Riyal politic

Once again Saudi Arabia is using its position as the financial superpower of the Middle East – it sits on top of no less than one-fourth of the world’s known crude oil reserves – to play a decisive role in international geopolitical affairs.

This time, though, Crown Prince Mohammed bin Salman (MbS) seems to be carving an entirely new policy for his country, its partners in OPEC (Organisation of Petroleum Exporting Countries) and, especially, its old friends and foes in the region and beyond.

First, he shocked the world by agreeing to a Chinese brokered truce with Iran, pulling the plug on a policy that aligned GCC’s interests with the EU, US and Israel, sucked in billions of dollars in the effort to isolate Iran, and caused ruptures in Tehran’s ties with its traditional friends and neighbours (like Pakistan).

Then he unilaterally went back on the 12-year effort to destroy the Syrian regime – which, too, drew weapons and money from the US, EU, GCC, Turkey and Israel, triggered a wider proxy war with the Iran-Syria-Hezbollah axis, and unleashed the so-called Islamic State’s religious fanatics and their brutal sectarian death squads on the Levant.

Then, just as he kissed and hugged Syrian President Bashar al Assad at the OIC summit, showing Washington who’s boss in the region, he surprised onlookers once again as Ukrainian President Volodymyr Zelenskiy was also in attendance.

No doubt the Americans would’ve been made aware of this development in advance, but that only underscores Uncle Sam’s helplessness as MbS, along with his Chinese friends, offers a different narrative towards peace than the west’s usual pro-Nato, anti-Moscow, pro-sanctions obsession.

And to top it all, Riyadh is also bidding up oil, which is crucial for strengthening its reserves and subsequently its diplomatic outreach, even as analysts look for crude to soften because of the stalemate in crucial US debt ceiling negotiations.

Oil jumped in the international market on Tuesday and Wednesday after Saudi Energy Minister Prince Abdulaziz bin Salman warned short sellers to “watch out” ahead of the crucial meeting between OPEC and partners including Russia, called OPEC+, on 4 June 2022; prompting the market to price in fresh production cuts in clear defiance of appeals from Washington and its European allies still struggling to balance their budgets because of the energy strain of the Ukraine war.

The desert kingdom’s petrodollar war chest has enabled it to punch above its weight in the region and beyond since at least the early 1970s, when King Faisal bankrolled Egypt and Syria’s militaries for the surprise Yom Kippur war in October ’73.

This outreach is directly lubricated by its oil wealth, the fabled riyal politic – a crude play (excuse the pun) on Count Metternich’s realpolitik or realist, ice-veined diplomacy that put the lid on post-Napoleon Europe’s troubles at the Congress of Vienna.

It emboldened Faisal into imposing the (in)famous oil embargo, triggering a 4X rise in oil prices that engineered a recession in the west, and paving the way for OPEC as a force to be reckoned with in international politics. It made Saudi Arabia the most profitable client for the west’s arms industry and also the de facto financier of pro-American Islamic countries in the Cold War – Morocco, Egypt and Pakistan.

It made Riyadh match CIA’s funding for the Afghan mujahideen “dollar for dollar” in the Soviet war, support General Zia’s regime in Pakistan, finance Saddam Hussein’s war against Iran, prop up the Hashemite kingdom in Jordan and facilitate the rise of Colonel Ali Abdullah Saleh in Yemen.

Saudi money was behind Refik Hariri’s sudden rise as post-civil war Lebanon’s charismatic prime minister, a counter-weight to Iran’s ally Hezbollah and Israel’s Maronite Phalangist warlords. Saudi Arabia financed the networks of madrassas across Pakistan to moblise recruits for the Afghan war and eliminate any spillover from the Iranian revolution next door. The list goes on.

MbS’s vision, however, seems to promise a new direction for Saudi petrodollar diplomacy. He’s the first young crown prince, soon to be king, in more than 50 years. He’s already decoupled from the almost 80-year-old oil-for-security deal with Washington, forged between President Franklin Roosevelt and King Abdul Aziz al Saud, founder of the kingdom, aboard a Red Sea warship in 1945. He’s pulling Saudi money away from the sectarian blood feud that has infested the Muslim world ever since the Russian Afghan war.

He’s making new alliances, gambling on the Russia-China embrace that is taking the first baby steps towards erecting a new financial order; one which dares to trade, even oil, out of the dollar. And he’s burying the hatchet all over the region.

The world is changing, and riyal politic along with it.

Copyright Business Recorder, 2023