Oil prices, ISIS, the 9/11 bill and Iran create a toxic stew for the longtime allies.
Ever since Saudi Arabia’s King Abdul Aziz Ibn Saud was hoisted atop his gilded throne onto a U.S. warship in 1945 to meet Franklin D. Roosevelt, every American president has journeyed to the region to nurture one of Washington’s most crucial relationships.
This week, it was President Obama’s turn. Obama landed in Riyadh on Wednesday with a gordian knot of issues to untangle with the current Saudi monarch King Salman, who presides over the world’s biggest oil power. Those issues have rendered the Saudi-U.S. relationship prickly and tense for more than a year, and include:
- Saudi financing of jihadist groups.
- Weak participation of wealthy Gulf countries in fighting ISIS.
- Low oil prices, which have badly damaged Saudi Arabia’s economy and complicated the world’s recovery from the Great Recession.
President Barack Obama (top) waves as he boards a plane at King Khalid International Airport following a US-Gulf Cooperation Council Summit in Riyadh, on April 21, 2016.JIM WATSON AFP/Getty Images
There is even an explosive new issue: Whether Saudi Arabia supported the 9/11 terror attacks against the U.S. in 2001; a proposed bill in Congress would declassify details about the Saudi role, and allow victims’ relatives to file lawsuits against the Saudi government. The Saudis have threatened to sell their roughly $750 billion in U.S. Treasuries and other dollar-denominated assets if the bill becomes law, according to The New York Times.
Still, one issue looms larger than all of those: Iran’s nuclear deal signed last July with the U.S. and Europe, which ended many Western sanctions against Iran and could draw Washington closer to the Saudis’ arch enemy and rival—a rivalry that has impacted the entire Middle East since the Iranian Revolution in 1979 brought conservative Shiite mullahs to power. The nuclear deal with Iran could fundamentally transform the U.S.-Saudi relationship.
But the public optics were not good in Riyadh.
King Salman chose not to greet President Obama when Air Force One touched down in Riyadh on Wednesday, sending the Governor of Riyadh to stand on the red carpet instead. The state-run TV did not air Obama’s greeting at King Salman’s palace—even though the photos were splashed across the country’s newspapers Thursday. And after Obama’s two-hour, closed-door talks with the King—the longest meeting the two leaders have held—Ben Rhodes, a deputy national security advisor, said it had been “a very open and honest discussion” and that the two men had an “opportunity to clear the air.”
At stake for each leader are needs—from military engagement to human rights commitments—which they might simply not be able to obtain.
On Thursday, Obama said he had promised both King Salman and the Gulf leaders he met with at the region’s Gulf Cooperation Council that he would keep close tabs on Iran, watching whether the world’s biggest Shiite power uses its new billions in Western investment to flex its military muscle.
Obama told reporters on Thursday that he had pushed the Gulf countries’ leaders in his closed-door meetings to participate more in the U.S.-led bombing campaign against ISIS in Syria and Iraq.
For months, U.S. officials have grown increasingly irritated at having been drawn into the war against ISIS while Saudi Arabia is backing jihadist rebel movements in the Syrian conflict. Saudi rulers adhere to the hardline Wahhabist strain of Islam, and the government devotes about 25% of Saudi Arabia’s budget to military spending, much of it buying U.S. fighter jets, missile systems, and other hardware.
Arab leaders have remain relatively removed from the bombing campaign against ISIS, preferring to let the world’s most powerful military force take the lead; American jets have pounded ISIS positions for months, decimating the terror group’s hold on key positions of Syria, and obliterating key oil installations, which had brought it huge revenues.
“Free riders aggravate me,” President Obama said bluntly in an interview published last month in The Atlantic magazine.
US President Barack Obama (R) shakes hands with Prince Faisal bin Bandar bin Abdelaziz al-Saud, Governor of Riyadh, as he arrives at King Khalid International Airport in the Saudi capital, on April 20, 2016.JIM WATSON AFP/Getty Images
Then last year, Saudi Arabia launched a fierce war against Shiite Houthi rebels in neighboring Yemen, the Arab world’s poorest nation; the United Nations estimates that millions have lost their homes, and thousands have been killed.
‘It’s Not Too Much to Ask’
Much like the Syrian War, the Yemen conflict has embroiled the U.S. in a conflict that poses little obvious threat to America. And just like Syria, it risks inflaming anti-U.S. extremism in the region. U.S. intelligence has been key to pinpointing Saudi targets in Yemen, and Saudi bombs and jets are all American-made.
“Yemenis will tell you this is not a Saudi bombing campaign, it is a U.S. bombing campaign,” Senator Christopher Murphy (D.-Conn.) said on Thursday at a panel discussion on U.S.-Saudi relations at the Brookings Institution in Washington. Murphy and Senator Rand Paul (R.-Ky.) are pushing to make U.S. arm sales to Saudi Arabia contingent on them stopping their bombing attacks on civilians in Yemen, and allowing in humanitarian relief. “It is not too much to ask,” said Murphy. “We need to start to expect a little bit more in our relations with the Saudis.”
US President Barack Obama delivers a speech following a US-Gulf Cooperation Council Summit in Riyadh, on April 21, 2016.JIM WATSON AFP/Getty Images
Aside from the war against ISIS and Yemen’s rebels, the U.S. now also finds itself in the midst of a battle in the region over oil.
Oil prices, which have rebounded in recent weeks but are still down 50% from 2014 highs, have pummeled the Saudi economy. In December, the Saudi government announced a budget deficit for 2015 of about $135 billion, which it filled largely by drawing down hundreds of millions of dollars of its foreign reserves. Much of those reserves are held in U.S. Treasury securities, which Saudi officials have threaten to dump if Congress passes the 9/11 bill. Economists believe that is unlikely, given Saudi Arabia’s fragile economy right now.
Not surprisingly, Saudi Arabia has pushed countries to try boost world prices—in part, by having OPEC cut the amount its members produce. “Lower oil prices is a negative sum game,” Ibrahim Al-Muhanna, advisor to the Saudi oil minister, told an oil conference in Paris on Thursday. “Everyone is losing.”
That message has brought fury in Iran, whose economy has been battered by years of sanctions.
Just as Obama was meeting King Salman on Wednesday, the head of Iran’s National Oil Corporation announced that the country would produce four million barrels a day by June—nearly double its output under sanctions. The announcement made front-page news in Iran. There, oil revenues are seen not only as a way to kickstart the economy after years of sanctions, but also as a way of standing up to their Saudi rivals.
“We lost 1.5 million barrels a day of exports during sanctions,” Aliakbar Vahidi Aleagha, managing director of Iran’s Pasargad oil company, tells Fortune. Asked whether Iran would consider the Saudi’s demands to limit exports, he replied, “That is crazy. It is like asking someone in the hospital not to recover.”
Meanwhile, political analysts in Tehran remain deeply frustrated—even perplexed—about the U.S.’s close ties to Saudi Arabia. “America ought to look at Iran as a strategic partner,” said Nasser Hadian, political science professor at the University of Tehran. “Instead they are putting all their eggs in the basket of Saudi, which is very fragile and resting on Wahhabism.”
There is no sign that the intense enmity between Iran and Saudi Arabia will end—perhaps explaining why U.S. officials said little about it publicly in Riyadh.