Date: 08/04/2023
Author: Mr. X
President Joe Biden may actually get a bad rap when it comes to foreign policy. Just a few years after the humiliating retreat from Afghanistan, American leadership is stronger than at any time it has been in the last decade. NATO is united – and expanding. Europe has abandoned the pretense of strategic autonomy and follows Washington’s leader. China looks far less powerful than it did just a few years ago.
However, there is one great exception – Saudi Arabia.
Under President Donald Trump’s Administration, Saudi Arabia and the United States were close allies. (One is reminded of the great picture of President Trump and Middle Eastern leaders pondering the orb.) The Trump Administration carried out a true diplomatic revolution in which Saudi Arabia joined with other Sunni powers in forging close relations with both Israel and the United States. America was on the brink of realigning the entire region.
However, because of the murder of Jamal Khashoggi, Joe Biden ran for president with a promise to freeze out Saudi Arabia and Crown Prince Mohammed bin Salman (MBS). High gas prices forced the president to go back on that promise very quickly, and President Biden had to essentially beg the Saudis for help. It hasn’t really been forthcoming.
Saudi Arabia has been moving away from the United States in several respects. It signed a strategic agreement with China. In a deal brokered by China, it normalized relations with the Shiite Islamic Republic of Iran, which would have once been unthinkable. The Saudis have not been especially eager to join the economic crackdown on Russia.
Meanwhile, Saudi Arabia is making tremendous profits because of high oil prices. In 2022, Saudi Aramco reported profits of $161 billion, the largest ever reported by an oil company. The Saudi sovereign wealth fund now controls assets of more than $750 billion, and has been on a buying spree of some of the most prestigious assets in the world.
Now, Saudi Arabia is showing its independence in a way that will hurt the American economy – and President Biden’s re-election chances. Saudi Arabia is extending its voluntary oil production cut of one million barrels per day. “This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” said a source at the energy ministry. The cut may also be “extended, or extended and deepened.”
Russia will also begin cutting production in September.
Not surprisingly, oil prices are up. Brent Crude is over $85 a barrel as of this writing – and increasing. This is a major problem for the president, as gas prices just hit a nine-month high. Extreme heat is part of the problem, but one can’t rule out oil production cuts.
Saudi Arabia is also going to present a diplomatic challenge to President Biden. About 30 nations will be represented at a Saudi conference in Jeddah, with Russia pointedly not invited. This means that Ukraine is putting relatively high hopes on the conference, despite the standoffishness of both China and Saudi Arabia to Ukraine. Saudi Arabia has already brokered the release of Ukrainian prisoners held by Russia, earning thanks from the American government. If the Saudis can help broker a peace, one suspects the American government will be unhappy. Russia may not be at the upcoming conference, but only the most naïve thinks that Moscow and Riyadh haven’t been in touch.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
