Spencer Toohill
Introduction
United States policymakers cannot afford to disregard the prevailing conditions in the Middle East. Why? Because U.S. national security priorities are not isolated from what occurs halfway across the world. As energy fuels the global economy and a majority of those resources reside in war-torn regions, it is important to understand how energy also fuels geopolitics. Saudi Arabia’s energy landscape has directly contributed to Riyadh’s policy decisions as assets intersect with economic and strategic goals. Saudi Arabia’s energy, geopolitical, and diplomatic decisions will affect the global energy landscape in a way that makes the kingdom’s actions impossible for U.S. policymakers to ignore. Saudi Arabia’s regional and international energy influence, strategic geographic location, and longstanding partnership with the U.S. warrants explanation and analysis, not only on how exactly this oil giant makes political decisions, but how those decisions directly impact U.S. national security. This memo includes a brief survey of Saudi Arabia’s energy landscape and explores the three major factors driving Saudi Arabia’s energy decisions: the role of energy at the intersection of economic prosperity, national security, and the environment. Then, this article will explore the specific energy assets of Saudi Arabia and how those create asymmetries between other states. Ultimately, I will analyze Saudi Arabia’s regional and global significance and conclude with policy recommendations for U.S. officials and policy practitioners.
More Than Oil, but Not Much More
Saudi Arabia has proven to be a resilient global producer of oil, but now it seeks to diversify its economy and shift away from oil dependence. Fueled by enormous revenues from oil exports, the Saudi Arabian capital, Riyadh, has turned the once underdeveloped country into a modern state. Saudi Arabia’s GDP has grown steadily over the past three decades mirroring in oil prices, with a recent dip in 2020 due to the COVID-19 pandemic when global consumption of oil dropped. Production/GDP has declined since 2002 as GDP has grown dramatically since 1991, with approximately a $3 billion difference, while total energy production has increased to a smaller degree. This has resulted in a disproportionate growth rate and a significant decline in total production/GDP as GDP far exceeds energy production.
Saudi Arabian energy production is dominated by oil and natural gas while renewables, coal, and nuclear produce insignificant output. Natural gas has seen a slow, yet steady, production increase marking just under 100 megatonnes (mt) as of 2021 while Saudi oil continues a steady decline that began in 2018. Between 2020 and 2021, Saudi oil production fell from 519.5 mt to 515.0 mt respectively.
Since 1991, the Saudis have consistently increased oil and gas consumption with minimal consumption of other energy resources. Saudi Arabian total energy consumption/GDP and consumption per capita have seen unstable growth from 1991-2021. Total energy consumption/GDP has fluctuated significantly over the past three decades primarily due to substantial drops in GDP. Additionally, total energy consumption per capita has seen a steady downturn since 2016 as total consumption has been stagnant while the country’s population continues to rise.
In terms of electricity, Saudi Arabia’s main generators rely on gas and oil with solar beginning to generate a small amount since 2007. Total electricity generation has grown substantially since 1991 with electricity generation/GDP and electricity generation per capita continuing to trend upwards. Fluctuation in total electricity generation/GDP is a result of notable dips in GDP. Total energy consumption per capita rose steadily from 1991 to 2015 but has seen a downturn since as total generation has slowed.
It is also important to note the ratio between production and consumption of oil and gas. From 1991 to 2021, gas production/consumption equaled one, meaning that all gas produced was consumed by the population. Oil tells a different story. In 1991, Saudi Arabia was producing significantly more than what it consumed. While oil production has remained relatively stable since 1991 (between 450 to 600 mt), domestic consumption has increased significantly over time. Saudi Arabia remains a net exporter of oil, however, a larger share of current production is consumed by the Saudi population.
Money Doesn’t Grow on Trees
The Saudi kingdom has been working tirelessly to keep fossil fuels at the center of the world economy for decades. As such, national security efforts and environmental implications trail behind priorities to maintain economic prosperity. Despite having a one-dimensional oil-based economy, Saudi Arabia is attempting to decrease its reliance on fossil fuels by investing in green infrastructure projects and encouraging the usage of electric cars. However, Riyadh has a far different energy agenda compared to Western states. Saudi Arabia aims to burn less oil at home to be able to release even more oil to export as part of an aggressive long-term strategy to keep the world dependent on Saudi oil for decades to come.
#1 Economic Prosperity
The centerpiece of Saudi leaders’ domestic agenda is the Vision 2030 initiative. This endeavor seeks to transform the kingdom’s economy by diversifying sources of revenue and reducing long-standing oil export dependence through investment and private sector growth. Saudi Arabia’s national oil company earned $161 billion last year, a nearly 50% increase over 2021. The Saudis anticipate that global demand for its oil will continue to be strong despite concerns about climate change and so far, those bets are paying off. “We anticipate oil and gas will remain essential for the foreseeable future,” said Amin H. Nasser, the company’s chief executive, meaning that resource-based economic prosperity will remain essential to Riyadh.
#2 National Security
In recent years, Saudi Arabia has stressed the importance of a reliable, long-term oil supply to global markets amid changing geopolitical situations. National security and foreign policy have often been used as an instrument to serve the needs of the regime in the domestic realm, while simultaneously responding to threats and opportunities in a hostile regional environment. Saudi Arabia’s policy objectives have grown beyond its own borders. In recent statements, the kingdom confirmed a “ willingness to work together to support the stability of the international oil market, continue close communication and strengthen co-operation to address emerging risks and challenges.”
#3 The Environment
The environment falls behind in order of importance for Saudi energy directives. Aramco’s top official warned that an increased focus on climate undermines the national focus on investment in oil and gas. This poses a threat to the world’s energy security. Riyadh has said it supports the Paris Climate Agreement, which aims to prevent global temperatures from rising 1.5 degrees Celsius above pre-industrial levels, and has said it intends to generate half its electricity from renewables by 2030. But, behind closed doors, the Saudis have worked to obstruct climate action and research by objecting to calls for a rapid phaseout of fossil fuels.
Saudi Arabia’s Assets are the World’s Asymmetries
Saudi leaders seek to recast the role of energy resources in the kingdom’s economy and plan to develop domestic civilian nuclear power infrastructure. In 2020, Saudi Arabia held 15% of the world’s second-largest proven oil reserves, at 259 billion barrels, representing 31% of proved reserves in the Middle East. Petroleum exports accounted for nearly 70% of the country’s total exports in 2020, and approximately 53% of the Saudi government’s revenues were oil-based. Additionally, as of January 2021, Saudi Arabia has established natural gas reserves of 333 trillion cubic feet, the sixth largest in the world behind Russia, Iran, Qatar, the United States, and Turkmenistan.
The Saudi government plans to replace oil with natural gas and renewable energy for domestic power generation by 2030, which would likely increase natural gas demand and investment in natural gas production and electricity generation in the next several years. However, this target will be difficult to reach given the country’s limited progress in phasing out crude oil, fuel oil, and diesel fuel to date. Saudi Arabia recently began developing large-scale renewable energy projects through its National Renewable Energy Program of Saudi Arabia (NREP) to meet its ambitious renewable energy goals. On such project, the 400-MW Dumat Al Jandal wind farm, Saudi Arabia’s first commercial wind project, came online in August 2021. Additionally, in April 2021, Saudi Arabia signed power purchase agreements for seven solar projects with a combined capacity of 3 gigawatts.
In 2022, Saudi Arabia initiated the process of seeking technical bids to advance the planned construction of two nuclear power reactors. It is noteworthy that Saudi officials have neither renounced uranium enrichment nor reprocessing and have expressed their commitment to utilizing domestic uranium resources for the production of nuclear fuel. While Saudi nuclear facilities are under the safeguards of the International Atomic Energy Agency (IAEA), certain media reports have sparked inquiries into potential undisclosed sites. The IAEA has conducted a review of Saudi Arabia's declared nuclear infrastructure, recommending the adoption and implementation of an Additional Protocol. This protocol is a safeguards agreement that provides additional tools for verification and significantly increases the IAEA’s ability to verify the peaceful use of all nuclear material in States with comprehensive safeguards agreements.
Saudi Arabia’s energy assets and evolving infrastructure prove asymmetrical to other countries within the Middle East, as well as those around the globe. Saudi Arabia remains, by far, the largest oil producer in the region with a 39% share, followed by Iraq with 17% and the UAE at 14%. Globally, Saudi Arabia ranks as the third largest oil producer. Petro-power has propelled Saudi Arabia to the forefront of the international stage and allowed this once-developing nation to rank among the wealthiest in the world. From this point, the Saudis have been able to generate deeper global partnerships while flexing power in the diplomatic realm over their regional counterparts. Like its neighbors, the UAE and Qatar, Riyadh has shored up its regional positioning and proves to be a strategic global ally for both the U.S. and other world powers; a combination that most other Middle Eastern countries have not secured.
So What?
Middle Eastern geopolitics prove themselves as immense curveballs for the U.S. As of March 2023, Iran’s uranium was reported to be enriched up to 83.7% – nearly weapons-grade level and the highest percentage ever recorded from Iran. In addition to these developments, Saudi Arabia and Iran have restored relations in a deal brokered by China. The deal has dramatically increased Beijing’s influence in the region at a time when relations between the U.S. and Saudi Arabia have grown strained. The war between Israel and Hamas has also further strained tensions in the region.
The global implications for the Middle East go far beyond oil, but one cannot ignore the global dependence on Middle Eastern energy resources. World leaders look toward the Middle East as a beacon for different facets of power for their respective interests; vast resources and energy supply, diplomatic opportunity, and economic prospects to name a few. Not only is it the energy hub of the world, but emerging militaristic and diplomatic opportunities lie at the heart of what the Middle East means for international security. As such, the U.S. must bring the Middle East back to the forefront of national security concerns.
A WMD-free zone in the Middle East is not only an aspirational goal but a matter of practical urgency in both political and historical contexts. A region torn with conflict, coupled with a history of mistrust, animosity, and chemical weapon use, suggests that the prospect of renewed WMD use is all too possible. Despite these realities, a stable and secure Middle East is one of the most sought-after prizes in international disarmament efforts. One cannot discuss this challenge of Middle Eastern nonproliferation efforts without discussing legality, regional tensions, and geopolitics that aid and inhibit nonproliferation goals.
There is a security imbalance within the Middle East in numerous areas; between Israel and its neighboring Arab states on one hand, and between Shia Iran and its neighboring Sunni rivals on the other hand. There is also inconsistency in the legal obligations taken by Middle Eastern states regarding different WMDs including nuclear weapons. Some states have joined international treaties while others have declined to do so (i.e., Israel's undeclared nuclear weapons capacity). These are the defining factors in the nuclear paradigm in the Middle East. The pursuit of nuclear weapons or WMDs is a function of states’ perceived security concerns. Recognizing this is important in determining how to move forward.
All of the Gulf states are non-nuclear signatories of the Non-Proliferation Treaty of 1968 and have committed themselves to the establishment of a Zone Free of Nuclear Weapons. With a focus here on Iran and Saudi Arabia, it is imperative to highlight that Iran has an interest in the technical capabilities needed to pursue nuclear weapons, given unresolved questions about the studies it undertook on weaponization. The rivalry dynamic between Iran and Saudi Arabia regarding nuclear weapons stems from these unresolved questions. In 2022, Saudi Arabia's foreign minister said that Iran's neighbors in the Persian Gulf would act to enhance their security if Tehran were to obtain nuclear weapons. In 2022, Prince Faisal bin Farhan Al Saud spoke in an on-stage interview at the World Policy Conference in Abu Dhabi. When asked about such a scenario, he said, “If Iran gets an operational nuclear weapon, all bets are off.” He continued, “We are in a very dangerous space in the region...you can expect that regional states will certainly look towards how they can ensure their own security.”
In addition, accounts of great power competition often present regional actors as subject to the calculus of the greater powers. This has been the experience of the United States in the Middle East with both allies and adversaries. As the United States, China, and Russia have jockeyed for decades for a position in the region, Egypt, Iran, Israel, Saudi Arabia, Turkey, and the United Arab Emirates (UAE) have pursued their own interests by working with, against, or around these outside powers. These conflicting interests have created an unstable dynamic within regional politics and, at times, pitted regional powers against greater powers that are themselves attempting to outmaneuver one another.
This game becomes clear with even a narrow understanding of the interests around which the regional powers conduct their foreign policies in the Middle East. For instance, Israel defines its core national interest as preventing its regional adversaries, most recently Iran in its drive to acquire nuclear technology, from acquiring the means to pose a threat to Israeli security. The United States, which has provided Israel with the means to ensure its security for decades, is therefore a critical piece to Israel’s national security priorities. Like Israel, Saudi Arabia regards Iran as its primary regional adversary and has worked with the United States on numerous economic and security-based fronts (resources, protection, energy, trade, and allyship to name a few). Since the 1950s, Saudi interests have aligned closely with those of the United States. However, as differences over Yemen and human rights issues have tested the U.S.-Saudi relations, the Saudis indicated, and now proved, their willingness to further develop their relations with China and Russia.
Saudi Arabia has wielded considerable influence with its neighbors and world powers through its vast oil reserves. Through these resources, Saudi Arabia has been able to advance its foreign policy interests as a form of smart power driving national energy decisions. Saudi oil is integral to its smart power strategy for now, as it has been able to use it to extend its influence and create unprecedented levels of dependence from even some of the strongest countries. While some relationships are simply transactional, based on cooperation when interests dictate, the Saudi energy landscape has fostered mutually beneficial regional and global strategic and diplomatic relationships.
Regional stability for Saudi Arabia, particularly the race for regional hegemon with Iran, proves to be another complication among energy experts. Many U.S. policymakers assume that the Saudi regime is fragile, despite its remarkable record of domestic stability in the turbulent Middle East. Many who think it is unstable domestically also paradoxically attribute enormous power to it, often depicting it as leading a “counterrevolution” against instability throughout the region. Saudi’s position in a historically unstable region poses a threat to its energy integrity and security; as such, that threat extends to the U.S. and the world. Geopolitical stability is “absolutely key” to global energy security, Saudi’s Foreign Minister declared at the World Economic Forum’s Annual Meeting in January of 2023.
The complications and fluctuating dynamic between Saudi Arabia and Iran are a source of apprehension for U.S. national security interests; with nuclear nonproliferation and energy security being at the forefront. While these implications are widely known across the policy-making enterprise, the tension and amounting consequences of a possible Saudi-Iranian showdown have been intensifying. Geopolitics and great power competition are working in tandem to negatively affect the prospects for regional peace, meaning that the prospects for cooperation among regional or great powers to mitigate conflicts in the Middle East are unfavorable. Regional rivalries, international intervention, and self-interest stimulate increasing international concerns about the risk of nuclear proliferation in the Middle East and the future of global energy security.
China on the Scene
China’s growing role in the Middle East complicates international dynamics. For the past 75 years, the U.S. has been the prominent actor in Middle Eastern relations as China has played a less eminent role in the region. However, China’s recent high-profile involvement in the Middle East has reshaped the region’s landscape, expanding beyond traditional the scope of energy to encompass economic, geopolitical, and strategic considerations. The country’s “no strings attached” approach is appealing to Middle Eastern states, which view their growing ties with Beijing as a means of diversification. However, China’s increasing participation poses a threat to U.S. interests in the MENA region and its relationships with traditional allies.
The most recent diplomatic developments unfolding this past spring and summer marked a change in power dynamics: China is in and the U.S. is out. Saudi-Iranian talks began two years ago in Baghdad with the sponsorship of then-Prime Minister Mustafa al-Kadhimi. Throughout six negotiating sessions facilitated by China, Iranian and Saudi representatives agreed on a timeline for the resumption of bilateral relations, which Saudi Arabia had suspended in 2016 in protest of Iran’s support of Houthi rebels in Yemen. Saudi efforts provide a window into the country’s attempt to pursue greater global influence as Riyadh expands partnerships with other world powers, including China. Some analysts say that is part of a strategy to pressure Washington to work with the Saudi government on its own terms; others say Prince Mohammed bin Salman sees an emerging multipolar world in which the United States plays a less dominant role.
When Chinese President Xi Jinping visited Saudi Arabia in December of last year, he asserted that he would use Beijing’s influence with Iran to close the deal. When the three sides met in Beijing this past March, Ali Shamkhani, Iran’s national security adviser, admitted backing the Houthis and agreed to stop sending them weapons, according to a knowledgeable source. Iran also pledged that it would not attack Saudi Arabia, either directly or through proxies. Many progressive steps have been taken since then to move forward with the deal. In June, Iran reopened its embassy in Saudi Arabia, marking another milestone toward restoring ties and lowering hostility between the powerful Gulf neighbors.
Even with the restoration of diplomatic relations, the Iranian nuclear program provides an obvious obstacle to lasting regional peace agreements. Iran has accelerated its nuclear program after two years of failed U.S. attempts to revive a 2015 deal that aimed to stop Tehran from producing a nuclear weapon. U.S. Secretary of State Antony Blinken has expressed that Iran poses a grave danger to Israel, a situation complicated further by recent events. Blinked also states that while the Biden administration believes in diplomacy, “all options will be on the table” to prevent Iran from obtaining a nuclear weapon. China’s growing role in the region complicates Israel’s decisions. Brian Katulis, of the Middle East Institute, said that for the U.S. and Israel, the agreement offers a “new possible pathway” for reviving stalled talks on the Iran nuclear issue, with a potential partner in Riyadh. Those hopes appeared to be coming to fruition with the recent Saudi-Israeli normalization efforts. Saudi had laid out conditions for normalization including security guarantees from Washington and help with developing a civilian nuclear program, but those talks are now on hold.
Even still, Katulis asserts that “Saudi Arabia is deeply concerned about Iran's nuclear program.” He continues: “If this new opening between Iran and Saudi Arabia is going to be meaningful and impactful, it will have to address the concerns about Iran's nuclear program - otherwise the opening is just optics.” Israeli leaders had previously viewed a preemptive military strike against Iran as a last resort, as Tehran moves closer than it ever has before to becoming a nuclear-weapon state. But as former U.S. Secretary of State Henry Kissinger noted, “Pressure on Iran will now have to take into account Chinese interests.”
The Chinese have capitalized on the diligent efforts by the United States over the past several decades to bolster Saudi Arabia and to undermine Iranian proxy fighters in Yemen, Iraq, and Syria. The United States built the road to rapprochement but the Chinese were the ones to “cut the ribbon.” In the short run, the de-escalation of tensions in the Persian Gulf is good for the region and good for the world. However, Chinese President Xi Jinping’s involvement in restraining Iran and reassuring Saudi Arabia brings a new geopolitical element to the table as the U.S. has been trying to bend Iran toward stability since 1979. Over the long run, Kissinger argued that Beijing’s emergence as a peacemaker “changes the terms of reference in international diplomacy.” The United States is no longer the indispensable power in the region; China has claimed its share of that convening power. Kissinger asserted that “China has in recent years declared that it needs to be a participant in the creation of the world order… It has now made a significant move in that direction.” Overall, the dynamics between China, Iran, and Saudi Arabia are changing, and they are changing without the United States at the helm.
Policy Recommendations
By July 1st, 2023, Secretary of State, Antony Blinken, must make another trip to the Middle East, this time only to Saudi Arabia, to solidify a stronger partnership with the Saudis as tensions in the Middle East are escalating. With approval from the National Security Council, Blinken must come prepared to offer a civilian nuclear program from Washington.
Blinken has already made a handful of whirlwind trips to the Middle East which included a slew of meetings with leaders regarding current Middle Eastern hostilities. Washington faces the prospect of escalations from the Houthis in Yemen and threats to regional security from Pakistan against Iran. Blinken asserts that he has made progress on the goals he set, however, to fulfill these goals, he must persist. Blinken has met with numerous regional actors including Israel, Jordan, the West Bank, Iraq, and Turkey, but he must continue pressuring Saudi Crown Prince Mohammed bin Salman. Another trip to the region, and specifically to Saudi Arabia, would signal dedication to the stalled diplomatic talks between Saudi Arabia and Israel and demonstrate credibility in U.S. claims.
The U.S. would have to concede a civilian nuclear program to the Saudis, but the diplomatic success of reviving talks would be invaluable at this point in the conflict. Saudi Arabia has explicitly stated that it will pursue nuclear weapons when Iran gets nuclear weapons. For them, it's not a matter of if, it's a matter of when. The U.S. cannot continue to hold states to the gold standard of nuclear regulations when other actors on the scene are more than happy to step up; most notably Russia and China. If we provide Saudi Arabia with the technology to have a civilian nuclear energy program and they one day use that technology to acquire nuclear weapons, at least they will be aligned with the West.
Jim Mullinax, Director, Office of Economic Sanctions Policy and Implementation must draft and pitch a series of well-developed sanctions on Iran to Ambassador James O’Brien, U.S. Department of State Sanctions Coordinator, by January 1st, 2025. These sanctions should avoid pushing Iran closer to China and specifically target the assets that aid terrorist organizations.
The Office of Economic Sanctions Policy and Implementation is responsible for developing and implementing foreign policy-related sanctions to counter threats to national security by particular activities and countries. The challenge lies in finding a way to align global non-proliferation strategies with region-initiated de-escalation initiatives. With smart or targeted sanctions, the hope would be to target specific parties in Iran instead of Iran as a whole. In turn, those sanctions would limit the funds that support regional terrorist groups, and nuclear proliferators, which would ideally shrink regional conflicts. The United States’ previous efforts to isolate Iran and impose a smattering of economic sanctions have reached their limits as policy tools. Blanket sanctions over Iran only push them closer economically, politically, and morally closer to Russia and China.
While Iran may not be considered a democracy, it does hold presidential elections, albeit with a pre-approved list of candidates. Following the government's manipulation of the 2009 elections, which resulted in widespread protests, and the subsequent imposition of Western sanctions leading to a significant economic downturn, Ayatollah Ali Khamenei, Iran's supreme leader, agreed to the election of Hassan Rouhani in 2013. Rouhani's campaign centered on the commitment to lift Iran from sanctions, and it is highly likely that, without his election, the nuclear deal would not have materialized. But will economic pressure change Iran’s policies or motivations? We must learn from the past so we are not doomed to repeat it. Policymakers know which sanctions worked and which did not. Moving forward, the United States must demonstrate restraint and employ coercive threats exclusively in constrained situations where the alternative threatens U.S. security.
Conclusion
Saudi Arabia – exemplifying themes of resource abundance, regional instability, and the goal to increase regional and international power – is working to sustain the status quo of petro-power as economic prosperity, national security, and global influence dominate the current conversation behind Saudi Arabia’s energy decisions. Global energy security and geopolitics prove themselves to be massively important to Saudi Arabia as the regime works to enter the global diplomatic arena while maintaining the world’s reliance on its oil resources. U.S. policymakers must not ignore the current state of the Middle East. The evolving dynamics between Saudi Arabia and Iran, coupled with waning U.S. diplomatic influence, growing Chinese involvement, and the evolving Israel-Hamas conflict are all reason enough for the U.S. to fear the implications for energy security and nonproliferation concerns. But they are happening simultaneously. If these issues are left unchecked, the U.S. will be blindsided. The U.S. must bring the Middle East back to the forefront of national security concerns. With this information, how will the U.S. choose to further its relationship with Saudi Arabia?
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