Hotspot Special – Saudi Arabia

Saudi King arriving in Kuala Lumpur in February Saudi King arriving in Kuala Lumpur in February Maswengs Studios/Shutterstock
15 Mar
2017
Klaus Dodds looks into the deeper political meanings behind the Saudi king’s recent tour of Asia

It sounded like a small-scale military exercise but when the king of Saudi Arabia, King Salman bin Abdulaziz Al-Saud, visited Indonesia in February, the accompanying entourage included nearly 1,000 people and multiple planes scattered around the Malaysian federation. Visiting after an absence from the country of Saudi royal leaders for some 50 years, the king and his ministers were here to sign trade deals valued at $20-25billion depending on various press reports.

The king’s visit also followed in the footsteps of another deal worth $6.5billion surrounding an oil refinery in central Java. The move suits both parties as the Saudis are leveraging their experience and expertise through Saudi Aramco and the Indonesian government is eager to expand the state-owned oil and gas company, Pertamina. An Indonesian-Saudi Arabian energy partnership would capitalise on an earlier partnership plan involving Pertamina and Kuwait Petroleum in 2014 which failed to materialise. So both parties see commercial and geopolitical advantages.

Working with the largest Muslim country in the world makes geopolitical sense for the Saudi kingdom. Economically, the country faces challenges from high domestic energy demand coupled with a desire to retain its lucrative position as the world’s leading oil and gas exporter. Counter-intuitively, this might lead to a situation in which the country becomes an oil importer. Working with the Indonesian oil and gas industry helps to secure not only future investment opportunities for Saudi Aramco but also projects Saudi regional and global influence.

Buried within trade deals with Indonesia lie plans to continue to invest and trade in infrastructure, education, culture, Islamic development, engineering and aviation. Saudi Arabia invests around the world in funding for Arabic language training and Islamic education and Indonesia is a recipient of such largesse. What that might mean for the moderate Muslim country is a moot point because, unlike Saudi Arabia, it has a Christian minority population. Although it only numbers around ten per cent, communities are concentrated outside the main island of Java, in islands such as northern Sumatra, Flores and West Timor.

Pertamina head office. Pertamina is an Indonesian state-owned oil and natural gas corporation based in Jakarta.Pertamina head office. Pertamina is an Indonesian state-owned oil and natural gas corporation based in Jakarta (Image: saiko3p/Shutterstock)

The king of Saudi Arabia, as part of his Asian tour, was scheduled to visit Brunei, China and Japan after an earlier stop-over in Malaysia. What is interesting about the destinations are that they include two Muslim-majority countries with oil and gas interests (Brunei and Malaysia) followed up by the two regional/global powers of Asia.

Looming in the background of the visit is something fundamental. The US-Saudi relationship is not quite so assured as it was once. As is well known, the deal struck decades ago allowed the US to access the hydrocarbon wealth of the kingdom in return for guaranteeing the security of the House of Saud. The stability of Saudi Arabia helped to shape US Cold War geopolitical strategy predicated on supporting other key allies including Israel. A great deal has happened since then. From the American point of view, the role of Saudi citizens in the 9/11 attacks on the US soured the relationship despite attempts to focus attention elsewhere in Iraq. The shale gas revolution in the US helped to reduce dependency on imported oil and gas supplies.

Within Saudi Arabia, historic dependencies on the oil and gas sector are being addressed. In 2017, it was announced that the country would be investing $50billion in renewable energy projects involving solar and wind power. Falling oil prices, new suppliers and domestic energy consumption are driving this investment, as are concerns about the long-term stability of the kingdom. Saudi Arabia is keen to attract new foreign direct investment and Japan is expected to play a role in renewable energy planning. Historically, Japan has had considerable interest in keeping a stable Middle East because of its high levels of oil importation.

Japan’s oil imports are heavily reliant on a stable Middle East (Image: Sakarin Sawasdinaka/Shutterstock)Japan’s oil imports are heavily reliant on a stable Middle East (Image: Sakarin Sawasdinaka/Shutterstock)

The king’s Asian tour was designed to showcase opportunities and counteract fears of a Chinese-Iranian trading relationship. In 2016, President Xi Jinping visited the region and signed deals with Iran. The Chinese visit was significant for a country beset by sanctions and isolation. From a Chinese perspective, reaching out to both Saudi Arabia and Iran fits well with its global plans for a ‘One belt, one road’ initiative, which is designed to strengthen China’s geo-strategic and geo-economic interests across the Euro-Asian landmass.

Visiting China and Japan is an admission on the part of Saudi Arabia that the ‘special relationship’ with the Americans is over. It was becoming clear that the two countries were no longer geopolitically simpatico. Newspapers in the US spoke of a ‘poisoned’ relationship because of the kingdom’s approach to regional geopolitics. Obama was supportive of Saudi intervention in Yemen even if it was militarily reckless and costly to Yemeni citizenry. The two countries did agree that they wanted to remove Colonel Qaddafi from Libya in 2012. Driving their military attacks in Yemen is a belief that the rebels (the Houthis) are funded by Iran. The current Saudi leadership is determined to pursue policies which intensify regional rivalries with Shia-dominated Iran, while the Obama administration was trying to engineer a rapprochement with Iran. President Trump may yet undermine the nuclear deal with Iran but he may find harder to ignore other Saudi interventions.

Saudi Arabia is determined to be a regional and global geopolitical player. It is eager to curtail the role of Iran in the Middle East and reach out through investment and education to the wider Sunni-dominated Muslim community. It is also mindful that Russia has now surpassed the country as the world’s largest producer of oil and that American exports of oil are rising thanks to shale gas exploitation.

President Trump faces a world radically different from his predecessors. Obama’s term of office encapsulated the hopes of an Arab Spring and ended with the disaster of Syria. Saudi Arabia was no supporter of the Arab Spring. A deal with Iran may now flounder. Imported oil is less important to the US. The pursuit of regional stability is more complex. Russia is back as a military player, China is an investor and Iran and Saudi Arabia are engaged in a series of proxy wars around the region.

For all the chatter about the size of the Saudi entourage and its luggage, the Asian tour should be seen as integral to what is called Vision 2030. The kingdom knows it needs to tackle its dependency on oil. Avoiding revolutionary upheaval will require it to address youth unemployment as well. The future cannot be based exclusively on black gold.

Klaus Dodds is Professor of Geopolitics at Royal Holloway, University of London and author of Geopolitics: A Very Short Introduction

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