October 23, 2018
Oil, Arms, and Counterterrorism: A Look At Saudi Options and How Far the Kingdom May Go
By Nabeel Khoury
Saudi King Salman appears to be standing by his favorite son, the crown prince. MBS, as the crown prince is popularly known, is now in charge of restructuring the kingdom’s intelligence directorate whose members have been blamed for the Khashoggi murder. In response to suggestions of possible Western sanctions on Saudi Arabia, the crown prince has reportedly—and only in informal conversations so far—issued threats of countermeasures.
But it may not come to that if the king continues to stand by MBS and Western powers decide the Khashoggi murder is not worth risking their special relationship with Saudi Arabia. Nevertheless, it is worth considering what Saudi countermeasures would look like should the US Congress force US President Donald J. Trump’s administration to sanction the Saudis.
Saudi reactions to such sanctions could include an oil embargo, a switch in arms purchases from Western to non-Western exporters, and/or removal of Saudi financial holdings and investments from the West, particularly the United States.
The Trump administration also concerned that Saudi Arabia would stop its counterterrorism cooperation with the United States.
Let’s take a look at these options.
The only successful use of an oil embargo as a weapon occurred in 1973, following the October War between Egypt and Syria on the one hand and Israel on the other. The Arab members of the Organization of the Petroleum Exporting Countries (OPEC) used an oil embargo to target the United States and Western Europe for supporting Israel.
The embargo held for only four months but produced a shockwave in the United States and Western Europe. Long lines formed at gas stations. This was followed by considerably higher oil prices, which at first doubled and then doubled again never going back to the pre-1973 levels.
In the short term, the embargo motivated the Nixon administration to pressure the Israelis—through Henry Kissinger’s shuttle diplomacy—to withdraw from territories seized in the war.
The long-term impact, however, did not necessarily favor the Arab oil producers. Israel never pulled back to the pre-1967 borders, as most Arab countries had demanded, and the Nixon administration announced a new energy strategy to boost domestic oil production in order to reduce US dependence on oil imports. These measures included the creation of the Strategic Petroleum Reserve, a national 55-mile-per-hour speed limit on US highways, and later, an imposition of fuel economy standards that have grown more stringent over the years.
An oil embargo would be difficult, if not impossible, to pull off today. Iran, Qatar, and Iraq, for a start, would not necessarily go along with such a policy, nor would they accept Saudi leadership in any confrontation with the West.
Russian oil exports, which were not a factor in 1973, have increased dramatically and would today counteract any reduction in the oil flow from the Gulf.
To boot, the United States and Europe are working on replacing oil with other forms of energy. An embargo would only speed the process of weaning modern economies off oil.
Weapon purchases by Middle Eastern countries, especially Arab Gulf countries, have indeed been a valued source of income, particularly for the United States, the United Kingdom, France, and Germany.
Middle Eastern purchases accounted for almost half of US arms exports from 2013-17. Saudi Arabia tops the list as the largest buyer.
Saudi Arabia has gone on a massive arms-buying spree, according to a new report by the Stockholm International Peace Research Institute (SIPRI). In the last five years, Saudi Arabia increased its arms purchases by 225 percent compared to the previous five-year period.
Yearly sales from Western countries to Middle Eastern countries have increased over the past decade, with US arms sales to Saudi Arabia rising from under $400 million in 2010 to $10 billion in 2017. Sales from the United Kingdom rose from $550 million to $4 billion for the same period.
Saudi Arabia, however, has in the process upped the percentage of its purchases from Europe and the United States to 98 percent of its overall arms imports. This is a significant dependency that would be very hard, if not impossible, to break. Saudi Arabia’s attempts to diversify its sources of weaponry has thus far been unsuccessful.
This dependency goes beyond mere dollar figures and percentages to the difficulty of changing weapon systems, personnel training, and war strategies. Here the dependency is total because while European weapons can easily be made interoperable with US weapons, this is not the case with weapons purchased from Russia and China. The Saudis would need an entirely different approach and training for their military forces.
Bruce Riedel, the author of Kings and Presidents, a book that narrates the story of Saudi dependency on the United States, says that of the Gulf Cooperation Council (GCC) countries, Saudi Arabia would have the most difficulty in switching over to a different system of security and weaponry.
This Saudi dependency is not new. The kingdom has relied on the United States for its security since the very beginning, when Franklin D. Roosevelt struck an oil versus security arrangement with King Abdulaziz toward the end of World War II.
In stressing the need to maintain good relations with Saudi Arabia, Trump has asserted 500,000 US jobs would be at stake should the Saudis stop buying US arms—an inflated figure even according to State Department assessments.
The United States is, in fact, the only country in the world that could sustain a weapons industry with purchases needed for its own military.
Outside the obvious Saudi dependency on the United States to come to its defense in the highly unlikely scenario of a direct attack by Iran, counterterrorism collaboration is a double edged sword. The kingdom is much more vulnerable to terrorist attacks than the United States, being in the neighborhood where al Qaeda has long operated and where ISIS now remains, not only in Syria and Iraq, but more importantly next door in Yemen.
All this to say that raising the specter of a cut-off of economic, military, and security cooperation by Saudi Arabia is bogus. It would be the equivalent of the proverbial cutting off one’s nose to spite one’s face. Saudi Arabia is much more dependent on the United States than the other way around. In weighting how much pressure to apply to affect Saudi behavior in the region, the Trump administration should not be overly concerned with losing significant equities, as has been repeatedly implied by Trump and by other administration officials.
Nabeel Khoury is a nonresident senior fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East. A retired foreign service officer, Khoury has served as a spokesman for the Department of State in Iraq in 2003 and as Deputy Chief of Mission in Yemen, 2004-2007. Between 2008-2012, he was the director of the Near East South Asia office of the Bureau of Intelligence and Research (INR). Follow him on Twitter @khoury_nabeel.