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When US President Barack Obama announced his intention to reach an agreement with the Ayatollah
regime on Iran's nuclear program back in 2014, relations between Riyadh and Washington began
to crack.
The former alliance, the old partnership, the special relationship between these two
countries that had begun back in 1945 when US President Franklin Roosevelt met with the
Saudi king at the Suez Canal, was beginning to crumble.
For Riyadh, Washington's pact with Tehran was little short of a betrayal.
And since then, things have gone from bad to worse.
Now the Russian invasion of Ukraine and Riyadh's systematic refusal to support the US position
and requests has made things worse than ever.
But, why on earth does Saudi Arabia continue to support Russia, and to do so even though
it may jeopardize its special relationship with the United States?
Why have relations between Riyadh and Washington deteriorated so much?
What is left of the old friendship between these two countries?
Will Joe Biden be able to put the relationship back on track?
In this video we answer all these questions, but before knowing where this special relationship
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And now, let’s continue with today’s video.
T1(SPECIAL RELATIONSHIP)
In 1945 President Roosevelt and Saudi King Ibn Saud sealed the oil-for-defense pact,
a pact whereby the United States obtained oil at reasonable prices while guaranteeing
the security of the Saudi kingdom in return.
It was the beginning of a long friendship that would leave a profound mark on world
history.
Although that was not really the first major contact between the two countries.
Twelve years earlier, in 1933, the Saudi government had partnered with Rockefeller's own Standard
Oil Company.
And so, little by little, close ties were forged between the two countries.
For example, the United States established a delegation in Jeddah in 1942, upgrading
it to an embassy in 1949.
For his part, King Ibn Saud urged the United States to open a consulate in Dhahran in 1944
to serve US citizens employed by the Arabian American Oil Company, now known as Aramco.
In 1943, he invited the United States to build an airfield in Dhahran, which the US Air Force
maintained until 1962.
The understanding was such that in 1944, the United States extended the Lend-Lease program
to Saudi Arabia, so that Saudi Arabia could buy a lot of equipment from the giant US arms
supermarket.
And shortly thereafter in 1951 the two States signed a Mutual Defense Assistance Agreement
which, for example, established the first US Military Training Mission in the Saudi
kingdom.
But hold on a minute, because Riyadh has always maintained an independent foreign policy and,
unlike other countries of the Gulf Cooperation Council, has always had many reservations
about the presence of US troops on its territory.
For example, the Saudi government had a hard time making the decision to accept the deployment
of half a million US troops during the first Gulf War.
And more recently, during the post-9/11 invasion of Afghanistan, the Saudis did not allow the
Americans to use their territory for military operations, while they were subsequently very
critical of the invasion of Iraq.
Not to mention the two oil embargoes led by Saudi Arabia in 1967 after the Six-Day War
and in 1973 after the Arab-Israeli War.
This second oil embargo, in particular, wreaked havoc in the United States.
So as you can see we are not exactly talking about a relationship of unconditional love.
Not at all.
The special relationship between Riyadh and Washington has been a key part of US foreign
policy over recent decades, but the relationship has always been marked by misunderstandings,
misgivings and mistrust.
In fact, other Persian Gulf countries have much closer relations with the United States:
For example, Bahrain is home to the fifth largest US fleet, Kuwait hosts thousands of
US soldiers at eight bases, and in Qatar, the United States has hosted the al-Udeid
base since 1996, one of the most significant US air bases in the world.
Things improved, however, with Trump in the White House.
The former president bet on Saudi Arabia to the detriment of Qatar when setting his priorities
in the Middle East, even though this meant the departure of his Secretary of State, Rex
Tillerson, and despite the fact that Qatar is a very close ally of Washington.
But while there seemed to be a certain romance during that era, the arrival of Joe Biden
to power has meant quite the opposite.
The Saudis see the current administration as the heir to the Obama Administration that
backed the Arab Spring, wanted to reduce the US presence in the Middle East and sealed
the nuclear deal with Iran.
All of which infuriated the Saudi government led at the time by the late King Abdullah.
To top it all off, Biden, unlike Trump, has been tremendously critical of the Saudi regime
in the aftermath of the macabre, heinous and vile murder of journalist Jamal Khashoggi.
The current US president went so far as to call Saudi Arabia a pariah country.
But take note VisualPolitik fans, because all these misgivings and disagreements are
not only a matter for the Saudi government.
Mohammed bin Salman is driving a major transformation in the country.
We have talked about this in a lot of videos, however he is not particularly well regarded
by the Americans.
Let's just say that in Washington they consider the new Saudi leader to be too impulsive and
to hardly be trusted.
Look at it this way.
In Washington, they understand that this character has almost completely destroyed the balance
of power of the Saudi royalty; that he is reforming the Saudi political system so that
everything revolves around him; that he recklessly decided to get involved in the war in Yemen
despite warnings that it would be a huge mistake; that he ordered the vile murder of Khashoggi
and that, to top it all off, he has attempted to blackmail the United States with his oil
policy on several occasions.
And all this without mentioning the silent coup he perpetrated in 2017 when he overthrew
and imprisoned Crown Prince Mohammad bin Nayef, who had very good relations with the United
States thanks to his fight against the presence of Al Qaeda in the country.
So much for Washington.
Now, what could explain so many misunderstandings: weren't the two countries supposed to have
a special relationship and even mutual dependence in such important fields as energy, security
and defense?
Well, VisualPolitik fans, the truth is that during the last two decades a Copernican turn
has taken place:
The United States no longer needs Saudi oil.
And that has been a turning point.
Today, exports to the United States represent less than 5% of Saudi crude oil exports, an
export that is now mainly destined for the Far East, especially to countries such as
China, Japan, South Korea and Taiwan.
Exports to China alone represent more than twice as much as exports to the United States.
And believe me when I tell you that this, this has changed everything.
The shale oil revolution in the United States made Washington stop giving so much importance
to the Middle East.
And that’s where things stood when, to top it all off, the Russian invasion of Ukraine
arrived.
Listen up.
T2(IT’S ALL ABOUT THE MONEY)
This could end up being a huge turning point.
Time and again, Riyadh has refused to condemn Moscow for its vicious invasion of Ukraine
and has even expressed support for it as partners in the group known as OPEC+.
While The White House was leading a campaign to isolate Russia, Saudi Arabia's leaders
continued to state things like this:
N1(Saudi Arabia signals support for Russia's role in Opec+ as sanctions pressure mounts.
FT)
And something that is even worse for US interests:
Saudi Arabia has steadfastly refused to pump much more oil in an attempt to mitigate the
effect of sanctions against Russia.
Sanctions that have driven oil and gas prices to their highest levels in more than a decade.
Of course, everything has an explanation.
You see, Saudi Arabia remains the world's largest exporter of crude oil and with Brent
crude at over $100 a barrel, money is pouring back into Saudi coffers.
Here on VisualPolitik we have already told you how this country faces a complicated future:
on the one hand its population is very young and accustomed to a relatively high standard
of living.
On the other hand, their oil revenues are no longer enough to support an ever-growing
population in an economy that fundamentally continues to depend on black gold.
In Saudi Arabia you basically either work for the government or for the oil industry.
The government of Mohammed bin Salman wants to change this situation and is doing so with
plans such as Vision 2030.
The problem is that in order to carry out these plans the country needs money, a lot
of money.
And financially the last few years have been very, very bad for the kingdom.
Between 2015 and 2020, the fall in oil prices caused the country to consume a substantial
chunk of its cash reserves.
We are talking about hundreds of billions, a hole that seemed to be leading them straight
into the financial abyss.
But now that has changed.
The new oil prices mean that Saudi Arabia now has the chance to rebuild its reserves
and return to financing investments in foreign companies and major projects that reduce dependence
on crude oil.
C1("The windfall gains from the additional revenues we will get from higher oil prices
will essentially be invested in resilience.
Whether it's replenishing reserves, paying down debt or investing in one-off transformational
projects through our wealth fund, that really helps us accelerate diversification plans."
Faisal Alibrahim, Minister of Economy and Planning, Saudi Arabia)
Even the Saudi government is considering selling more ARAMCO shares now that ARAMCO has soared
on the stock market and has once again become the world's most valuable company after overtaking
Apple.
But to achieve all these plans, the country needs oil prices to continue to rise for a
good period of time.
During 2022 alone, the country is expected to earn more than US$280 billion from oil
sales, some US$180 billion more than in previous years.
And that, my friends, is a lot, and I mean a lot of money.
Support for Russia may tighten enough to ensure that those revenues keep coming in, and Riyadh
may also be thinking that when Russian production begins to be reduced by sanctions they can
release a lot more oil without substantially depressing prices.
This could give the kingdom a margin of 3 or 4 years of extraordinary income: We could
be talking about more than $500 or 600 billion dollars.
A fortune with which its economic diversification plans would be accelerated.
Of course, you need to be wary of miraculous plans.
Listen up.
T3(DON'T COUNT YOUR CHICKENS BEFORE THEY’VE HATCHED)
The United States may no longer be such an important client and Riyadh may now have other
priorities, but its relationship with the American giant remains indispensable to the
House of Saud.
As much as it pains Mohammed bin Salman, the United States remains terribly important to
Saudi Arabia.
The United States is the home of big finance, big business and big multinationals from around
the world.
Saudi Arabia alone, a country desperately seeking to diversify its economy away from
oil, has more than $800 billion invested in the United States compared to less than $100
billion in China.
And yes, at this point some of you might think that this is a point of weakness for the United
States, that Saudi Arabia could take its money and run with it elsewhere.
However, this is not so easy: Saudi Arabia wants to diversify its oil economy and for
this it needs the large US multinationals.
Nor is it easy for the petro-monarchy to find another destination where it can deposit such
large amounts of money with total security and liquidity.
And it is not only an economic issue.
From the military point of view, the dependence is even greater.
The Saudi Armed Forces are almost completely dependent on the US military industry.
To give you an idea, between 2015 and 2019, 73% of Saudi military purchases were made
from US companies.
Between 2008 and 2020 alone, the Saudis spent over $145 billion on US weapons.
On the other hand, the Russian invasion of Ukraine has given Riyadh a new opportunity
to gain influence and recompose its relationship.
The United States currently needs oil again...
And it needs it this time not so much for itself, but to calm a terribly stressed market
before oil prices begin to fracture its international alliances against Russia.
For that...
And for the 2024 election.
Because you see, the evidence says that every $10 per dollar change in the price of crude
oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every
penny increase in the average US gasoline price, more than $1 billion a year is lost
in additional consumer discretionary spending.
In other words, we are talking about tens and tens of billions that companies could
lose along the way.
And going into an election with gas prices skyrocketing, companies losing tens of billions
in business and the economy reeling – in the United States that is almost a death sentence:
electoral defeat is a given.
And we cannot forget either, although its presence is becoming less and less relevant,
the important role that Saudi Arabia could play in terms of security and regional stability.
This is exactly what the United States needs to get out of the Middle East and focus on
its major political, military and economic objective: Asia-Pacific.
C2(Saudi Arabia is a critical partner for us in dealing with extremism in the region,
in dealing with the challenges posed by Iran, and I also look forward to continuing the
process of building relations between Israel and its neighbors.
Antony J. Blinken, US Secretary of State)
Be that as it may, a forthcoming trip by Biden to the region will make it clear whether the
relationship can be rebuilt or whether it is mortally wounded.
Riyadh has so far shown the first signs that it might be willing to give in:
N2(Saudi Arabia ready to pump more oil if Russian production plunges under ban.
FT)
But at this point it's your turn:
Do you think the relationship between Saudi Arabia and the US can be revived?
Should the US seek to strengthen its old alliance or conversely should it begin to regard Riyadh
as unfriendly?
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