin of the global economy, and Riyadh has sometimes increased or decreased its oil output in coordination with Washington. In return, the United States has traditionally been regarded as Riyadh’s main security partner; in 1990-91, U.S. troops protected the kingdom from a foreign invasion, and in the last few years, American anti-air systems have shot down dozens of missiles and drones targeting Saudi Arabia from the Houthis in neighboring Yemen.

Against this historical pattern, the decision by OPEC+ to reduce oil production by two million barrels per day (bpd) in November led to political and economic shockwaves in the United States and a surge in hostility toward Saudi Arabia. Commenting on the decision, President Joe Biden declared that Riyadh would bear the consequences of its actions. Members of the U.S. Congress, including chairman of the Senate Foreign Relations Committee Bob Menendez, called for a freeze on U.S. cooperation with Saudi Arabia, including arms sales. A group of U.S. legislators proposed moving forward with the so-called “NOPEC” legislation in Congress, a proposal that would empower the Justice Department to sue OPEC+ countries under U.S. antitrust law.  In the American media and think tanks, the OPEC+ decision was widely portrayed as Saudi Arabia’s decision to side with Russia against the West. Others went as far to accuse Saudi Arabia of meddling in the U.S. domestic politics by seeking to increase the price of oil ahead of the upcoming midterm elections, in the hope that Republicans would regain control of Congress. Saudi Arabia’s explanation that the decision to decrease oil production was unanimous, apolitical, and purely based on economic considerations fell on deaf ears.

Oil Economics

Saudi Arabia’s decision to cut oil production comes from a position of concerns regarding oil prices. Beginning in July 2014, the global price of oil began to fall precipitously, reaching less than $50 per barrel by January 2015. From 2015 until December 2019, prices gradually rose to roughly $70 per barrel, only to collapse again with the onset of the COVID-19 pandemic and reach $11. The sustained low price of oil for six years came at a critical time for Saudi Arabia, as it was embarking on major socioeconomic reforms such as Vision 2030—that required major government spending. In fact, the government of Saudi Arabia ran a budget deficit of 367 billion riyals (roughly $100 billion) in 2015, and did not produce an annual budget surplus for the next six years. This difficult economic situation forced the Saudi government to borrow from internal and world financial institutions, as well as tapping its sovereign fund and instituting austerity measures to manage its budget. During those years, the price of oil was subjected to market pressures much as it is today, but when Saudi Arabia was suffering from depleting its sovereign fund to manage its budget deficit throughout the late 2010s, no one questioned the rules of the market.

Consequently, the main drivers behind Riyadh’s support of the OPEC+ decision to cut oil production were twofold: keeping oil prices within a reasonable range that would permit the kingdom to keep pace with its social and economic transformation plans; and helping to make up for its huge financial losses over the past seven years.

It must be acknowledged that there are external and internal structural changes that have forced Riyadh to alter its foreign policies in order to better serve its own interests. To start with, the changes in U.S. policy towards the Gulf region since it became an oil and gas exporter did not go unseen. For example, the U.S. and many European states had prioritized reaching an agreement with Iran over its nuclear program at a time when Saudi Arabia was more concerned with Iran’s aggressive policies in neighboring countries.  Saudi Arabia has also maintained longstanding concerns over Iran’s sophisticated ballistic missile program, particularly after the strike on the Abqaiq oil facility in September 2019 that halved Saudi oil production for nearly a month. Furthermore, at times when the Houthis sought to escalate their missile and drone attacks on Saudi airports, oil fields, and vital infrastructure, the U.S. withdrew some of its missile defense installations from the Kingdom, underscoring the notion that it could not be relied upon to protect Riyadh in an emergency. Indeed, since President Obama’s first term, Saudi leaders have observed a growing impatience in Washington to pivot away from the Middle East, undermining its traditional security arrangement with Riyadh.

New Variables, New Partners

But these are not the only reasons that force Saudi Arabia to opt for a new foreign policy approach to the world. Today, the prosperity of the Saudi people hinges on its trade relations with East Asia, and in particular China, which the U.S. perceives as its main competitor and adversary in a world that is rapidly witnessing an increase of great power competition. For America, China is a rival, but for others, Beijing is a partner and its economic prosperity is an opportunity. In the last decade, the main source of the kingdom’s income has come from its trade with Asian countries. Export of oil alone has been increasing steadily since 2015 to China, Japan, India and South Korea, and Saudi exports to those four nations reached more than 66% of Saudi Arabia’s total oil export in 2020. In 2021, 20% of Saudi Arabia’s total imports came from China alone, compared to only 10% from the United States.

More importantly, Saudi Arabia believes that the window of opportunity to move away from a primarily hydrocarbon-based economy to a knowledge-based one is shrinking rapidly. Before the war in Ukraine, all the industrialized economies had embarked on green energy projects that aimed to minimize dependence on hydrocarbons. The war in Ukraine has only intensified this trend, as European nations have sought to seek alternatives for Russian oil and gas imports. The European Union, for example, has reached an agreement stipulating that “all new cars and vans registered in Europe will be zero-emission by 2035.” With a population of more than 35 million people, of whom 60% are below the age of 30, Saudi Arabia clearly views these developments with concern and has sought to undergo its own socioeconomic transformation in response.

These pressures have four major consequences for Saudi Arabia’s foreign policy. First, Riyadh can no longer rely on the United States alone for its security; it needs to diversify its security by seeking arms purchases from other exporters and working to localize its military industry, especially in the area of air defense. This diversification of foreign partners necessarily means that Saudi Arabia must have good relations with other great powers such as Russia, China, France, and Britain, and not merely with the U.S.

Second, Saudi Arabia cannot afford to take sides in the great powers’ rivalries, as doing so would be destructive to its economy. Accordingly, the Kingdom will adopt policies that maintain its economic and security interests with all countries, without attempting to take sides in great power conflicts.

Third, for the next decade, domestic policies such as Vision 2030 plan will be the main driver of Saudi Arabia’s foreign policy. As these plans are ongoing, Saudi Arabia will seek economic and security cooperation with all states that respect its sovereignty and security and accommodate its vital interests.

Fourth, stability, security and prosperity are the main ingredients of Saudi Arabia’s foreign policy in the Gulf and the broader MENA region including Yemen and Iran. For all of the criticism of Saudi Arabia’s role in Yemen, Riyadh is seeking a solution to the conflict that is accepted by the international community and that it supports the efforts of the UN special envoy in this regard.

Avoiding Great Power Competition

Of course, those new trends in Saudi Arabia’s foreign policies necessarily have implications on the bilateral relations with the U.S. To a large extent, those trends are impartial to domestic American politics; regardless of whether a Democrat or a Republican occupies the White House, Riyadh’s policies will emanate from its perception of its priorities and the structural changes in U.S. policies. Without taking sides between any of the great powers, Saudi Arabia will seek to maintain its strategic and historic relations with the U.S. based on mutual respect of the interests of each side. Free trade, maritime security, energy, mining, and counterterrorism will continue to be important areas of cooperation between Saudi Arabia and the United States; after all, they benefit Washington as much as Riyadh.

Finally, both Washington and Riyadh will have to acknowledge that both nations’ policies might not converge all the time because of their different perceptions of their priorities. This should not turn them against each other; rather, the two nations will need to continue engaging in a serious strategic dialogue to minimize their areas of disagreement. For example, the United States has perceived the war in Ukraine as a defining moment, similar in scope to the September 11 attacks, in which it expects the world to fall in line behind its positions and offers quasi-neutral nations a choice between being “with us or against us.” For Riyadh and the majority of the non-Western part of the world, including important allies to the U.S., the Russian invasion to Ukraine is not acceptable; it violates the international law and destabilize world’s order.  However, they perceive the war in Ukraine as simply part of the strategic competition between the Western bloc and Russia, a confrontation that harms global security and economic stability and they should not take side in it.

To conclude, the U.S. media, think tanks, and decision-makers who denounced Saudi Arabia for following its core interests are missing the main point; Saudi Arabia is neither acting in favor of Russia nor against the United States. Instead, it is calibrating its foreign policy to meet its urgent internal needs, taking into account the structural changes in its security and trade relations with the great powers. Saudi Arabia is an important country to the global economy, and its policies are supported by its people and by the majority of the international community; it should not be threatened. The United States’ foreign policy is intended to defend its interests, but so is Saudi Arabia’s; opportunities and areas of cooperation between the two sides are endless, but only if they can establish a relationship based on mutual understanding of each other’s core interests.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.