Oil Supply Showdown: Why America Must Stand Beside Its Saudi Partner

September 19, 2019 Topic: Security Region: Middle East Tags: Saudi ArabiaOilEnergyNonproliferationPersian Gulf

Oil Supply Showdown: Why America Must Stand Beside Its Saudi Partner

While the U.S.-Saudi relationship has evolved substantially, its fundamentals remain constant. Saudi Arabia is one of the world’s leading oil exporters and its supplies affect global oil prices significantly.

Escalating tensions in the Persian Gulf—including an alleged Iranian attack on Saudi Arabia’s oil industry infrastructure—have thrust the kingdom to the center of American foreign policy, a position that Riyadh has not occupied to this extent since half-million U.S. troops were deployed there during the first Gulf War in 1990–91. This has focused attention on the longstanding, informal and turbulent U.S.-Saudi alliance. In an era of growing American competition with China and Russia, hard choices will be required in this international relationship and others.

While the U.S.-Saudi relationship has evolved substantially, its fundamentals remain constant. Saudi Arabia is one of the world’s leading oil exporters and its supplies affect global oil prices significantly. Despite impressive innovation-driven growth in U.S. oil and natural gas production, the recent attacks demonstrate that domestic gasoline prices remain connected to international markets. This reality—as well as the simmering tensions between the United States and Iran since the latter’s 1979 revolution—are the principal drivers of U.S.-Saudi security and economic ties. In 2018, this meant almost $22 billion in Saudi crude oil exports to the United States and about $3 billion in U.S. weapons sales to Riyadh. Notably, however, America is no longer Saudi Arabia’s top customer—China’s crude oil imports from the kingdom reached nearly $30 billion last year, more than a third higher.

Several other factors add complexity and painful dilemmas to U.S.-Saudi ties. Among the most notable of Saudi Arabia’s disturbing behaviors are its decidedly mixed contributions to regional security—including a brutal war in Yemen, support for extremist Islamist forces in Syria’s civil war, and an effort to isolate and punish Qatar, which hosts the most important U.S. military base in the Gulf—and its domestic human-rights practices, which prevent Americans from developing a sense of shared values. The kingdom’s murder of dissident journalist Jamal Khashoggi after luring him to a diplomatic building in Turkey has particularly weakened American confidence in the country’s leadership and direction.

Consequently, many Americans appear to believe that the disturbing aspects of U.S.-Saudi relations increasingly outweigh the benefits. After Khashoggi was murdered, polling showed that only 4 percent saw Saudi Arabia as a U.S. ally and 23 percent viewed it as a friendly country. A combined 42 percent viewed the country as either unfriendly or an enemy. In domestic political debates, skeptical sentiments seem especially strong among those who hope that surging domestic oil production will permit disengagement from the Middle East, those concerned about the collapse of the Iran nuclear deal and the rising risk of regional destabilization, and those who find any cooperation with the Saudi government to be morally compromising.

Notwithstanding these concerns, sustaining a fraying U.S.-Saudi alliance seems likely to remain a U.S. policy priority; intensifying great-power competition will generate strong incentives for this. In a competitive environment, policymakers will be less likely to view the finely-balanced ledger of U.S.-Saudi relations strictly on its own terms—that is, from the perspective of what the United States gains and loses directly through the relationship. What others will gain or lose, especially in Beijing and Moscow, is also becoming an influential consideration, as are the wider possible implications of U.S. choices.

Ongoing negotiations between Washington and Riyadh on civil nuclear cooperation are one of the most visible examples of this. American attitudes toward Saudi Arabia suggest broad reservations about helping its government to build nuclear reactors. But rejecting this opportunity won’t prevent the kingdom from obtaining nuclear technology. Russia signed its version of America’s 123 agreement—a deal to create the legal framework for nuclear commerce—with Saudi Arabia in 2015 and has already submitted proposals to build a nuclear plant in the country.

This illustrates the dilemmas America faces in a competitive international system. Washington can deny U.S. nuclear technology (or other forms of American cooperation) to any other government that rejects U.S. requirements or preferences. But we cannot prevent Riyadh or others from pursuing nuclear technology, or other key technologies, from China, Russia, or other governments whose military capabilities and/or economic power limit their vulnerability to U.S. pressure. Ultimately, America’s refusal to allow nuclear energy exports will do little, if anything, to advance our nonproliferation aims.

Preserving and strengthening America’s international influence in today’s competitive world requires engagement with a range of nations, including those that we disagree with on many issues. Nuclear power usefully illustrates this at the global level too: The United States can only shape global nonproliferation and safety standards to the extent that it is a major participant in international markets for nuclear power. A Department of Energy official recently pointed out that America’s share of the global market has fallen from 90 percent to 20 percent at best. A 20 percent market share is far short of what would be necessary for the United States to assume its past role as a standard-setter.

America’s best chance for influence over Saudi conduct is in working with the Saudi government, not refusing cooperation. This requires a subtle combination of incentives and penalties, not a simple accommodation of Riyadh’s desires. But it also requires understanding and accepting the competitive realities of the twenty-first century. Burying our heads in the sand, whether in the Saudi desert or elsewhere, will only serve to undermine U.S. interests.

Paul J. Saunders is president of the Energy Innovation Reform Project and a senior fellow in U.S. Foreign Policy at the Center for the National Interest. He served as a State Department senior advisor in the George W. Bush administration.

Image: Reuters