Saudi-US Relations Breakdown Scenario
How the US' failure as a security guarantor, its extreme use of sanctions and past statements by President Biden risk turning Saudi Arabia into a failed state, or collapsing US-Saudi ties.
Executive Summary:
Over the coming three to five years, it is likely that ties between Saudi Arabia and the US will continue to worsen but not break completely, even after an upcoming visit by President Joe Biden to Saudi Arabia. Saudi Arabia is increasingly likely to price some oil sales in Chinese yuan and to acquire more Chinese technology, including UAVs and missiles, while seeking Chinese diplomatic, albeit not security, guarantees against Iran, in a bid to diversify its dependence and reduce the impact of a potential future dramatic breakdown of ties with the US.
Despite enormous Saudi weapons purchases from the US, the US has been unable or unwilling to protect Saudi Arabia against attacks by the Iran-backed Houthi movement targeting critical energy infrastructure and aviation. The US also permitted Iran to conduct attacks against global energy security and international shipping without retaliation. This likely leads Saudi Arabia to believe that the US is no longer a reliable security partner.
The US has used the dollar as a weapon against Russia during the Ukraine crisis in a manner that likely unsettled Saudi authorities. From the Saudi perspective, the US could easily sanction Saudi individuals or assets over human rights violations, climate change or the war in Yemen.
Additionally, the US previously refusing to deal directly with Saudi Crown Prince Mohammad bin Salman at an appropriately senior level is likely viewed in Saudi Arabia as a threat of regime change, likely driving MBS to find other ways of securing his rule. US willingness to have President Biden visit Saudi Arabia and meet with MBS is likely to lead the Saudis to consider the US both weak and dangerous.
These factors raise the likelihood that Saudi Arabia would turn to China and Russia as diplomatic guarantors, to enable a temporary accord between Iran and Saudi Arabia to allow the Saudis breathing space to re-arm and review their military doctrines, while downgrading ties with the US. China has an interest in providing diplomatic guarantees as it needs a continued stable supply of oil from the Middle East. Russia and NATO both view their conflict as global, and any weakening of the US favours Russia.
Such a reconfiguration of Saudi foreign relations would entail Saudi Arabia accepting payments for some of its oil in renminbi, and probably moving away from the dollar peg to a managed basket of currencies, while continuing to cooperate with China on missile and UAV technology.
Any such reconfiguration would raise political instability risks within Saudi Arabia, as the US would likely seek to retaliate, viewing such a change as an attack on its global role. The US would likely use disgruntled senior royals to target Saudi Crown Prince Mohammad bin Salman.
The worst-case outcome for Saudi Arabia – and for global energy markets – would be the assassination of current Crown Prince Mohammad bin Salman in the immediate aftermath of the death of his father, King Salman bin Abdul Aziz, potentially plunging Saudi Arabia into chaos and leading to the country’s break up. That said, MBS has developed extensive surveillance capabilities and is likely able to keep his rivals in check, though whether he can prevent US-backed actions against him is an open question.
I would ask my readers to treat this piece at least a ‘red team’ exercise, intended to explore the possibility of a major change in Saudi-US ties, which would impact both the petrodollar and internal Saudi stability.
The current landscape
Critical Saudi infrastructure, including energy, desalination, aviation, and ports was not defensible against high precision, Unmanned Aerial Vehicle (UAV, drone) and missile strikes.
The Ansar Allah (Houthi) movement have demonstrated their ability to repeatedly target critical Saudi infrastructure with high precision weapons. The most spectacular attack was on ARAMCO’s critical Abqaiq oil facility in September 2019; the most recent was against fuel storage tanks in Jeddah in March 2022. Houthi weapons, almost certainly developed with Iranian support, can strike targets with pinpoint precision, and penetrate layers of Saudi and foreign air defence systems. The Houthis were able to continue to strike against critical Saudi infrastructure until Saudi Arabia made concessions permitting the entry of fuel and other critical resources into Houthi-controlled areas of Yemen. As of April 2022, Saudi Arabia has begun to make such concessions, but the Houthi continue to complain that the Saudis have not fully lived up to their promises, threatening renewed strikes. Adding to the humiliation, Saudi Arabia seems to have negotiated this compromise with Hizbullah in Lebanon, rather than with Iran. Further compounding Saudi embarrassment, the specific demands that permitted the ceasefire came in a meeting between a Saudi delegation and Deputy Secretary General of Hizbullah, Na’im Qassem. The Secretary General himself, Sayyid Hassan Nasrallah, refused to meet with the Saudis directly, though this had been the initial agreement.
Should the current ceasefire breakdown, and Saudi Arabia re-enter the war, it knows that it can be hit again. Likely targets include energy and aviation, especially, but also ports, military bases, royals’ palaces, and other strategic assets. Tourism assets, offices and the like are likely not at risk, and if they were to be targeted, they would be hit when not occupied. For example, the Houthi may well strike government offices during holidays, showing their reach but avoiding civilian casualties. It is worth noting that the Houthi have the capability to target both the UAE, and, very likely, Eilat in Israel. Also likely in the event of the ceasefire breaking down is a major attack against Saudi shipping, with the aim of sinking a Saudi tanker off the Yemeni coast using an advanced anti-ship missile, such as an Iranian replica of the Chinese-made C-802. Thus far, maritime attacks have involved low level use of mines, and, occasionally, the use of unmanned marine vehicles (UMVs, naval drones).
The US has failed to live up to its role as security guarantor for Saudi Arabia.
The relationship between Saudi Arabia and the US is underpinned by the US guaranteeing Saudi Arabia’s security in exchange for Saudi Arabia pricing its oil in US dollars. The US effectively protected the Saudis against threats including late Egyptian President Gamal Abdul Nasser and late Iraqi President Saddam Hussein, with Saudi Arabia rewarding the US through weapons contracts, infrastructure contracts, and recycling oil revenues through the US financial system – hence the term petrodollar. The US has increasingly failed to protect the Saudi regime against the revolutionary regime of the Islamic Republic of Iran, especially since the 2011 US withdrawal from Iraq. Since then, Iran’s influence in the Middle East has grown considerably. From Saudi Arabia’s perspective, the US has been a nightmare ally for a generation. First came the invasion of Iraq in 2003, which removed any buffer between Iran and the Arab States of the Persian Gulf. Then, during the Obama administration, the US legitimised the Iranian nuclear programme, enabled Iran to gain increasing control over Iraq, permitted Iran to win the proxy war in Syria, and allowed Iran to considerably expand its influence in Yemen. Creating further problems for Saudi Arabia, the US refused to support Egyptian President Hosni Mubarak and permitted his ouster, did not sufficiently support Yemeni President Ali Abdullah Saleh, and played a major role supporting what was then termed the “Arab Spring”, which was seen, correctly, as a direct threat to the monarchic regimes in the Gulf. Under President Donald Trump, the US failed to retaliate against Iranian attacks against international oil shipping, and against Iran’s attack on Abqaiq facility, which was essentially an attack against global energy security. Both international shipping and international energy were understood by regional actors as American redlines, the violation of which would warrant a response. That no response came confirmed the idea that the US was no longer willing or able to guarantee its allies’ security. Now, Saudi Arabia is at Iran’s mercy – Iran has established missile bases from which it can target Saudi Arabia in both Yemen and Iraq, with the US being unable or unwilling to stop this. This is despite Saudi Arabia being one of the largest weapons purchasers from the US. Therefore, from Saudi Arabia’s perspective, the US has failed to play its agreed role as security guarantor for almost a generation. This is made evident by the fact that US supplied technology, including jets, air defence systems and advisors, has been unable to secure Saudi Arabia against attacks from Yemen. The Patriot systems have repeatedly failed, and the Saudis have heretofore been unwilling to risk angering the US by purchasing Russian equipment. A prolonged economic crisis in the West, record high energy prices and the West’s failures in Ukraine may well change the Saudis’ calculus.
The Saudi leadership almost certainly views the US leadership as unreliable and weak, and is likely to press its advantage.
It is worth recalling that as a candidate, President Joe Biden promised in November 2019 to make Saudi Arabia a ‘pariah’ and promising to stop selling them weapons. The US under President Biden said it would not sell offensive weapons to the Saudis. It also withdrew some Patriot air defence systems to put pressure on Saudi Arabia. The threats to weapons sales and withdrawal of Patriot systems confirmed to the Saudis that the US was not meeting its security guarantees. Furthermore, the US consistently refused to grant senior level meetings to Crown Prince Mohammad bin Salman, suggesting that the US intended to change the line of succession in the kingdom – in effect threatening regime change. During the ongoing Ukraine crisis, the tables were turned, with the Saudis refusing to take calls from Biden intended to pressure them into releasing more oil into the markets. That Biden would turn to the Saudis to ask for oil, having earlier in effect implied a threat of regime change, made the US look weak and unreliable. Therefore, the visit of President Biden to Saudi Arabia is likely to go badly. Specifically, MBS is likely to use Biden’s visit to consolidate his domestic position, while also refusing to grant Biden meaningful concessions – aside from conciliatory statements. After the visit, MBS is very likely to move closer to China in order to secure the relationship with the world’s largest energy importer. Recall that so far, Saudi Arabia has refused to take any actions harmful to Russian interests during the Ukraine crisis, even though Russia is its biggest competitor for oil export market share. Saudi Arabia is extremely unlikely to take any action against China in any future crisis over Taiwan, given that China is its biggest client and biggest trade partner.
Saudi options
The weaponization of the international financial system against Russia and the US’ failures as a security guarantor are likely to push the Saudis to consider alternatives, including pricing some oil in Chinese renminbi.
America has effectively weaponised the US-led financial system, cutting most Russian banks from SWIFT, freezing the assets of the Russian Central Bank, imposing sanctions on Russian businessmen – even those who were not clearly part of the decision to invade Ukraine – and trying to use a financial “shock and awe” campaign to destabilise the Russian economy and political system, in the hope that this would topple Russian President Vladimir Putin. Although this has dramatically backfired, Saudi Arabia likely fears that the same tactics could be used against it – namely, that the US would impose sanctions against Saudi Arabia with the intent of imposing regime change for things like pollution, human rights violations, support for terrorist groups or the Yemen war. Given the Saudi perception of US unreliability, and the fact that the Biden administration appeared to the Saudis to be considering de-facto regime change by replacing MBS, it is likely that the Saudis would seek alternative arrangements to secure MBS’s position against such potential outcomes. It is in this light that we understand Saudi Arabia floating the idea of receiving payments for some of its oil sales in Chinese renminbi. It is worth noting, however, that this would not be a purely economic decision – Saudi Arabia would require Chinese assistance and security guarantees to proceed with such a change, including security guarantees to protect Saudi Arabia from Iran. Furthermore, in such an eventuality, Saudi Arabia would also likely move to peg its currency against a basket of currencies, rather than just the US dollar as is currently the case. Saudi Arabia would argue that this is necessary to combat inflation, which appears likely to be far more severe in the US and the West than in China and the rest of Asia. It would likely be seeking US concessions, not a breakdown in ties, and would be signalling that it has strong alternatives to the US. The US may not see it this way.
As Saudi Arabia is unable to defeat the Houthi in Yemen, let alone Iran, and as the US is unable to guarantee Saudi security and may in fact be a threat to it, the current Saudi leadership is likely to develop closer military ties with China, and to seek Chinese and Russian security guarantees to enter a truce with Iran.
The US has not demonstrated that it has the leverage or commitment needed to stop Iran from using proxies in Iraq or Yemen to target Saudi energy, short of engaging Iran in an all-out war. Such a war, however, would likely result in widespread destruction of Saudi energy infrastructure in the Eastern Province, and would not be a victory for Saudi Arabia, even if the US eventually destroyed Iran’s war-making capabilities. That said, Saudi Arabia is dependent on the US for weapons purchases, spare parts, and technical support. The dependence is so deep that it would require at least a decade, if not longer, to overturn. Thus, the Saudis are unlikely to favour a complete break with the US, but will seek to diversify their options and reduce their dependence on the US, out of fear of a future souring of relations. As such, it is likely that Saudi Arabia will continue to work with China to develop new technologies that it is not obtaining from the US – primarily, UAVs and missiles – while maintaining cooperation with the US. Saudi Arabia will likely seek Chinese support to reach a temporary accord with Iran, to gain some time to rebuild its military capabilities and doctrines. China, for its part, has every interest in guaranteeing that Saudi Arabia and Iran do not escalate further – China wants lower oil prices and reliable supplies, given its extensive reliance on Saudi and Iranian oil. Russia, for its part, likely prefers to allow Saudi Arabia and China to weaken the US and the collective West, following the imposition of a total economic war by the West against Russia over Ukraine.
US reaction and consequences
The US would likely view the sale of Saudi oil in Chinese renminbi as a threat to the US financial system and regional role. This is likely to lead to retaliation, including supporting disgruntled Saudi royals who wish to remove or kill MBS.
The petrodollar, along with the Eurodollar, the perception of US military power, the US agricultural and natural resources wealth, and the depth of US capital markets, is one of the main pillars of US financial hegemony. Pricing even some oil sales in renminbi would be seen by US decision makers as a direct attack on the US, as it would undermine the petrodollar, set a precedent for other oil exporters and undermine the perception of US power, thereby striking at key pillars of US financial power. The key risk is that Saudi Arabia would intend such a move as part of a pressure campaign to extract more US concessions, but that the US would see it as a complete betrayal. In this case, the US would almost certainly retaliate. As the US is very unlikely to sanction Saudi oil exports while Russian, Venezuelan, and Iranian oil exports are also under sanctions, the US is likely to resort to other means, including most likely subversion within the Saudi royal family. The US maintains extensive ties with Saudi princes, most of whom have been harmed by the rise of Mohammad bin Salman and many of whom wish to see his physical demise. Indeed, some of my interlocuters are adamant that MBS will likely be killed by rival family members upon the death of his father, King Salman. This eventuality would become more likely should MBS incur the wrath of the US.
Given the absence of clear successors and the large number of contenders, the attempted removal of MBS from the scene, if successful, may well cause the collapse of the Saudi state.
There is an abundance of aspiring successors to MBS, but none of them has a clear ability to unite the royal family or the security services. Aspiring successors include his brother, Khaled, his cousin, former Crown Prince Mohammad bin Nayef, his cousin, former Minister of the National Guard Mit’ab bin Abdullah, his uncle, Ahmad bin Abdul Aziz, and other, lesser princes, each with enormous wealth and some military units personally loyal to him. Furthermore, various Saudi tribes would view the demise of the Al Saud as a historic opportunity to address old grievances, and these tribes tend to be armed and cohesive. This set up makes chaos far more likely than an orderly succession should MBS be forcibly removed from the scene. Indeed, should there be multiple contenders fighting to control the Saudi state, this would very likely turn OPEC’s most important member into a failed state. That said, there is no guarantee that the US would succeed in having its local Saudi allies remove MBS. The latter has developed an extensive surveillance network over his rivals’ activities, aided by access to Israeli technology and international mercenaries. As such, should MBS believe that the US has turned personally hostile, he may be encouraged in his commitment to undermine American influence.