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Saudi Arabia: America’s Achilles Heel

US overreach with sanctions has prompted many countries around the world to avoid dollar transactions to insulate themselves – presenting a growing threat to the US economy and growing opportunities for China

Chinese President Xi Jinping (right) shakes hands with then-Saudi Deputy Crown Prince and Defense Minister Mohammed bin Salman at the 2016 G20 Summit in Hangzhou, China.

Saudi relations with the United States famously hit rock bottom after the September 11 attacks in 2001. TheSaudi leadership was reasonably assured that the US administration was not about to shift its attention from Afghanistan to Iraq to Riyadh, but the scare did prompt them to institute a broad programme of reform that aimed to blunt the rough edges of the Wahhabi religious establishment internally and project a friendlier face to the world.

But the relationship has been on a rollercoaster since the beginning of King Salman’s reign in early 2015. The Obama administration acquiesced in the war launched on Yemen to remove the Iran-backed Houthis from Sanaa – offering support that it was hoped would mollify Riyadh after Obama signed the Iran nuclear deal – but the US political establishment had begun to sour on Saudi Arabia.

The Trump administration’s public embrace of Saudi Arabia after a series of scandals after Salman’s son Mohammed assumed the crown prince role in 2017 – such as the murder of US-based journalist Jamal Khashoggi – polarised opinion as Democrats took an increasingly hostile policy approach. Congress began to make noises about human rights and arms sales, and courts continued make rulings over 9/11 culpability and the Khashoggi case.

But matters have taken a surprising turn since Joe Biden assumed the presidency in 2001 and the oil price recovery that year after markets had collapsed due to the COVID-19 pandemic. Now it was Saudi Arabia’s turn to give Washington the cold shoulder.

First Riyadh rejected US pressure to join with Western sanctions on Russia after its invasion of Ukraine in February. Then, following a visit by Biden in July, the crown prince rejected US pressure to work with OPEC to raise production in order to bring down prices at the American gas pump and help reduce Ukraine-induced inflation before the US midterm elections in November. Not only that, OPEC actively cut production in order to push prices up.

Now China has brokered a rapprochement between Saudi Arabia and Iran, Saudi Arabia has joined the Shanghai Cooperation Organization despite US security concerns, and the threat to the US appears to be rising of Saudi Arabia and Russia pricing oil and gas sales to China in yuan rather than the dollar.

In short, Saudi-US ties are perhaps entering their most dangerous phrase ever. Since the Nixon administration took the US dollar off the gold standard in 1971, Saudi Arabia’s role as the world’s largest oil exporter is to ensure that transactions are done in dollars, in return for which the United States uses its political and military power to protect the Saudi regime.

But Bin Salman is clearly exploring how far Saudi Arabia can go in losing its American dependence, and thetrend towards dedollarization among a string of global powers who each have their grievances with Washington over its weaponization of the dollar over the past decade by imposing aggressive sanctions opens new vistas.

Officially, Riyadh says it won’t do any such thing. The Saudis know that the results for America would be catastrophic if the dollar were to lose its status as the world’s currency, risking hyper-inflation. It’s somethingincreasingly talked about in the United States itself among the chattering classes.

The US media and intelligence services would for sure turn their guns on Saudi Arabia in a way that they have not before if the US ruling elite thought there was a serious chance of it happening – think of the US discourse on Erdogan in Turkey, Putin in Russia or Xi in China and the covert operations accompanying it.

Were he minded to, Bin Salman would be more likely to inflict a kind of death by a thousand cuts if he gradually joined the bandwagon and encouraged dedollarization behind the scenes among his friends in the non-West/Global South. At the same time, the US-Saudi entanglement is complicated further by the vast Saudiinvestments in the West and in US treasury bonds in particular.

The evident discomfort with Bin Salman in US political circles and Saudi discomfort with the new-found US public distaste for Saudi Arabia means that this tension is not going to go away. The stakes could not be higher. 

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