Saudi Arabia, the oil-rich desert kingdom, which produces 10 percent of global oil demand and holds the world’s largest proven reserves of oil and natural gas, has been dependent on the mighty United States for security for the last 75 years.
The strategic yet unnatural alliance between the United States and Saudi Arabia has often raised eye-brows, as Saudi Arabia is the opposite of everything the United States is boastful about. The Islamic Kingdom is one of the harshest ruled states under Shariah Law, and the Wahhabi ideology of the Saudis has been percolating into other Muslim nations driving them towards extremism and terrorism. However, in the last few months, this alliance has developed deep cracks to the detriment of Saudi Arabia.
Historically, Al Saud, the founder of the Saudi kingdom who reigned when oil was discovered in 1933 in the desert kingdom, very cleverly aligned the country United States, the rising power which emerged as one pole of the bipolar world order after World War II and became a sole superpower after the dissolution of Soviet Union, the other power block, in 1991.
Ever since World War II, the US provided security to Saudi Arabia in exchange for cheap oil, which fuelled the American economy for decades. After the Islamic revolution in Iran in 1979, the mutual ties only strengthened as the US needed Saudi Arabia to counter the Islamic regime and the Kingdom needed the former to remain the de facto leader of the Islamic world, which was being challenged by hostile Shia-Islamic regime of Iran.
And this led to the establishment of an American military base in Saudi Arabia. Since then, successive American Presidents have stood behind the Royal family of the Kingdom, which has extended warm hospitality to the US establishment for more than seven decades in exchange for protection of its reign in the desert kingdom.
However, the discovery of shale oil and the rise of the shale oil industry in the United States has destabilized America’s ties with Saudi Arabia in the last few years. With the booming shale oil industry which grew exponentially due to high oil prices, the US became a net exporter of oil in last few years. The production cost of shale oil is in the ballpark of 50-60 dollars per barrel, thus profitable only when the natural oil price is above that. Although the US still imports Saudi oil in large quantities, at the same time it also exports shale oil which makes it a net exporter of oil.
After Trump came to power with his isolationist approach in 2016, he threatened all countries including Japan, Saudi Arabia, and NATO that the US will no longer pay for their security, and until these countries are not ready to pay for military expenses, the US would withdraw troops and abandon bases in foreign countries.
However, withdrawing of troops from Saudi Arabia was a risk Trump could not afford back then, given the hostility of Iran towards the US. To balance Iran, which was then led by the formidable general Qasem Soleimani, US needed military presence in the Kingdom. However, in January 2020, the US made a timely move through a Baghdad International Airport strike in which Soleimani, the second most important man in Iran, was killed.
In the last few months, Iran suffered many blows- the killing of Soleimani; the devastating impact of Coronavirus and rock bottom oil prices in the time of American embargo which has already brought Iranian exports to historic low. The Iranian regime is trying to pick the pieces of the shattered nation at a time when the Islamic government is facing widespread protests and therefore- Iran is too weak to attempt something bold like taking on the US.
Now, the US needs very little military presence in Saudi and Trump has already called the Patriot anti-missile systems and military back home. Trump is also using this strategic advantage to bargain production cuts from Saudi Arabia which is essential to save the US shale oil industry, which Trump vowed to protect.
The members of the Republican Party have already presented a bill to ban Saudi oil imports but Trump would not go that far. A skilled negotiator, Trump first brought the Saudi-led OPEC and Russia to call a truce to the oil-price war, and the parties agreed to cut the production by 10 million barrels, or 10 percent of total oil production. In the meantime, the FBI has ‘mistakenly’ leaked Saudi Arabia’s official link to the 9/11 attacks. The FBI disclosed the name of a Saudi diplomat suspected of directing support to the two al-Qaeda hijackers in the September 11, 2001 attacks.
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Trump further forced Saudi Arabia to cut production by 1 million barrels- 9 percent of Saudi’s total production- which results in a total cut of about 4 million or more than one-third of Saudi’s total production.
Saudi Arabia and the United States are strategic allies for more than 75 years but given the fact now the Kingdom has very little to offer, Trump is no longer interested in the ‘strategic alliance’.
Oil price is not expected to revive very soon and the global demand has fallen by 30 million barrel or 30 percent and the prices have halved in the last few months, thus, Saudi’s clout has weakened, thanks to its highly oil-dependent economy.
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However, Trump still cannot completely abandon Saudi as oil price war by the Kingdom would only hurt American shale oil industry, and therefore, he is using the strategic advantage for a tough bargain, to which, it seems, the Kingdom’s rulers are falling in line, as evidenced by Saudi Arabia’s production cut by 1 million barrel.