Analysis: Ukraine war at Saudi pivot point as global oil prices soar

No other country in the world stands to rapidly benefit financially from the war as the kingdom of Saudi Arabia.
Saudi Crown Prince Mohammed bin Salman (File photo| AP)
Saudi Crown Prince Mohammed bin Salman (File photo| AP)

DUBAI: A spike in global energy prices benefits Saudi Arabia as the world’s top oil exporter, but problems remain for the kingdom’s impulsive crown prince.

Whether trying to find jobs for a growing number of unemployed youth or finding a way to end the long war he launched in Yemen, Crown Prince Mohammed bin Salman and his father King Salman now face a potential pivot point for the kingdom amid Russia’s war on Ukraine.

Can the ruling Al Saud family reset a now-troubled relationship with the United States, long the security guarantor for the wider Persian Gulf, as tensions simmer with Iran and higher fuel prices squeeze Washington? Or does the kingdom tip toward further toward China, now its biggest buyer of crude, or Moscow?

An American rapprochement seems unlikely. Asked in a recent interview about what he’d want President Joe Biden to know about, Prince Mohammed bluntly said: “I don’t care.”

“It’s up to him to think about the interests of America,” the prince added.

For Saudi interests, however, perhaps no other country in the world stands to rapidly benefit financially from the war as the kingdom.

Its vast oil resources, located close to the surface of its desert expanse, make it one of the world’s cheapest places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.

It’s a wild turn of events considering oil prices in April 2020 turned negative at the height of lockdowns in the coronavirus pandemic. Now, benchmark Brent crude stands at $105 a barrel — highs unseen since 2014.

The additional cash comes in handy for 36-year-old Prince Mohammed, whose vision for Saudi Arabia includes developing a futuristic city called Neom in the desert reaches along the Red Sea. Its latest iteration involves a ski slope project called Trojena, advertised in a computer-generated commercial now in heavy rotation across Mideast satellite channels.

But while expansive palaces now exist there, satellite photos from Planet Labs PBC show the wider Neom project remains still at an early stage. It likely will be years before they produce the jobs the prince counts on to slingshot the kingdom’s economy away from oil.

Meanwhile, unemployment among youth — a carefully watched barometer since the uprisings of the 2011 Arab Spring — stood at 32.7% for men and 25.2% for women late last year, according to the Saudi General Authority for Statistics. Reopening cinemas and allowing concerts in a kingdom where ultraconservatives view music as a sin comes as a part of that push for jobs.

“If I’m going to get the employment rate down, and tourism could create 1 million jobs in Saudi Arabia, ... that means I have to do it,” the prince told The Atlantic magazine in a recent interview. “Choose a lesser sin rather than a bigger sin.”

The sheen, however, has come off for human rights activists and some Western nations.

Saudi Arabia just put to death 81 prisoners in a single day, the biggest known mass execution in the kingdom’s history, after a pandemic lull. The Saudi-led war in Yemen against the Houthi rebels rages on despite a unilateral Ramadan cease-fire years after the prince promised a quick victory, decimating the Arab world’s poorest country.

Internationally, perhaps nothing received more attention than the killing and dismemberment of Washington Post columnist Jamal Khashoggi at the Saudi Consulate in Istanbul in 2018. The kingdom falsely insisted for days Khashoggi left the consulate before acknowledging his slaying.

Turkey moved Thursday to end an ongoing court case over Khashoggi’s death as its president seeks to repair ties to Saudi Arabia and the United Arab Emirates over economic concerns. For the United States, whose intelligence services believe Prince Mohammed approved the operation that killed Khashoggi, finding a resolution to the killing of a permanent resident of the U.S. remains much-more fraught.

Biden, who called the crown prince “a pariah” while campaigning, pointedly has only spoken to King Salman since entering the White House. Biden’s first foreign trip was to a G-7 summit in England — rather than the sword-dancing embrace then-President Donald Trump gave to Saudi Arabia.

But now, with gasoline prices at the pump hitting record prices in March, Biden faces a Saudi Arabia that repeatedly says it can’t be held responsible for higher energy prices as it faces attacks from the Houthis. That puts increasing pressure on Biden, whose administration withdrew American air defenses from Saudi Arabia last year.

Saudi Arabia, as well as the UAE, appear to be leveraging the situation to extract American concessions on Yemen while maintaining their own ties to Russia. The kingdom also is again reportedly thinking of selling some crude oil in Chinese yuan to Beijing, rather than the U.S. dollar.

Even Ukrainian President Volodymyr Zelenskyy dramatically weighed in on the situation in recent days, telling regional energy powers “the future of Europe depends on your efforts.”

“The kingdom cannot — and must not — be left alone to safeguard global energy supplies at a time when the entire world is unanimously hurting from price hikes which have been further sparked by the uncertainty due to the situation in Ukraine,” wrote Faisal J. Abbas, the editor-in-chief of Saudi Arabia’s English-language daily newspaper Arab News.

“This is an international issue that impacts almost every household around the globe. Saudi Arabia, therefore, deserves all the support it can get.”

Where the support comes from in the future remains the question.

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