Sometimes the biggest things happening in the world are happening out of view. Sometimes they're hidden but just as often they simply don't get the attention they should because they don't have traction as news stories. Or perhaps all the players have their own interests in not drawing attention to them. You may have noticed that Joe Biden is traveling to Saudi Arabia next month and that he plans to hold a summit with the de facto ruler of the country, Mohammed bin Salman — usually called MBS. He's going to Riyadh. MBS is not coming to Washington. This is presented as a full reset of relations between the two countries and — though this is stated less directly — a full reset with MBS. So all that human-rights, Yemen-war, Jamal-Khashoggi-being-dismembered-at-a-consulate-in-Istanbul stuff is done with. That was then. This is now.
So why would the U.S. do this? Well, that's pretty straightforward. We have no choice. The Saudis, and really MBS, has played the most brass knuckle kind of hardball with the U.S. And he's won. I don't think there's any other way to put it. There's a complex set of causes behind the inflation that currently plagues the U.S. and global economy. The exact interplay between supply chain disruption, pent-up demand from the pandemic, demand driven by stimulus spending, changed work and leisure patterns driven by the pandemic isn't clear. The relative importance of each is a matter of on-going controversy. But a critical part of the equation is energy prices — both in their political impact and as a driver in the economy overall.
For many decades, Saudi Arabia has been the key player in the global oil market. That is not only as one of the largest producers but as the producer with the greatest production elasticity. Put simply, the Saudis can dial up supply quickly if they want to. And that means they have an outsized impact on global prices. For the last year and a half the U.S. has needed the Saudis to step in and hike production very, very badly. That's both for the health of the U.S. economy and for Joe Biden's political fortunes. And MBS has consistently said, no. Why should I? What have you done for me lately? All I hear is that I'm a pariah and now you want my help? Being tight with the Trump family and particularly Jared Kushner hasn't hurt certainly. There are numerous reasons why MBS is more aligned with U.S. Republicans and more autocratic rulers around the world. But the biggest thing here is likely simply to be respected and power.
The Saudis didn't cause the economic trajectory of the last 18 months. But they could have altered it very substantially. They didn't. And they refused against a gusher of U.S. demands and pleas.
This hasn't all been to stick it to the U.S. and the Biden administration. After all, the Saudis and other producer states have been making a fortune. There is also Russia's new partnership with OPEC through OPEC+. That's weighed in the balance too. But that's another part of the same equation. The Saudis have been more solicitous of Russia than the U.S. This has all come even more to the fore after the Russian invasion of Ukraine which put even greater pressure on global energy supplies — oil and natural gas. It may be Ukraine that finally forced the White House to cry uncle.
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The Saudis have us over a barrel. Now we're suing for peace. Not a pretty picture. But we have no choice.
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