(Bloomberg Opinion) -- One should never let a crisis go to waste — and Saudi Arabia isn’t. The kingdom is using the Ukraine-Russia tension to re-establish itself not only in energy markets but global politics.
The Saudi royal family has weathered four difficult years. The assassination of Washington Post columnist Jamal Khashoggi in Istanbul in October 2018 badly tarnished the kingdom. The war in Yemen, where Riyadh is fighting Iranian-backed Houthi rebels, has dragged on, damaging its reputation as a regional hegemon. In 2020, oil prices plunged during the Covid pandemic, crushing the Saudi economy. Then Joe Biden arrived at the White House in early 2021 with a promise, made during the presidential election campaign, to turn the kingdom into a “pariah.”
But now the Saudis are back in business — just over a year since Biden took over from their staunch ally, Donald Trump. The revival has been going on for a while, but the crisis in Ukraine — and fears about the disruption of Russian energy flows — is accelerating it. According to the International Energy Agency, Riyadh controls 55% of the global crude oil production capacity that can be tapped in short order to cushion any stoppage. It’s a powerful tool in a world worried about rising oil prices and inflation.
With Brent crude approaching $100 a barrel and Saudi production on its way to the highest annual average, Riyadh is making more money than at any time since King Salman ascended to the throne in January 2015. On current trends, the kingdom will earn $375 billion pumping oil this year, the second-highest amount ever. It’s more than double the $145 billion it made in 2020.
Biden had avoided talking to the Saudis — especially Crown Prince Mohammed bin Salman, who runs the kingdom’s day-to-day affairs. When oil prices rose in October and November, the White House chose instead to tap the U.S. Strategic Petroleum Reserve rather than have Biden personally lobby the Saudis on the phone for more oil.
Indeed, it’s been about a year between Biden’s direct calls to King Salman. Back in February 2021, their conversation was about “recalibrating” Washington’s security relationship with Riyadh, including reversing Trump’s decision to list the Houthis as a terrorist organization. Last week, however, if Biden mentioned human rights at all, the White House didn’t cite the issue in its read-out. What it did include, however, was a reference to the importance the U.S. puts on “the stability of global energy supplies.”
The campaign promise to make Saudi Arabia a “pariah” crumbled completely the moment oil prices shot toward $100 a barrel. U.S. retail gasoline is now at an eight-year high of nearly $3.50 per gallon. In White House-speak, Riyadh has gone from an outcast to a “partner” in managing the oil market — in just 12 months. Biden had pulled his punches back in February 2021 after an official report said the crown prince, usually referred to as MBS, had approved the operation to capture or kill Khashoggi. The administration sanctioned aides of the prince but not the Saudi royal himself.
Oil isn’t the only area of Saudi interest where Washington’s tone has shifted. Yemen is another. In recent weeks, U.S. diplomats have highlighted how Riyadh has supported United Nations efforts to end the war, while blaming the Houthis for launching new offensives. “It takes two to get to a ceasefire and end the war and right now the onus is on the Houthis,” said Brett McGurk, the National Security Council’s coordinator for the Middle East and North Africa, speaking at a virtual conference of the Carnegie Endowment for International Peace. Biden even suggested he might list the Houthis as a terror group, reversing his own decision from a year ago.
However, there is still one signal that Biden has refused to send to Saudi Arabia: to talk directly to MBS. Others leaders, who were vocal critics of Riyadh, have already done so. French President Emmanuel Macron met face-to-face with the prince in December; Boris Johnson, the U.K. prime minister, was on the phone with him late last year. Washington has to come to terms with a reality. But it is just a matter of time: MBS isn’t going anywhere. He’s 36; his father is 86. Furthermore, despite the global fight against climate change, oil demand isn’t going away. Saudi Arabia — and its ruling dynasty — will remain a force in decades to come.
More From This Writer and Others at Bloomberg Opinion:
What If Goldman Is Wrong and a Lonely Oil Bear Is Right?: Javier Blas
The World Has Been Using A Lot More Oil Than We Thought: Julian Lee
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. He previously was commodities editor at the Financial Times and is the coauthor of "The World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources."
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