Brian M Downing
The apparent murder of Saudi dissident Jamal Khashoggi at the direction of the crown prince has been disastrous for the kingdom. Western publics are horrified and voicing their concern to elected officials. Members of the US congress are calling for sanctions. Senator Lindsey Graham (SC) wants Mohammed bin Salman removed from the line of succession. (Both ideas were advanced here earlier.)
The shaken Saudi rulers are struggling to explain Khashoggi’s death, but at this late date it’s unlikely they can find a sellable one, even with the help of dutiful politicians in Washington. The Saudis may respond to sanctions with their own economic weapon – boosting oil prices. They used that weapon quite well against the US amid the 1973 Yom Kippur War.
The huddle of princes may calculate that pain at the pump will soon enough ease criticism from foreign media and masses. They may be a miscalculation.
Markets and moods
The Saudis have already boosted oil prices over the last two years. Not long after benchmarks fell to $36/bbl in early 2016, Saudi Arabia, other Gulf producers and Russia restricted production, sending prices on a sustained upward path. They’ve doubled since then.
With Venezuelan output reduced from years of mismanagement and Iranian oil facing sanctions, further Saudi manipulation could bring world prices well over $100/bbl. An impressive display of economic clout, but what would follow?
Though the effect on individual countries could be limited by discounting the benchmark price to friends, the Saudis would be punishing much of the world – and incurring almost all its wrath. The Khashoggi affair has made clear how widespread and intense the disdain for Saudi Arabia is. Water-cooler talk, social media posts, respected editorials, and ranking politicians are pointing out the absurdity and murderousness of the Saudi government.
Arab oil producers after the Yom Kippur War became the subjects of ridicule and contempt for a generation. This is coming back, thanks to the crown prince. Middle-Eastern publics share the West’s contempt. They are angered by growing Saudi influence on their governments and clergy. The welter of criticism today brings more than ridicule and contempt. It points to trouble for the princes’ longterm plans to modernize their economy and dominate the region.
Market share
Saudi vengeance against world criticism could play out badly for them. Rising oil prices encourage production everywhere. New fields come on line, capped wells reopen. American oil production has soared in the last decade, especially during the recent Saudi-Russian production agreement. The US, Canada, Mexico, and many other smaller producers will benefit from further hikes.
Saudi allies in the Gulf might cheat on production quotas to enrich coffers and mollify subjects. Saudi Arabia may lose market share to North American and Gulf producers as well. Russia could tap into South Asian markets by way of the pipeline running through Israel from the Mediterranean to Eilat near the Red Sea. Importers will look at the stability of a reckless family autocracy when they ponder oil contracts.
Oil importers might be tempted to overlook pressures to boycott Iran – just as Saudi efforts to isolate and gravely weaken Iran are falling into place. Further, governments will weigh claims of Iranian terrorism and expansionism against comparable Saudi actions.
Copyright 2018 Brian M Downing
Brian M Downing is a national security analyst who’s written for outlets across the political spectrum. He studied at Georgetown University and the University of Chicago, and did post-graduate work at Harvard’s Center for International Affairs. Thanks as ever to Susan Ganosellis.