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This is an audio transcript of the Rachman Review podcast episode: ‘US-Saudi ties at an all-time low

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Gideon Rachman
Hello and welcome to the Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s edition is about Saudi Arabia’s place in the world at a time when its relations with the United States are under unprecedented strain. My guest is Emile Hokayem of the International Institute for Strategic Studies here in London. So, as the Ukraine war fractures the international system, whose side is Saudi Arabia really on?

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From the outset of his presidency, Joe Biden’s had a very difficult relationship with Saudi Arabia. During the 2020 election campaign, he talked of turning the Saudis into a pariah state. An intelligence report released by the Biden administration pinned the blame for the brutal murder of the Saudi journalist Jamal Khashoggi firmly on Saudi Arabia’s de facto leader, Crown Prince Mohammed bin Salman, who’s universally known as MBS. Khashoggi himself, when alive, had highlighted how MBS controlled everything in Saudi Arabia.

Jamal Khashoggi
He is creating an environment of intimidation and fear. Saudis are being silenced. Things are not being transparent. And that is not a good recipe for reform in Saudi Arabia. And he needs to do something about that.

Gideon Rachman
But the energy price shock created by the Ukraine war forced Biden into a humbling about-face. In July, he visited Saudi Arabia and fist-bumped the crown prince before the television cameras. However, Biden’s visit did not pay dividends. In recent weeks, Saudi Arabia and a group of countries known as Opec+ have announced plans to restrict oil supplies and so force up prices. That move has been greeted with fury in the US. Here’s Senator Chris Murphy, a Democrat, telling CNN that it’s time to get tough with the Saudis.

Chris Murphy
I mean, listen — for years, we have looked the other way as Saudi Arabia has chopped up journalists, has engaged in massive political repression, for one reason: we wanted to know that when the chips were down, when there was a global crisis, that the Saudis would choose us instead of Russia. Well, they didn’t. They chose Russia. They chose to back up the Russians, drive up oil prices, which could have the potential to fracture our Ukraine coalition, and there’s got to be consequences for that.

Gideon Rachman
For their part, the Saudis insist there was no political motivation behind their decision. Here’s their minister of state for foreign affairs, Adel al-Jubeir, talking to Fox News.

Adel al-Jubeir
Saudi Arabia does not politicise oil or oil decisions. Oil is not a weapon. It’s not a fighter plane. It’s not a tank. You can’t shoot it. You can’t do anything with it. We look at oil as a commodity and we look at oil as important to the global economy in which we have a huge stake. The idea that Saudi Arabia would do this to harm the US or to be in any way politically involved is absolutely not correct at all.

Gideon Rachman
Emile Hokayem worked for many years in Washington, then based himself in the Middle East and now works here in London. And he believes that the Saudi move has to be understood as part of a broader reorientation of the country’s international relationships taking place under Mohammed bin Salman. I began our conversation by asking Emile how things stand between the US and Saudi Arabia in the wake of the Opec+ decision.

Emile Hokayem
I think the relationship is at an all-time low. There’s no trust in Washington or in Riyadh. The relationship has become very cold, very transactional. It used to be the case that what mattered was the rapport between the king or the crown prince and the president, whoever is sitting in the White House. Mohammad bin Salman is on record saying he doesn’t care about Biden’s view. And on the American side, there is also a lot of negativity, a lot of resentment toward the Saudis. So I would argue that this is possibly even worse than after 9/11. Of course, after 9/11, Saudi was vilified, tarnished and so on. But strategically, the Saudis and the Americans agreed that al-Qaeda was a major threat, that something needed to be done. Whereas here, you feel because of this lack of trust, every move by any of the two actors is interpreted in the worst possible way. And the Opec+ cuts are quite revealing in this sense.

Gideon Rachman
Yeah. I mean, I was gonna ask you about I guess the American interpretation of the Opec+ cuts is, firstly, it’s a deliberate humiliation of Biden who’d gone to try to patch things up with MBS, and then it’s with Russia, which is even worse. And then the timing makes some people suspect that this is almost an interference in American politics to try to damage Biden ahead of the midterms. You’re shaking your head.

Emile Hokayem
I mean, I’m not surprised, and I think it’s reasonable for lots of Americans to interpret it this way. I look at it differently. I think the Saudis were primarily motivated by their economic financial interests. They’re now hooked on oil prices above $80, a hundred dollars. MBS has a positive economic story to tell for the first time in many years now. So I think the Saudis knew that the second-order effect would be to rile up the US, but in a way they were comfortable with that because of the status of the relationship. So Riyadh didn’t do this because they wanted to upset the US. I think they knew it would upset the US and they were fine with it, which is a different interpretation. Perhaps, you know, some people will say it’s a too-generous interpretation, but that’s because of an inability to look at things from Riyadh’s perspective. You know, what matters in terms of the economic diversification, but most importantly, Riyadh’s strategic diversification.

Gideon Rachman
Hmm. And how far can US-Saudi relations deteriorate? Or to put it another way, in the end, that both sides are gonna have to come back because they need each other for security reasons.

Emile Hokayem
I think there is a floor to that deterioration. Ultimately, there are two things that the US will always care about, which is counter-terrorism co-operation and the containment of Iran. And in both cases, Saudi is central to these plans, and in a way the Saudis know that, which is why . . . 

Gideon Rachman
Interestingly, neither of those are oil, which was what we would have said 20 years ago.

Emile Hokayem
True, I mean, there is an oil dimension to which I’ll come back in a second. But in terms of hard security interests, Riyadh knows that these two files matter massively to the US. So Riyadh will always think — the Americans won’t really retaliate. You know, the Americans can signal their displeasure in many ways. They can downgrade levels of attendance at meetings, they can delay things, they can stop weapons sales, and so on. All this will be painful, but from a Saudi perspective, we’ve seen that in the past few years. So in a way, it’s more of the same. On the oil issue, and that I think is both important and ironic, is a lot of Americans, if you listen to American senators, a very prominent one and others, say, well, our relationship with Saudi Arabia was always oil for security and now we’re not getting oil, so therefore, Saudi shouldn’t get security. I go to Riyadh often, and what I hear from there is that, well, okay, it’s all for security. And in 2019, when our key oil facilities were struck by the Iranians — Abqaiq and Khurais — well, the Americans didn’t retaliate. So, you know, we continued pumping the oil, we come back on market, but we didn’t get that security. Now, of course, the irony is that it was President Trump who was in power then, and he was supposed to be Riyadh’s best friend, and he didn’t do it. So the Saudis need to think hard about the reliability of some of their preferred relationships. But in a way, this is how they look at it. They go back to Americans and say, “Where are you when we’re being bombed, whether from the Houthis in the South or from the Iranians in the north? We’re exposed. You are our partners. We invested tens of billions of dollars in American defence systems and others because we want the security cover, and we’re not getting it”.

Gideon Rachman
Yeah. And on the hard security side, I mean, I guess one reason the Americans might be reluctant to walk away is the Saudis, as you said, are massive buyers of American weaponry.

Emile Hokayem
The Saudis think of their relationships with key western countries, most notably the US, as like an insurance policy. They buy weapons, they invest in western countries, they try to bring investors, they sometimes overpay and so on, because of the hope that all this translates into a de facto security umbrella. And that has been key. Now, there are increasing questions across the Gulf, not just in Saudi, but how real that is. Western countries are not going to automatically embrace Gulf security concerns and not gonna automatically do something when something bad happens. The Gulf states are slowly waking up to that reality.

Gideon Rachman
And also, there’s been an ongoing argument about Yemen and that war that the Saudis started. Explain what’s going on there.

Emile Hokayem
Saudi should be criticised for its conduct of the war in Yemen at the military front. Saudi should also be criticised in terms of its diplomatic failures there. At the same time, the Saudis in the past couple of years have really tried to de-escalate, and I think they mean it on this one. They tried to demonstrate to their western partners who have been quite critical that they’re willing to get somewhere and that the real problem lies on the other side, the Houthis. And the reality is that the ceasefire ended a few days ago, and as many people expected, the Houthis used that time to regroup and push against Taiz and especially Marib. And if Marib in particular falls, then that’s essentially the end of the anti-Houthi alliance, and that’s essentially the takeover of Yemen by the Houthis except for an important region in the south around Aden. So the Saudis are trying to say, do you really want this to happen?

Gideon Rachman
And then beyond this US-Saudi relationship, which remains key, I mean, you said earlier that Saudi Arabia is trying to diversify its relationships.

Emile Hokayem
I mean, under Mohammed bin Salman, Saudi has been rethinking its global role. Mohammed bin Salman doesn’t want Saudi Arabia to be just the leader of the Islamic and Arab worlds. He wants Saudi Arabia to be a modern G20 power. There’s nothing that he loves more than the G20 setting where Saudi Arabia can present itself as a modern economy. Now, the viability of his economic plans at home, which are extremely ambitious, depends on the building of relationships with all these important economic powerhouses around the world, primarily in Asia. For instance, Japan is a key partner of Vision 2030, for instance. So he’s trying to place Saudi in a different box, you know, not the leader of poor, needy nations, mostly in the Arab and Muslim world, but a peer among G20 nations. And the counterpart of that is — I want the investment, I want the technology. And that requires him to develop not just economic but also security and political relations. And what we’ve seen in the past six, seven years is a significant investment in this kind of outreach across the world.

Gideon Rachman
I know you mentioned Japan, which obviously the Americans would have no problem with. But he’s also developing relations with China, which must get people nervous in Washington. What’s going on there?

Emile Hokayem
The key point here is that, for Saudi, like other Gulf states, their security lies in the west and their prosperity lies in the east. So there is a great desire to invest more in the east, to understand Asian countries better, to, you know, build refineries in China and to invest in Malaysia and Indonesia and to be present in South Korea and so on.

Gideon Rachman
And when you say that prosperity lies in the east, simply because Asia represents more and more of the world’s economy.

Emile Hokayem
Exactly. It’s a bigger market, but also because the sense that the energy transition in the west is going to go much faster than elsewhere. And so they need to secure those markets. They need this market share. They need to build relations now. At one point, the US talked about the Middle East as — understandably, given the pain and the misery of the past 20-plus years — as a distraction from greater strategic objectives, except that global competition is happening in the Middle East. And so the US has to be involved there. And this is what we see with Saudi flirtations with China and also Emirati flirtation with China and so on. And the Gulf states see this as an opportunity, in a way, as saying, “Okay, what do you give us, Chinese are offering this?”

Gideon Rachman
Yeah. Multipolarity widens their options.

Emile Hokayem
Yes, except that this strategic diversification at the moment doesn’t answer what they see is their biggest threat: Iran. Because there is no prospect China or Russia will ever extend security guarantees. It’s only westerners who mind, and they’ve done that. At least they can go back to 1990 and say, “We’ve done it once. The blood of young Western soldiers was shed in the name of the sovereignty of Kuwait and Saudi and so on. So please value this relationship a bit more. Understand that we’re here and there are expectations in return.”

Gideon Rachman
Just a little bit more on the relationship with China. I mean, how deep does it go in a practical sense? Are the Saudis building drones for the Chinese?

Emile Hokayem
Well, the Chinese have a production line. It’s one of the first projects of the new Saudi defence industry — SAMI, Saudi Arabia Military Industries. And they have an assembly line of CH-4 in Saudi, which is quite notable. One way to look at it is to say the Saudis are looking for technology that the Americans denied them. But it was not just the Americans who denied this to the Saudis: the MTCR regime, that prevents the sale of armed UAVs.

Gideon Rachman
UAV is unmanned vehicles, ie drones. MTCR?

Emile Hokayem
MTCR, it’s the regime that limits the sale of specific weaponry, missiles and UAVs and so on. It has to do with payload and range and so on. So anyway, the US has denied, because of the MTCR regime, certain arms systems to the UAE and to Saudi and to other countries. In turn, those countries have turned to China primarily to procure those systems. The Wing Loong that was deployed in Yemen and in Libya, for instance. In Ethiopia, by the way, these days, there is CH-4 as well. None of these systems today is of comparable quality to American Reapers and other armed drones. And by the way, during the final days of the Trump administration, there was a push to sideline the MTCR regime completely to open the sale of these armed UAVs to Saudi and other countries. So the point is, there is a military defence rationale there, but there is a technology rationale there, which is Saudi saying: “You know what, we want access to technology to build our own defence base, to build our own industrial base. If and when denied this by one country, we can go elsewhere. And if the Chinese want to do it, great.” The issue down the road for the Chinese is going to be, well, could those capabilities ever be used in a possible Saudi-Iran contest? Because suddenly, you know, it becomes much more uncomfortable for China because at the moment the Chinese sell this because Saudi says it’s for counterterrorism and for counterterrorism, you’d do anything.

Gideon Rachman
And another aspect that you’ve written about is the way in which Mohammed bin Salman’s modernisation project extends also to foreign policy, and that he’s ditching some of the traditional Muslim causes that Saudi was associated with. Ditching is too strong, but playing down commitments to the Palestinians, to Pakistan and elsewhere.

Emile Hokayem
If you’re in Riyadh and you look at your portfolio of relationships in the past, you know, four, five decades going from Pakistan to North Africa, what you see is that there is no real return on investment. You pour massive amounts into Pakistan, into Lebanon, into Syria. And where is your influence today? I mean, it’s quite limited or it’s contested or it is bruising to be in those places. There’s no economic return. There’s no necessarily a political return. There’s no automatic loyalty in those countries to the Saudi foreign policy agenda. Pakistan and Egypt refuse to send troops to Yemen. Lebanon has stood in opposition to Saudi over Iran, for instance, and harbours Hezbollah, which is in direct conflict with Saudi. And the list is long. So I think the Saudis sat down and said, “We need to rethink how we’re deploying our political capital, our money, our charity, our financial assistance and so on. We want to see a return. We can play tough from now on — we will cut relationships, we will downgrade them if need be. We don’t want people to take us for granted. And with this extra time, this extra political capital, this extra money we invest elsewhere, we look for new opportunities. There are places, whether it’s in Africa or Europe or Asia that are perhaps more worth it.”

Gideon Rachman
So it’s less ideological and more pragmatic.

Emile Hokayem
I think it’s very pragmatic. I think Mohammed bin Salman doesn’t value the image of Saudi Arabia as an Islamic and Arab champion as much as a powerful modern G20 nation. Now, I don’t wanna suggest that this is necessarily a winning bet. The problem is, first, internally, domestically, there are a lot of people, including the king himself, who are not necessarily on the same line. And we saw that King Salman himself has been a lot more supportive of the Palestinian cause, for instance, has been more interested in maintaining some of these relationships. And second, what Mohammed bin Salman learned in 2018 at the height of his isolation is that those relationships are useful. These are the countries that will rally just after a phone call to show their support for Saudi when no one showed up at the 2018 investment conference in Riyadh. It was the Lebanons and the Pakistans and African countries and so on who showed up and allowed Mohammed bin Salman to say, “Look, I’m not isolated.”

Gideon Rachman
I mean, the way you portray it makes Mohammed bin Salman sound like really quite a rational actor and in some ways a bit of a visionary. And yet the popular image of him in the west, I think mainly because of the Khashoggi murder, but also because of the war in Yemen and just generally the sort of impetuosity — the youth, the bullying, all of that, is that this guy is a loose cannon, not a profound thinker.

Emile Hokayem
I think he’s strategically rational but he’s operationally ruthless. And that is the fundamental tension there. This in no way means that I start to subscribe to this or that. It’s just that when you look at what Saudi seeks to achieve and wants to achieve today, it makes sense so that Saudi is more prosperous, more stable and so on. The process of getting there is extremely bumpy, to say the least. If you are Mohammad bin Salman, one of the reasons you’re really angry with western countries these days is the following. During the time of his predecessors, Saudi Arabia was probably sliding towards a really bad place. There was no economic reform. There was a lot of social turmoil. There was no sense of the medium and long term. So he came and said, “Well, I’m thinking about those horizons that the others haven’t, and I’m doing the hard work and it’s painful.” He wants recognition for that. Obviously in the west, the attention to the dark side of that agenda is very strong.

Gideon Rachman
But is it the dark side of the agenda or just the dark side of the personality?

Emile Hokayem
Well, I mean, they’re linked. The agenda is the personality. But I think in large part, there is a frustration that we are not valuing the modernisation dimension of his agenda the way he thinks we should.

Gideon Rachman
How complete, though, is his rehabilitation? Because you said he values the G20 and obviously there was that moment when he came to a G20 summit and I think had a hug with Putin, of all people. But I suspect by the next G20 summit, there are other pariahs in the room. You know, he’s kinda back. And you mentioned also that famous investment conference where people didn’t show up. And I remember talking to western businessmen at the time and I said, “You know, is this forever?” And they said, “No, no, just as soon as the Khashoggi murder is like forgotten or off the front pages even, we’ll be back.” And are they?

Emile Hokayem
Well, they’re back. I mean, business is booming in the kingdom. Very senior businessmen are making the trip there. Their line is that MBS is taking responsibility for it, although he did not give the order and that that’s behind essentially. The other thing today is Prime Minister Johnson (then Prime Minister Johnson) went to Riyadh. President Macron met Mohammed bin Salman, Biden did and I can go down the list. Charles was just in Riyadh and so on. I think the era of western ostracisation of MBS is behind us, but that never was the case with non-western countries. I mean, even Japan continued engaging him personally. The late Prime Minister Abe was one of them. He really deepened relations with Modhi, with Abe, with Putin, with Xi Jinping and so on. The thing is, right now, there’s another element to all that — the Saudis are voting at the UN to condemn the Russian invasion. And they were very vocal in reminding Americans that, okay, we may have cut production, but we’re still condemning the invasion. But there’s something else that works in Saudi’s favour. Today you have Iranian drones bombing Ukraine. Right? The point was the Saudis was always to say, “Look, we want to be good global citizens, but you’re the ones who try to accommodate Iran, who close your eyes after 2015 and the deal to that. And we had our eyes on that. We suffered from Iranian missile and air and UAV attacks. And you didn’t listen to us. Well, now you have Iranian technology wreaking havoc in . . .”

Gideon Rachman
 . . . in this conflict that you’ve put front and central.

Emile Hokayem
Exactly.

Gideon Rachman
So the other thing we haven’t mentioned, which is very, I think, central to American thinking about this and probably in the plus column for MBS, is the Abraham Accords, where, you know, obviously Israel’s fate looms very large in American thinking. And it’s this huge breakthrough, not directly yet with Saudi, but with the Gulf states, with the promise that at some point MBS might even normalise with Israel. I mean, how big a step is that? It gets headlines in America. How big is it in Riyadh’s world view?

Emile Hokayem
In Riyadh, there is a widely shared understanding that Saudi Arabia has to extract a much greater price for a normalisation agreement with Israel. I suspect that there is a desire to normalise with Israel, but there is, in understanding that if Saudi where to compromise Palestinian rights to statehood and to sovereignty and so on, this will not fly well. And it’s probably one of the most contentious issues in Riyadh. I would say there is also a strategic issue here that is not necessarily well understood. For Israel, the priority when it comes to Iran is the nuclear programme, because Israel assesses that it can deal with militias and missiles and so on. The problem is the existential fear of an Iranian nuclear capability. For the Gulf states, the nuclear programme is secondary to their concerns about Iranian influence, shu militias in particular, and political partners and missiles, UAVs, etc. because they’re experiencing it. So there is a bit of strategic disconnect between Israel and its new Gulf friends. In 2019, for instance, Saudis basically say that they paid the price for America’s maximalist strategy, which, of course, they supported. But they’re saying, well, because Iran couldn’t hit America, they hit us. It’s a very uncomfortable place for them to be, even though there is a convergence in terms of threat assessment and actually agreement on the nature of the Iranian regime and so on.

Gideon Rachman
This is convergence between Jerusalem and Riyadh.

Emile Hokayem
Exactly. It doesn’t necessarily flow that you’re gonna have operational cooperation and they’re gonna agree on everything.

Gideon Rachman
Okay. You said that in a sense, all of this is of a piece that Mohammed bin Salman is making a big bet on really transforming Saudi Arabia as he would see it, modernising it both in its international relations and in its domestic relations. And as he pointed out, they look like they’re in long-term decline and long-term trouble before he came along. How do you think Saudi Arabia’s future prospects over the, say, the next generation look? Do you think he’s gonna succeed?

Emile Hokayem
I think it’s gonna be extremely hard to pull off some of the big, big projects that he has in mind. At the same time, you have quite a lot of interesting things happening in the kingdom. My concern is that the transformation of the Saudi economy, which is central to all that may be hampered by the dominance of the state, by the dominance of PIF, the sovereign wealth fund. You see a lot of positive energy, but everyone wants money from PIF, everyone wants to have PIF be a shareholder and so on. So that PIF economy may actually hurt the development of a private sector that is so essential for the success of Vision 2030. And I think that’s the real difficulty for him on the horizon. How much of it should be state-led and how much of it should be empowering the private sector, extending financing, you know, rethinking regulatory frameworks and so on? And sometimes the easy way is just to empower the people closest to you because they’ll tell you, we can do this, we can deliver on that and it’s all large-sized projects. So it looks really real when what you actually want is to incentivise the private sector. You’re talking about small and medium businesses and even larger businesses, by the way, which, you know, in Saudi right now are wondering what their places is in the economy.

Gideon Rachman
We will talk about the opportunities there. But what about the threats? I mean, you said to me when we were just chatting beforehand that in some ways you think Saudi Arabia is kind of uniquely vulnerable geopolitically, which I hadn’t really thought of it in that way. Why?

Emile Hokayem
No, what I was saying is that the Gulf states in general are very vulnerable to the shifts in the global balance of power because they seek protection from the big guys. When there are tensions among them, they worry. The Saudis are not happy right now to see that there’s no consensus on the Security Council because if tomorrow, let’s say there is a showdown with Iran, whereas the legal, the Security Council cover, is it possible that the Russians will close their eyes if something were to happen or even encourage the Iranians because, you know, there are shared interests on other battlefields. So they were very worried about global governance in that sense, but they’re also concerned about the economic picture. Their sovereign wealth funds invest massively in western countries. So they’re not happy about western recession. Well, then perhaps don’t cut oil production. That’s the answer to that. But for them, it’s very hard to calibrate this given how geopolitics has come back in the calculations. It’s just becoming overwhelming at this point. So it is vulnerable in the sense.

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Gideon Rachman
That was Emile Hokayem of the International Institute for Strategic Studies ending this edition of the Rachman Review. Thanks for joining me and please listen again next week. 

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