Saudi Arabia and a Tale of Two Presidencies

The other day, Liz Peek, the longtime political-economic commentator and former Wall Street oil-field analyst, penned a column for The Hill in which she wondered whether the Saudis are trying to sabotage President Joe Biden’s reelection efforts. By doing everything in its power to keep oil prices high, Peek theorized, the Saudi government is purposefully undermining Biden on two fronts: inflation at home and foreign policy in Russia and Eastern Europe. She wrote:

For the Russians, high oil prices are a matter of survival. For the Saudis, skyrocketing oil costs are essential to fulfilling the grandiose economic vision of Saudi Crown Prince Mohammed bin Salman (MbS). They are also key to exacting revenge against Biden, who early on went out of his way to insult the young heir apparent

Other factors will certainly influence Biden’s standing in coming months, but oil prices could prove key as they drive inflation higher. In a recent poll, 22 percent of voters ranked inflation as their top issue; rising prices at the pump will keep the problem top of mind even if the overall inflation level continues to moderate.

Although I have long been critical of President Biden’s handling of the American relationship with Saudi Arabia, questioning both his forethought and diplomatic skills, I have no comment on the nature of the Saudi response. It is impossible, I think, to determine whether MbS is intentionally undercutting President Biden or simply looking out for his nation’s best interests, which happen to be opposite the interests of the Biden Administration. But then, I’m not sure that it matters much.

Whether the Saudis’ destabilization of the Biden White House is intentional or mere happenstance, it should serve as a lesson for future American leaders about the importance of prudence, modesty, and fortitude in the conduct of foreign policy.

Peek is inarguably correct that MbS and the Saudi government have cause to be unhappy with Biden and to believe that he has treated the relationship between the two nations as an afterthought. This is not to say that Saudi Arabia should be given free rein to do as it pleases or that its government should be immune to criticism. Far from it. Rather, it’s to say that the relationship between the two countries is important and should, therefore, not be the subject of indiscreet soundbites or partisan, politically motivated attacks.

No one doubts that the Saudi regime has its issues and has done much deserving of rebuke. That said, this isn’t about them so much as it is about Biden and his team and their inability to see past those issues to promote and secure American interests. And in that context, an example for comparison might be useful. Specifically, it might be valuable to recall a strategy employed by the Reagan Administration.

Although it is generally accepted today that the fall of the Soviet Union was inevitable, when President Reagan took office in 1981, such sentiment was hardly widespread. Reagan and his team did much and worked wisely and determinedly to ensure that fate.

Though the Soviet command-and-control economy was indeed doomed and bound eventually to collapse, the Soviet Union, like the Arab States, had managed to survive and even thrive in the 1970s because of its energy resources. The comparatively high price of oil and natural gas kept the Soviets flush with cash that their economy could not otherwise generate. Reagan and his national security advisors (most notably Roger Robinson, the onetime Senior Director of International Economic Affairs in President Reagan’s National Security Council) understood the Soviets’ dependency on their energy wealth and thus actively set about to damage the Soviet Union by attacking that wealth. Three formerly secret but now declassified National Security Decision Directives (NSDDs Numbers 32, 66, and 75, issued in 1982 and 1983, respectively) spelled out the administration’s plans to hit the Soviets where it would hurt most, including in the energy sector.

President Reagan intrinsically understood what is commonly known as “the resource curse,” or the “paradox of plenty.” He knew that the Soviet economy was built on smoke and mirrors, that its socialism was highly destructive, and that that destruction was both exacerbated and masked by the country’s energy wealth. Should energy prices dip, in other words, or even collapse, then the Soviet economy itself would collapse, with the entire Soviet empire not far behind. In short, the fall of the Soviet Union may well have been inevitable, but it certainly was no accident.

To that end, the Reagan Administration deftly and discreetly managed the nation’s relationship with Saudi Arabia, ensuring that the Saudis understood that their interests were aligned with America’s interests and that America’s interests favored considerably lower oil prices. When oil prices collapsed to $12 per barrel in 1986, the Saudis did not panic, and they did not join the rest of OPEC in calling for an output cut. Indeed, the Saudis increased their production in the face of the collapse.

The historical record shows that Saudi Arabia’s output increases were intended to punish some producers who were cheating on their production quotas (Iran and Iraq) but also to enable it to gain market share at the expense of other producers, namely the Soviets. It would be simplistic and historically inaccurate to say that the Saudis and the Reagan Administration coordinated the price collapse—and the nearly $20 billion per year it cost the Soviets—or that they had a specific plan to drive the Soviets into bankruptcy. Nevertheless, King Fahd would not have been as bold and vigorous in his efforts to reshape the global oil market had he not been confident that he had American backing.

When Vice President Bush complained to the King that oil prices had fallen too far too fast, the Saudis responded by cutting production and allowing prices to rise modestly. No agreement or plan—explicit or implicit—was necessary. By managing its relationship with the Saudis, the Reagan Administration ensured that Saudi actions would be as mutually beneficial as possible, especially when it came to exploiting Soviet vulnerabilities.

Unfortunately, such careful and deferential diplomacy is no longer en vogue. Soundbites and red meat for the base have replaced prudentia and sophia as virtues in American foreign policy. Such changes yield consequences. Whether those consequences are intentional or inadvertent is largely beside the point.

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About Stephen Soukup

Stephen R. Soukup is the Director of The Political Forum Institute and the author of The Dictatorship of Woke Capital (Encounter, 2021, 2023)

Photo: Oil industry well pump under blue desert sky, nodding donkey rig pumping crude oil up from the ground of an oil field in the desert.