The storm about the disappearance of Jamal Khashoggi after he entered the Saudi Arabian consulate in Istanbul in October is unlikely to pass soon. If murder has been committed, it is unforgivable.
But Saudi Arabia’s status as a small nation with the influence of a superpower in energy, finance and the Islamic world will remain intact.
It’s the only leading oil producer with substantial spare export capacity and consequently has most ability to influence world oil prices which rose above $85 a barrel earlier in October mainly due to speculative buying ahead of the implementation of US energy sanctions on Iran.
The kingdom’s dominant role within OPEC has been reaffirmed by the costly decision to let prices crash in 2014 and its successful efforts to create at the end of 2016 a partnership between Opec and leading non-Opec countries including Russia, the world’s largest oil producer.
Saudi Arabia’s lifted production to 10.7m b/d to offset the fall so far recorded in Iranian exports. And it’s prepared increase it further to help cap prices this winter, though this can’t be assumed.
President Trump also depends upon Saudi assent for his Middle East peace plan. Riyadh’s opposition to his decision unilaterally to recognise Jerusalem shows that it won’t automatically accept whatever the White House proposes. Trump can live without Saudi approval, but his plan has no chance if it’s rejected by Riyadh.
Saudi Arabia’s the Middle East’s largest economy and one of the best markets for foreign goods and services outside the OECD. Some of the US’ largest corporations depend upon Saudi buyers and they include ExxonMobil, ChevronTexaco, Goldman Sachs, JP Morgan, GE, Ford and practically every American defence equipment manufacturer. Trump himself said in October that he wants to preserve weapons deals he says are worth $110bn.
Saudi government savings are held almost exclusively in dollar-denominated securities. Its Public Investment fund (PIF) aims to have assets of at least $600bn to become one of the world’s richest sovereign wealth funds. No financial institution can afford to be indifferent to this development.
Plans to list Saudi Aramco, the world’s largest oil producing company, on foreign markets have been postponed but not cancelled. Every international listing centre would love to host the company’s shares and won’t give up hope of doing so.
In the IMF, the World Bank and many leading transnational bodies, Saudi Arabia has influence that is backed by money. It’s effectively the chair of the Muslim community of nations. And the kingdom has the best-equipped armed forces in the Arab world, an effective domestic security framework, the capacity to gather intelligence on a global basis and the resources to influence the narrative of the global media.
Saudi Arabia’s domestic policies offend but it’s never stopped the world beating on the kingdom’s doors for trade, finance and help in the war against terror. After all, the world’s made Saudi Arabia what it is today.
But something different is nevertheless happening: Saudi Arabia is increasingly behaving the way major powers do.
Russia invaded Georgia and the Ukraine, assassinates exiles and backs the regime of Syria’s President Asad for many reasons, but mainly because it could.
President Trump’s decision to pull out of the Paris Climate change accord, threaten to withdraw from global trade bodies and apply sanctions on China can be explained in the same way.
Throughout history, countries that have power tend to use it and it’s often been unsightly.
It’s 86 years since Saudi Arabia was created and almost half a century since it became for the first time the world’s largest oil exporter. The kingdom’s economy in 2018 has never been bigger, its surpluses are largely intact and growing demand for its oil means both will rise still further for the foreseeable future.
Saudi Arabia’s power will inexorably grow as a result.
The only surprise, perhaps, is that it’s taken so long for the kingdom to use it in the way superpowers always have.