Trade strengthens political alliance between Riyadh and Washington

19 January 2010

Saudi Arabia’s long-standing relationship with the US has been fraught with differences in recent years, but strong economic ties are bolstering the fragile diplomatic alliance

It is now one year since Barack Obama was inaugurated as US president. While the people of the Middle East played no part in his election, they watched the event with high hopes for what it might do to promote peace in the region. Their hopes were boosted by Obama’s visit to Riyadh on 3 June last year, followed the next day by his visit to Cairo and address to the Muslim world. But their hopes did not last long.

Obama’s Middle East policy has two principal strands – confronting Iran over the issue of nuclear proliferation, and making progress on the Israeli-Palestinian peace process. Saudi -Arabia is critical of both. Since Obama took office, analysis of the US-Saudi relationship has focused on whether he can coax Saudi Arabia into a more active diplomatic role in the region.

Peace plan

Riyadh’s role in the Israel-Palestine peace process is rooted in the Saudi peace plan, which was authored by Saudi Arabia’s King Abdullah bin Abdulaziz al-Saud in 2002 and endorsed by Arab nations at a Beirut summit the same year.

It offers Israel diplomatic recognition by the Arab world in return for both Israeli withdrawal from all Arab land occupied in 1967 and a resolution to the Palestinian refugee issue. In 2002, the plan met with a cold reception from the Israelis. Eight years later, can the plan be revived with encouragement from the US?

“I think the Obama administration has been quite positive about the Abdullah plan and they make reference to it quite frequently,” says Gregory Gause, professor of Middle Eastern politics at the US’ University of Vermont.

The crunch time for reviving the 2002 plan came with Obama’s visit to Riyadh in June last year. “He [Obama] essentially said to King Abdullah: ‘Our views on Iran are very similar and we can get things going by increasing -pressure on Iran, if you also make some public -gestures to the Israelis on the peace process’,” says Simon Henderson, director of the Gulf and Energy Policy programme at the Washington Institute for Near East policy.

The concessions Obama wanted from Saudi Arabia included allowing Israeli commercial flights to enter the kingdom’s airspace and a relaxation of regulations governing tourist visas. But Abdullah rejected Obama’s requests. In Riyadh’s view, an Israeli withdrawal from Palestinian territories is a prerequisite for any reciprocal Saudi gestures.

This diplomatic stalemate stems from a difference in US and Saudi perceptions of the 2002 plan. Riyadh argues that, having brought the Arab world to the table, the US should now put pressure on Israel on key issues such as the building of illegal Israeli settlements. 

“I suspect the Saudi public is just not ready to make concessions to Israel,” says Henderson. “Abdullah felt [that by making concessions] he would lose the support of the Saudi public and the wider Arab world.”

Key fact

Saudi Arabia is one of the world’s largest holders of US government paper with $500bn of Treasury bills

Source: MEED

On the US’ part, the Obama administration seems  to be waiting for the Arab world to make the first concession before amy progress can be made on the Abdullah plan.

The Saudis would also like to get Hamas and Fatah to settle their differences. The 2007 Mecca Agreement, brokered by King Abdullah, put an end to military clashes in Gaza between the two factions. The king has invested his personal and political prestige in the agreement, which was intended to form a government of national unity. Since brokering the Mecca Agreement, Riyadh has been pushing for reconciliation.

To this end, Abdullah hosted talks in the Saudi capital with Syrian President Bashar Assad on 13 January. Enticing Assad away from the Iranian sphere of influence is seen as a key step in getting Hamas to soften its line on reconciliation with Mahmoud Abbas’ Fatah-led Palestinian Authority.

Khaled Mishaal, Hamas’ Damascus-based political leader, had met Saudi foreign minister Prince Saud al-Faisal in Riyadh a week earlier. These visits are building up to a fresh round of talks between Hamas and Fatah. An agreement between the two parties would pave the way for talks with Israel and a possible renaissance for Abdullah’s 2002 plan.

Besides the challenge of reviving the 2002 peace plan, Iran’s nuclear ambitions are the other major source of tension between Riyadh and Washington. Abdullah fears Iran will acquire nuclear weapons as a result of the US’ and Saudi Arabia’s failure to act. Equally, he fears the US or Israel will carry out military strikes to prevent Tehran acquiring weapons.

“The Saudis stand in two different places at the same time [on Iran],” says Henderson. “Please do not use military action, [they say], but [they believe] military action is the only thing the Iranians will understand.” 

Petrol sanctions

US diplomatic efforts to date have focused on isolating Iran economically through sanctions. A bill to prevent countries that export petrol to Iran from doing business with the US is currently in the US Senate.

Washingtonhas also been encouraging buyers of Iranian crude oil, such as China, to seek alternative sources. “At the same time, the US has encouraged Saudi Arabia to offer inducements to China in terms of good deals on oil supplies or investments in the Saudi oil sector,” says Henderson. But neither approach appears to have worked.

Yemen rebellion

Saudi Arabia’s problems with Iran go beyond fears about the Iranian regime’s nuclear aspirations. The kingdom sees Iranian agitation behind the recent flare-up of tension on the Saudi border with Yemen.

Yemeni officials have privately warned that the stability of the country could be at risk if it does not receive military help in its campaign against the Houthi rebellion in the north of the country. Saudi diplomats have agreed, arguing that the Houthis, encouraged by Iran, undermine US and Saudi interests in Yemen.

“Certainly, the Saudis have decided to make the Houthi rebellion in Yemen a test case for what they see as Iranian influence and how they are going to stand up to it,” says Gause. Washington, on the other hand, is more focused on insurgency by Al-Qaeda in Yemen and does not appear to buy into the claims of Iranian involvement in the country. “They do not believe the extent to which the Saudis and Yemenis say the Iranians are playing games there,” says Henderson.

Whether the Iranians are behind the rebellion or not is perhaps less important than the fact that the Saudis have declared that they are, and are making a stand against it. “The US wants President Ali Abdullah Saleh to be against Al-Qaeda in the Arabian Peninsula,” says Gause. “The Saudis want Saleh to crush the Houthi rebellion, to make a statement to the Iranians.”

“The Saudis were very enthusiastic about [Obama] but now they are wondering what is going to happen”

Gregory Gause, professor, University of Vermont

Despite having different reasons for wanting stability in Yemen, US and Saudi interests run in parallel – in support of the Saleh government. The hope in both Washington and -Riyadh is that, if they support Saleh, Yemen will act, crushing Houthi rebels in the north, to stamping out secessionists in the south and defeating Al-Qaeda in the country.

Riyadh’s crucial role in stabilising Yemen is a sign of Saudi Arabia’s growing importance to the US, both politically and financially. The US remains the pre-eminent trading partner for the kingdom. US companies are the largest investors in Saudi Arabia, while the US is the prime destination for Saudi investors. Following Obama’s visit to Riyadh in June last year, US Treasury secretary Timothy Geithner visited Riyadh the following month to reassure the kingdom and its Gulf neighbours over the safety of their dollar assets. The kingdom holds about $500bn in US Treasury bills, making it one of the largest holders of US government paper.

“It is now a financial relationship, not just political or military,” says Jean-Francois Seznec, visiting professor at the US’ George-town University.

Strategic partner

Having been at loggerheads after the 9/11 terrorist attacks on the World Trade Centre in the US and the 2003 invasion of Iraq, Saudi Arabia and the US have made progress in recent years, despite their often divergent views on Israel and Iran.

King Abdullah and Obama certainly appear to have established a sound relationship – diplomats often describe a ‘good rapport’ between the two. Obama’s first stop in his tour of the Middle East was Riyadh, and he chose a Saudi-owned satellite television station, Al-Arabiya, for his first interview aimed at the Arab and Muslim world – just one week after his inauguration in January 2009.

But one year into his presidency, with conflicts escalating in Afghanistan and now potentially in Yemen, Saudi patience with Obama’s lack of progress on Middle East peace may be wearing thin. George Mitchell, Obama’s special envoy to the region, will visit the kingdom in the coming weeks. The Saudi royals who greet him will no doubt express their concerns over US policy in the region.

“They are getting impatient,” says Seznec. “Prince Saud al-Faisal has expressed some strong feelings about how poor the [Arab world’s] relationship with Israel is because the US is not applying enough pressure on Israel.”

In 2010, Obama may have to reassess how Washington deals with the kingdom and move towards something more substantive than the promises that brought him to power.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications