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James Durso

James Durso

James D. Durso is the Managing Director of Corsair LLC, a supply chain consultancy. In 2013 to2015, he was the Chief Executive Officer of AKM…

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China Makes Move On Riyadh As Washington Considers Sanctions

Panda Express isn’t just a fast-food chain in Saudi Arabia. Soon it’ll be the daily Air China flight bringing Chinese businessmen and officials to the kingdom.

Saudi Arabia recently achieved the distinction of joining Turkey as an American ally subject to sanctions.

The sanctions followed the U.S. Director of National Intelligence report that an operation to “capture or kill” Saudi activist (and Qatari agent of influence) Jamal Khashoggi in October 2018 was “approved” by Saudi crown prince Mohammed bin Salman.  

U.S. Treasury Department sanctions targeted Saudi officials and the Rapid Intervention Force, the crown prince’s bodyguards. The U.S. State Department announced the “Khashoggi Ban,” a visa restriction policy targeting 76 Saudis believed to have acted against activists, dissidents, or journalists. The Biden administration announced it would consider limiting Saudi arms sales to “defensive” weapons.

The American sanctions and visa restrictions left the Crown Prince unscathed for now, but many in Washington are still angry he sidelined their candidate for the throne, former interior minister Muhammad bin Nayef, and may hope to criminalize him to scupper improved relations with Israel, and move him out of the line of succession.

Financial markets took the two-year-old news in stride, and the crown prince’s allies claimed the report was a “practical victory” as it lacked details and “used equivocal words like ‘probably.’” (The report’s phrase “capture or kill” left open the possibility things just got out of hand.) The Saudi foreign ministry declared  the government "categorically rejects the abusive and incorrect conclusions” and affirmed the “enduring partnership” between the kingdom and the U.S.

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Not so the media, who feel “Biden is doing the same thing as Trump” or  Representative Adam Schiff (D-CA), who thundered, “There must be accountability, and we will continue to press for it.”

Biden’s announcement the U.S. would re-join the Iran nuclear deal, and a U.S. pause in arms sales to Saudi Arabia over the brutal campaign against Iran’s proxies in Yemen, signaled Washington’s intent to align itself with Iran. But some relief is in sight for Riyadh: the kingdom’s growing relationship with China, which is now receiving over 2 million barrels of oil per day from Saudi Arabia, its largest supplier.

Riyadh will remind Beijing it did them a solid when Mohammed bin Salman defended China’s treatment of its 10 million Muslim Uighurs. (Though, like governments everywhere do when they do something unpleasant, it was couched as “counter-terrorism and de-extremism measures.”

The relationship with China goes back to 1986, when the Saudis bought about 50?Chinese CSS-2 ballistic missiles.  Saudi Arabia was the largest relief donor following the 2008 Sichuan earthquake, and it recently offered support after the COVID-19 outbreak. Though the relationship has been described as “functional, but not strategic” and won’t replace the American relationship, better Sino-Saudi ties will give Riyadh breathing room.

Beijing will be glad to increase its influence on both shores of the Persian Gulf. It has secured a  partnership with Iran and has boosted BRI links with Saudi Arabia, but it will work to avoid getting drawn into regional conflicts to safeguard its $150 billion investment in the Gulf region.  In the kingdom, China will pursue additional sales of high-technology goods, and seek to invest in Mohammed bin Salman’s showplace, the $500 billion NEOM, the “first cognitive city.” One venue for Sino-Saudi cooperation – and a signal to the U.S. – would be adoption of the Yuan in place of the Dollar in payment for hydrocarbon sales to China. Related: What To Expect From The Upcoming OPEC+ Meeting

Aside from moving closer to China politically and economically, Saudi Arabia may diversify its weapons suppliers and China is the kind of no-conditions seller every buyer wants. And the kingdom may start to “make” instead of “buy” by growing the capability of Saudi Arabian Military Industries so it is  less vulnerable to a parts cutoff by the U.S. 

Qatar, Bahrain, and the United Arab Emirates voiced their support for Saudi Arabia as Washington’s actions probably reminded them how quickly the U.S. abandoned longtime ally Hosni Mubarak for the Muslim Brotherhood. As Cairo, Jerusalem, and Abu Dhabi ponder Iran’s next steps and the shape of their mutual support, the potential for a U.S. reversal will be baked in. Accordingly, they may explore broader relations with Beijing.

Two days after announcing sanctions, the White House undermined itself when it justified the absence of action against the crown prince by explaining “The United States has not historically sanctioned the leaders of countries where we have diplomatic relations or even some where we don’t have diplomatic relations,” which is surely news to Syrian President Bashar al-Assad. It’s a far cry from Candidate Biden’s boast he would “make them [Saudi Arabia] in fact the pariah that they are.”

To be sure nothing was lost in translation, the State Department then said “We are very focused on future conduct,” and so grandfathered Khashoggi’s killing.  

So, the U.S. “circled back” to business as usual over a few days, but it was few very illuminating days for America’s friends and enemies.

Saudi Arabia faces a rough patch, but the U.S. faces a dilemma: It pined for a youthful modernizer  who would liberalize the economy and put the kingdom on a “new religious trajectory.” Now that it has him, what does it do if he commissions a murder and doesn’t seem worried he was found out?

By James Durso for Oilprice.com

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  • Mamdouh Salameh on March 03 2021 said:
    Despite talk about sanctioning Saudi Arabia for the murder of Saudi journalist Jamal Khashoggi, I don’t believe for one moment that the United States will let its partnership with Saudi Arabia weaken for the following reasons.

    The first is Saudi oil wealth. Saudi Arabia is the ultimate strategic oil reserve for the United States. If the US invaded Iraq under false pretences to get its hands on Iraqi huge oil wealth (and failed), does anybody think it will be so stupid to lose Saudi Arabia.

    The second reason is that Saudi Arabia is the world’s largest market for American weapon manufacturers.

    The third reason is that Saudi Arabia can retaliate in ways that really hurt the United States economically, strategically and geopolitically. It can undermine the United States policy towards Iran by reaching for a rapprochement with Iran. But its ultimate weapon is that it can adopt the petro-yuan instead of the petrodollar for payment for its crude oil exports to China.

    For the United States, undermining the petrodollar which is the core of the US financial system, amounts to a declaration of war against it.

    For these reasons, the talk about sanctioning Saudi Arabia is just talk.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School
  • Tarik Mitrano on March 04 2021 said:
    Dr. Salameh,
    Your arguments would hold if the US under the Democrats and their Green New Deal acolytes were actually interested in using oil. In order for the GND to be successful, and the US to be weakened globally, all oil must be cut off from entering the US. China is happy to replace the US as Saudi Arabia's main partner. It is one more strategic move to isolate and weaken the US. Make no mistake, the Democrats do not want a strong America, and welcome a world dominated by China and its allies.
    Regards,
    Dr. Mitrano

Leave a comment




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