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Playing for Higher Stakes: Saudi Arabia Gambles on Oil War with Russia

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Saudi Arabia’s oil spat with Russia throws a spanner into the works of the Kingdom’s long-standing effort to hedge its bets, a strategy that has taken on added significance as the Gulf comes to grips with the likelihood that the region’s security architecture will fundamentally change.

Saudi Arabia, despite a primary focus on close ties to the United States, has increasingly sought to put its eggs in multiple baskets by initially forging closer military and economic relations with Britain, France, and Germany, and more recently with Russia and China.

The Saudi strategy, stemming from mounting doubts about the reliability of the United States as an ally and protector of last resort, was showcased when China opened its first overseas defense production facility in Saudi Arabia for the manufacturing of the CH-4 Caihong, or Rainbow drone, as well as associated equipment.

The CH-4 is comparable to the US armed MQ-9 Reaper drone that Washington has refused to sell to the Kingdom.

Saudi Arabia’s willingness to undermine its hedging strategy by challenging Russia’s refusal to continue to align its production levels with that of the Organization of Oil Exporting Countries (OPEC) follows the Kingdom’s bowing to US pressure to acquire Lockheed Martin’s Terminal High Altitude Area Defense (THAAD) system rather than Russia’s S-400 anti-aircraft and anti-missile weapon.

Mr. Putin made a last-ditch sales pitch last September after the Kingdom’s six battalions of US-made Patriot batteries failed to detect drone and missile attacks on two of the country’s key oil facilities that knocked out half of its production capacity.

The decision by Mohammed bin Salman, known by his initials MbS, to confront Russia stemmed from a stark choice confronting the Crown Prince: endanger relations with the only power to have put forward a regional security plan that would have allowed the Kingdom to hedge its bets while maintaining close ties to the United States, or drive oil prices down in a bid to force Russia to coordinate production levels that would ensure a higher price.

Ultimately, the Crown Prince’s choice was driven by economics rather than longer-term security.

Low oil prices have already forced the Kingdom to borrow from international financial markets. $80 USD per barrel is the price it needs to balance its budget. It is also the price MbS needs for his ambitious plans to diversify and streamline the Saudi economy and turn it into a cutting edge 21st century knowledge hub.

MbS may in some respects have shot himself in the foot even if his assumption proves correct that the Kingdom could win a price and production war and that Russian President Vladimir Putin would see a longer term move from a unipolar to a multilateral security arrangement in the Gulf as too big a prize to lose.

Last year’s limited initial public offering (IPO) on the Saudi stock exchange by Aramco, the Kingdom’s national oil company, that constituted a crown jewel in MbS’ economic reform plans, failed to convincingly address fears that it was subject to the whims of the Kingdom’s ruling elite.

The war with Russia may have convinced investors’ worst fears with Aramco raising capacity and production to help MbS with his gamble.

“This has proved to investors that their worst fears about Aramco were a reality. The company’s plans and its output decisions are based on MbS’ erratic behavior,” said a Saudi official familiar with Aramco’s offering.

MbS may not be the only one to suffer consequences of the oil war but his may be a tougher struggle because it involves restoration of trust.

The setback for US shale oil companies that need a relatively high oil price to break even, the reason Russia was willing to go to war with Saudi Arabia, is likely to be temporary as was evident in 2014 when Saudi Arabia gunned for market share rather than price to drive American producers out of business.

“A protracted crude oil price war on the supply side, combined with the simultaneous demand shock caused by Covid-19’s impact on economic activity, will hurt oil producers everywhere,” said Tilak K. Doshi, an energy scholar at the National University of Singapore’s Middle East Institute.

If the Crown Prince’s decision was driven by domestic considerations, so was Mr. Putin’s.

Yet, despite believing that OPEC had outlived its utility, Mr. Putin was taken aback by the ferocity of Saudi Arabia’s response to the Russian cancellation of its earlier production level agreement with OPEC, prompting Moscow to call for a return to the agreed levels for the first quarter of this year.

“OPEC is finished, so is any attempt to ‘manage’ the oil market. US shale (as a fully privately owned industry) operates on aggressive free market principals. The Russians understand that and so does Saudi. The energy game (including alternatives) is now a survival of the fittest,” tweeted Ali Shihabi, a banker-turned-pro-Saudi-political commentator.

In Russia, MbS is up against an opponent that could prove to have a longer breath.

Author’s note: This article was first published on Inside Arabia

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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Biden’s Opportunity To Reset Relatons With The Muslim World Begins In Istanbul

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When President Obama delivered his famous speech at Cairo University in June of 2009, it was an historic moment. The symbolism of a sitting U.S President speaking to Muslims, and not about them, was refreshing and enormously impactful. America’s first African American President opened his speech with “I’ve come here to Cairo to seek a new beginning, between the United States and Muslims around the world, one based on mutual interest and mutual respect.” 

It appeared to many the world was changing and with American leadership, the global community was embarking on a new era of understanding between East and West.

Obama’s speech hit all the right notes: he acknowledged the contributions of Muslims throughout history. He recognized the common humanity between Muslims and people of other faiths. He disavowed the narrative of an inevitable civilizational divide. And he emphasized the need to support democratic reforms in the Muslim world. He reiterated the right of Palestinians to a dignified living, promised to leave “Iraq to Iraqis,” and sought to prioritize diplomacy over war in places like Afghanistan, Pakistan, and Iran. 

A year and half later Obama’s message would be tested by the Arab Spring. As Muslim communities across the Arab world rose up against autocratic rule demanding freedom and democracy, the Obama White House struggled to support the people. The optimism that followed his Cairo speech had fizzled.  

The pledge to establish a “new beginning” was neglected during Obama’s presidency and then destroyed by President Trump’s divisive policies. Since his inauguration, Trump has taken a wrecking ball to America’s relationship with Muslims at home and around the world. He claimed that “Islam hates us,” and on his first day in office fulfilled his campaign promise to ban visitors from several Muslim-majority countries. On election day this year, he tweeted warning that his rival, Joe Biden, will increase “refugees from terrorist nations.”  President Trump’s one serious claim of progress toward Middle East peace, the Abraham Accords, was viewed by many as little more than a last-ditch effort to deliver a foreign policy victory for Trump in time for his reelection bid. The Accords willfully left out the Palestinians, the most crucial stakeholders in the conflict, leaving a hollow agreement with few guarantees for a lasting peace. 

More than a decade after the Cairo speech, the divide between East and West seems to have only deepened.  Muslims feel the world is at war with them – fueled not only by American military actions but by the continued persecution of Muslims in Burma, Kashmir, China and elsewhere. There is a sense that Islam’s most revered symbols are under attack, and that Muslim identity is suspect in the eyes of many in the West.

However, the picture is not entirely dark. As the Trump era comes to a close, there is an opportunity for President-elect Biden to pick up where Obama left off in 2009: a chance to reset the partnership between America and the Muslim world.  This opportunity passes straight through Istanbul. If in 2009 Egypt represented “the heart of the Arab world”, to reset ties with the Muslim world today, Biden will need Turkey. 

The centrality of Turkey to the Muslim world and The East today is undisputed. Tens of thousands of Muslim dissidents and human rights defenders from Saudi Arabia, UAE, Egypt, Syria, Iraq, and Libya have taken refuge in Turkey.  Istanbul has become a hub of diaspora intellectual activism. Because of a leadership vacuum in the Muslim world, Turkey continues to emerge as the champion of Muslims under persecution, and that role resonates with Muslims around the world. 

Turkey took the lead in launching the Alliance of Civilizations in 2005 to combat extremism and broker deeper understanding between Muslim societies and the West, this project now comprises 146 members including member states and international organizations.  The pluralistic Islam practiced in Turkey today is more representative of Muslim communities around the world and starkly different from the Wahhabi-influenced regimes of the Arabian Gulf, with whom Trump became very friendly during his tenure. 

Turkey is also a critical NATO ally, with the second largest military contribution. Trump’s continual attacks on NATO have challenged and weakened the world’s strongest military alliance. Biden will need Turkey’s assistance to strengthen NATO to meet new regional challenges, especially with Russia, as well. 

Although Turkey’s human rights record is not perfect and its democracy has been tested since the failed military coup of 2016, the government has shown commitment to democratic principles, and its institutions and civil society continue to be lightyears ahead of Egypt, Saudi Arabia and elsewhere in the Middle Eastern.

Turkey today can be the bridge between the West and the Muslim World, mending the deepened rift and launching that new beginning promised by Obama eleven years ago.  When Biden used the word inshallah, which means “God-willing” in Arabic, during a presidential debate, Muslims in America and abroad took note. Muslim American turnout in critical battleground states like Michigan was decisive in his favor. Biden should capitalize on the momentum of his gesture to re-engage with the Muslim world and repair America’s image around the world. The destination of his first foreign trip could even be to Istanbul, to listen and to signal change. It would represent the metaphoric start of a new chapter.

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Covid-19 Vaccine: A Mutual Partnership between Morocco and China

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Since the establishment of diplomatic relations between China and the Kingdom of Morocco (1958), a strong and rapid strategic development of mutual ties categorized contemporary collaboration.

On August 31th 2020, King Mohammed VI held telephone talks with Xi Jinping, President of the People’s Republic of China, which falls within the framework of the existing friendship between the two countries, which was strengthened through the signing of the Joint Declaration on the Establishment of the People’s Republic of China. A strategic partnership was signed by the King and Chinese President during the royal visit to Beijing in May 2016.

The phone talks between King Mohammed VI and the President of the People’s Republic of China touched on the development of bilateral relations in all fields, especially political dialogue, economic cooperation, and cultural and humanitarian exchanges. King Mohammed VI and President Xi Jinping also discussed the partnership between the two countries in combating “Covid-19”.

According to Moroccan Newsmedia, Minister of Health Khalid Ait Taleb is expressed his satisfaction with the signing up of a cooperation agreement between Morocco and China National Biotec Group Limited (CNBG) on the COVID-19 vaccine trials. This shared Moroccan-Chinese collaboration will allow the Kingdom of Morocco to be among the prior served in terms of the vaccine against the COVID-19 pandemic. Also, he added, under his Majesty, The Kingdom of Morocco would be able to take part in creating vaccines in sense of the exchange of Chinese expertise. Though, to strengthen the Sino-Morocco strategic partnership, to boost both countries’ international solidarity and promote health cooperation.

The issue of discovering an anti-“Covid-19” vaccine still raises several controversies, and altercations especially since the kingdom of Morocco issued its participation in the clinical trials of the Chinese vaccine, but without giving any details about how these trials were conducted, or, knowing its initial outcomes.

Accordingly, despite those who attempt to question it, China’s vaccines constitute a trendy choice because they are affordable and can be distributed in a substantial and more successful capacity. Yet, several states which face similar economic issues, people, and ambiance-based impediments are likely to see China’s vaccines as the obvious choice. That does not mean it will be the sole state they do trade with, as several of the states have more than one trade partner.

Though, Chinese vaccines have a competitive price and making capacity, allowing developing countries like Morocco a way out of the pandemic as fast as possible. Unlike European companies, is not only about business; China has also agreed to give billions of vaccines.

China has timely released the latest vaccines information, China’s vaccines are gaining international steam and a growing number of states are following up to obtain them. Whilst the achievements of Moderna and Pzifer are widely lauded, in the end, these companies only complete a part of the jigsaw in ending the COVID-19 crisis. Not everyone has the privilege or infrastructure to buy them. Therefore, the accomplishment of SinoVac, CanSino, and SinoPharm are set to play a significant role in making a difference for billions of people around the world.

According to Jamal Eddine Bouzidi, a doctor specializing in chest diseases, allergies, and immunology, president of the Moroccan Association for Fighting Tuberculosis and Respiratory Diseases, pointed out: “They say that the Chinese vaccine is purely safe, but to make sure of that.” You must wait for a long time because there are side effects that may appear after a period of up to two years or after months at least. Therefore, we might say that it is 100% safe. “

He added, “All vaccines that are produced around the globe go through many phases in the laboratory, then they are analyzed and checked on mammals and followed by humans. And when tested on humans, they also go through three stages; and during each stage, the number” of people subject to testing, so that the effects are discovered. Side effects of the vaccine and its effectiveness. “

Under such circumstances, The Moroccan minister noted that the vaccine, according to the statements of Chinese officials, is successful at a rate of between 97 and 98 percent, and is given in two doses with a difference of 14 days, and the antibodies are manufactured within a month and can sustain in the blood to defend the body for two years. “The vaccine experiments will originally involve volunteers as of next week,” the official said.

Ait Taleb highlighted that the agreements reached will allow Morocco to have its vaccine as soon as possible with the help of our Chinese health expertise. The signing of the agreements will allow Morocco to launch its first experience of clinical trials.

Meanwhile, Al-Bouzidi considered that what is being said is the “only guess”, indicating that the near-term side effects of this vaccine are high temperature, a little fatigue, slight pain at the injection site, and some tremors. The long-term symptoms are not yet known.

As acknowledged by Chinese officials, “Jun Mao” said the signing of the agreements paves the “excellence of strategic relations between China and Morocco in terms of cooperation against COVID-19, which is entering a new phase.” The Chinese diplomat Mao reaffirmed that Rabat and Beijing’s commitment to deepening their cooperation through the clinical trials. He said he hopes the newly-signed agreement will yield “decent results” as soon as possible for the peoples of the two countries.

In conclusion, China has big expectations for the Kingdom of Morocco as the latter has an extreme pond of resources to spur its anticipated vision and China’s economic growth. As a superpower, China’s motive in partnership with Africa through the creation of more legality and impartial world order places the East Asian giant is a powerful stand to provide more substantial aid to Africa under win-win cooperation.

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The Muslim world’s changing dynamics: Pakistan struggles to retain its footing

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Increasing strains between Pakistan and its traditional Arab allies, Saudi Arabia, and the United Arab Emirates, is about more than Gulf states opportunistically targeting India’s far more lucrative market.

At the heart of the tensions, that potentially complicate Pakistan’s economic recovery, is also India’s ability to enhance Gulf states’ capacity to hedge their bets amid uncertainty about the continued US commitment to regional security.

India is a key member of the Quad that also includes the United States, Australia and Japan and could play a role in a future more multilateral regional security architecture in the Gulf.

Designed as the backbone of an Indo-Pacific strategy intended to counter China across a swath of maritime Asia, Gulf states are unlikely to pick sides but remain keen on ensuring that they maintain close ties with both sides of the widening divide.

The mounting strains with Pakistan are also the latest iteration of a global battle for Muslim religious soft power that pits Saudi Arabia and the UAE against Turkey, Iran, and Asian players like Indonesia’s Nahdlatul Ulama, the world’s largest Islamic movement.

A combination of geo- and domestic politics is complicating efforts by major Muslim-majority states in Asia to walk a middle line. Pakistan, home to the world’s largest Shiite Muslim minority, has reached out to Turkey while seeking to balance relations with its neighbour, Iran.

The pressure on Pakistan is multi-fold.

Pakistani Prime Minister Imran Khan charged recently that the United States and one other unidentified country were pressing him to establish diplomatic relations with Israel.

Pakistani and Israeli media named Saudi Arabia as the unidentified country. Representing the world’s second most populous Muslim nation, Pakistani recognition, following in the footsteps of the UAE and Bahrain, would be significant.

Pakistan twice in the last year signalled a widening rift with the kingdom.

Mr. Khan had planned to participate a year ago in an Islamic summit hosted by Malaysia and attended by Saudi Arabia’s detractors, Turkey, Iran and Qatar, but not the kingdom and a majority of Muslim states. The Pakistani prime minister cancelled his participation at the last moment under Saudi pressure.

More recently, Pakistan again challenged Saudi leadership of the Muslim world when Foreign Minister Shah Mahmood Qureshi complained about lack of support of the Saudi-dominated Organization of Islamic Cooperation (OIC) for Pakistan in its conflict with India over Kashmir. The OIC groups the world’s 57 Muslim-majority nations. Mr. Qureshi suggested that his country would seek to rally support beyond the realm of the kingdom.

Turkish President Recep Tayyip Erdogan, on a visit to Pakistan earlier this year, made a point of repeatedly reiterating his country’s support for Pakistan in the Kashmir dispute.

By openly challenging the kingdom, Mr. Qureshi was hitting Saudi Arabia where it hurts most as it seeks to repair its image tarnished by allegations of abuse of human rights, manoeuvres to get off on the right foot with incoming US President-elect Joe Biden’s administration, and fends off challenges to its leadership of the Muslim world.

Pakistan has not helped itself by recently failing to ensure that it would be removed from the grey list of the Financial Action Task Force, an international anti-money laundering and terrorism finance watchdog, despite progress in the country’s legal infrastructure and enforcement.

Grey listing causes reputational damage and makes foreign investors and international banks more cautious in their dealings with countries that have not been granted a clean bill of health.

Responding to Mr. Qureshi’s challenge, Saudi Arabia demanded that Pakistan repay a US$1 billion loan extended to help the South Asian nation ease its financial crisis. The kingdom has also dragged its feet on renewing a US$3.2 billion oil credit facility that expired in May.

In what Pakistan will interpret as UAE support for Saudi Arabia, the Emirates last week included Pakistan on its version of US President Donald J. Trump’s Muslim travel ban.

Inclusion on the list of 13 Muslim countries whose nationals will no longer be issued visas for travel to the UAE increases pressure on Pakistan, which relies heavily on exporting labour to generate remittances and alleviate unemployment.

Some Pakistanis fear that a potential improvement in Saudi-Turkish relations could see their country fall through geopolitical cracks.

In the first face-to-face meeting between senior Saudi and Turkish officials since the October 2018 killing of journalist Jamal Khashoggi in the kingdom’s consulate in Istanbul, the two countries’ foreign ministers, Prince Faisal bin Farhan and Mevlut Cavusoglu, held bilateral talks this weekend, on the sidelines of an OIC conference in the African state of Niger.

“A strong Turkey-Saudi partnership benefits not only our countries but the whole region,” Mr. Cavusoglu tweeted after the meeting.

The meeting came days after Saudi King Salman telephoned Mr. Erdogan on the eve of a virtual summit hosted by the kingdom of the Group of 20 (G20) that brings together the world’s largest economies.

“The Muslim world is changing and alliances are shifting and entering new, unchartered territories,” said analyst Sahar Khan.

Added Imtiaz Ali, another analyst: “In the short term, Riyadh will continue exploiting Islamabad’s economic vulnerabilities… But in the longer term, Riyadh cannot ignore the rise of India in the region, and the two countries may become close allies – something that will mostly likely increase the strain on Pakistan-Saudi relations.”

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