It tells you something when an American president talks openly about his unsuccessful attempts to persuade another country to do what he wishes.
But that’s what happened yesterday during President Trump’s unscripted speech to supporters in Mississippi.
Trump referred to a demand he made to Saudi Arabia’s King Salman that the kingdom should pay more for US support.
“We protect Saudi Arabia. Would you say they’re rich? And I love the King, King Salman,” he said. “But I said ‘King – we’re protecting you – you might not be there for two weeks without us – you have to pay for your military.”
The words are being interpreted as reflecting a threatening and contemptuous attitude to the Middle East’s most influential head of state.
Trump seems to be saying the kingdom’s weak and dependent upon the US.
In fact, the opposite is true. Saudi Arabia’s probably never been stronger and America has rarely needed its help more.
Iran’s oil exports could fall by more than 1.3m b/d from November
As ever, oil is key.
US sanctions against Iran announced in May will be applied to energy from 5 November. In anticipation, buyers of its oil are seeking other suppliers.
Iran’s oil and condensate exports in July were 2.1m b/d, around two-thirds of the figure reported in April. At least 1.3m b/d of Iranian exports are in jeopardy from next month. China, which bought 840,000 b/d in July, is the only major Iranian oil buyer that’s so far failed to signal its purchases will fall.
Looming shortages are behind a new oil price surge. The Opec basket was more than $83 a barrel on 2 October. That was almost 20 per cent higher than in mid-August.
For Saudi Arabia, this has created a situation where it can’t lose.
The next Opec ministerial meeting on 6 December will be confronted with the choice of either maintaining production ceilings or allowing those that can to increase output to contain prices.
If the first option is taken, oil could hit $100 a barrel, which is good for Saudi Arabia’s finances.
The kingdom has most spare capacity which means it will be the principal beneficiary if the second option is selected.
That will set the scene for a meeting the same week of countries party to the declaration of co-operation, originally agreed in December 2016. It involves 25 oil producing nations constraining output.
Russia, which produced 11.4m b/d in September, is its most important non-Opec signatory. Like the kingdom, Moscow can’t lose. But it’s worked hard to align itself with the kingdom and doesn’t want to disagree with Riyadh in December.
The US, as President Trump has made clear, doesn’t want oil to go higher.
But it too needs Saudi Arabia’s collaboration. The kingdom’s decision to postpone indefinitely the IPO of shares in Saudi Aramco which was planned next year has made several points, including to Trump who lobbied for the oil company to list in New York.
The result that Saudi Arabia is the broker between Moscow and Washington about the world oil.
Israel’s unilateral actions that the US supports can’t be blocked by Riyadh
But the kingdom’s clout doesn’t end there.
Using leverage in oil markets, but not just that, it’s persuaded both Russia and the US to contain Iran. For the US, this has involved an outright confrontation.
For Russia, it’s entailed conventional diplomacy.
The Arab Israel issue is where Saudi and US views diverge most.
President Trump’s announced he’ll launch a new Middle East peace plan but has unilaterally recognised Jerusalem as Israel’s capital and cut financial support for the Palestinians. The Israeli government’s approved further settlements in the West Bank and urged Jordan and the Palestinians to form a confederation.
All this conflicts with Saudi Arabia’s assertion, unchanged since 2002, that there should be a Palestinian state based on the 1967 borders with Jerusalem as its capital.
Trump’s pre-emptive actions are deemed to be in part the result of messages delivered to his Middle East envoy and son-in-law Jared Kushner by Crown Prince Mohammed Bin Salman. The White House has wrongly interpreted them as indicating the kingdom’s policy has radically shifted.
There is an alternative perspective which is that Saudi Arabia accepts its favoured approach is impractical and that Palestinian divisions are permanent. It’s realised a new policy is needed but won’t say so until the conditions are right.
Unilateral action by Israel that America supports can’t be prevented. But it will force a reaction from West Bank Palestinians and the leadership in Gaza that will create a new reality where Saudi Arabian intervention can be effective.
Iran’s presenting himself as the Palestinians real friend, but its capacity to act has been reduced by economic and political developments this year.
So here too, Saudi Arabia is well-placed.
Saudi Arabia’s coming economic rebound
Underpinning the kingdom’ position are excellent economic trends. The IMF’s annual article IV report in August forecast the kingdom’s GDP in dollar terms will grow by 14 per cent this year and continue expanding in real terms for the foreseeable future. Its budget deficit is declining and creditworthiness improving.
Saudi Finance Minister Saudi Finance Minister Mohammed al-Jadaan said on 1 October that the government’s preparing to increase spending. This is likely to include action to soften the impact of higher domestic energy prices and VAT on the Saudi people.
Complaints about the impact of government spending cuts and revenue-raising measures are being tackled in other ways. Critics are being punished. And prominent business people detained last autumn as part of a crackdown on corruption are still under arrest.
The international response has been muted. The decision to break relations with Canada following its call for a Saudi blogger to be released was an over-reaction. But a point has been made that can’t be ignored by countries hoping to do more business with the Middle East’s largest economy.
Saudi Arabia’s blockade of Qatar imposed in June 2017 has produced no concessions from Doha. But Riyadh says its working and will be maintained.
The Saudi-led coalition has so far failed to achieve its objective of restoring government control over the whole of Yemen. Its blockade of rebel-held areas is creating a humanitarian crisis and the kingdom’s been criticised for inaccurate bombing raids that have led to civilian deaths. Saudi Arabia, nevertheless, refuses to change course.
All told the kingdom ends 2018 in a stronger position than it was at the start of the year.
At meetings in December, Saudi Arabia will use its influence to shape world energy in 2019. And Saudi Arabia will be ready to help when Trump’s peace plan emerges.
President Trump said this opposite this week, but he now needs Saudi Arabia more than it needs him.