Complex ruptures in the US-Saudi oil vessel

By Ameen Izzadeen
In a monopoly market, a trader can make one thousand rupees by selling a commodity he is dealing with in two ways – by selling a few items at a high price or many items at a low price. Saudi Arabia and some other member states of the Organisation of Petroleum Exporting Countries (OPEC), which with its 80 percent of the market dominance acts like a near monopoly, has opted for the latter method – selling more oil to reach the desired revenue.
But Saudi Arabia’s motive is aimed not at raising the revenue alone. It has political agendas with economic undercurrents. What seemed like a political move to punish Russia and Iran has now backfired, with the United States itself looking at the Saudi moves with much suspicion.
The US-Saudi ties were once like that of conjoined twins. So much so that some described Saudi Arabia as the United States’ desert kingdom. But instead of blood vessels what kept the ties warm were pipelines and tanker vessels. Saudi Arabia had declared itself an independent country in 1932 after centuries of Ottoman rule. A year later, American companies led by Standard Oil set foot in Saudi Arabia, which possessed one fourth of the world’s crude oil reserves. At the height of the Second World War, the then US President Franklin Roosevelt met King Abdul Aziz, the founder of Saudi Arabia, aboard a US cruise ship in the Suez canal and signed a deal, according to which the US undertook to protect the kingdom and the royal family from internal and external threats. Since then the Americans have done all they could do to keep the Saudi royal family in power and, in turn, ensured that US oil companies brought home billions of petrodollars.
But recent developments indicate a serious rupture in the ties. The relations between the two nations have entered a phase where one’s national interest is in conflict with the other’s. Usually, a nation works towards a balance when it realises that its national interest is in conflict with that of a key ally. But in the US-Saudi ties, we see no such compromise. There seems to be, instead, mutual suspicion of each other’s moves. This explains why Saudi Arabia’s new King, Salman bin Abdulaziz, did not show up at last month’s Gulf summit which US President Barack Obama hosted in Camp David. Analysts say the Saudi king’s absence was nothing but a huge snub.
The strain in the ties did not come about with the new king ascending the throne four months ago. It began more than two years ago when President Obama desisted from attacking Syria even after strong evidence emerged that the Bashar al-Assad regime had used chemical weapons. Saudi Arabia applied pressure on the US to attack, but Obama took cover behind congressional and popular opposition to the war to justify his stance.
An angry Saudi Arabia ditched the US and decided to intervene in Syria its way.
If that was the first indication of a rupture, the second came when the United States intensified contacts with Iran, Saudi Arabia’s enemy number one. In addition to a telephone conversation between President Obama and Iran’s President Hassan Rouhani in September 2013, the US together with the other four permanent members of the United Nations Security Council and Germany has been holding in the past two years regular meetings with Iran on Teheran’s nuclear programme. The talks reached a breakthrough in April and, much to Saudi Arabia’s chagrin, the two sides are set to sign an agreement next month. The deal is likely to lift some of the sanctions imposed on Iran. If that happens, Iran will be able to attract foreign investors to modernise its aging oil industry and increase its oil and gas output. Saudi Arabia feels that an economically stronger Iran will be a bigger threat than it is today. At present, Iran is providing military assistance to Iraq and Syria to fight the ISIS (Islamic State in Iraq and Syria). Iran is also the godfather of the powerful Lebanese Shiite militia Hezbollah and is said to be backing the Houthi rebels against whom Saudi Arabia has been waging a war for the past two months.
The third parting shot was Saudi moves to glut the oil market. Initially the move had the US nod because it targeted Iran and Russia, the world’s number one oil producer, which had spurned Saudi Arabia’s request that it stop propping up the Assad regime.
But soon the US shale oil industry players realised the move also targeted them. The US shale oil industry blossomed when world market prices were going over US$ 100 a few years ago. Thanks to shale oil, by 2013, the US surpassed Saudi Arabia in terms of oil production. The US which depended on Middle East oil to meet half of its energy needs could halve its imports from the Middle East. But when the prices plunged as a result of Saudi oversupply, the US shale oil industry was hit hard. Many small-scale shale oil producers in North Dakota – the key drilling area for shale oil – went out of business. Even after last week’s OPEC talks in Vienna, where members failed to reach accord on supplies and prices, Saudi Arabia continues to glut the market. But now with the oil prices stabilising at US$ 60, some of the big shale oil players have developed cheaper ways of extracting shale oil and are set for a showdown with Saudi Arabia. The shale resilience is no good news for Saudi Arabia.
Also bad news for Saudi Arabia is the US decision to increase its military involvement in Iraq in the fight against ISIS – a move that may increase military contacts between Washington and Teheran. Iran is said to have sent more than 30,000 military advisors to Iraq and is training and arming the Shiite militia groups which are in the forefront of the battle against the ISIS in Iraq. Though Saudi Arabia is officially in the US-led coalition against ISIS, its soft corner for the extremists, who subscribe to the Wahhabi interpretation of Islam just as the kingdom does, is no secret. Saudi Arabia’s main aim is to oust Assad. It does not care who does it.
The United States is also unhappy about the Saudi decision to continue the war on the Houthis in Yemen, because Washington regards the Houthis as a counterweight to al-Qaeda. Here, too, the Saudi policy is in conflict with that of the US.
With the US dependence on Middle Eastern oil declining, the only other factor that keeps US focus on the region is the security of Israel. Ironically, Saudi Arabia’s foreign policy finds some common ground with that of Israel, which also sees Iran as its biggest enemy. Don’t they say, my enemy’s enemy is my friend?
(This story first appeared in the Daily Mirror, Sri Lanka)

About ameenizzadeen

journalist and global justice activist
This entry was posted in Political analysis and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s