The successive decisions by OPEC+ countries to cut production, again and again, to push up oil prices, seems to have thrown the U.S. administration into trouble. But these decisions only reflect a truly seismic change in the positions of the countries of the Middle East, and mostly of Saudi Arabia.
Saudi Arabia’s realignment. At the heart of this movement of the tectonic plates, there is naturally the evolution of Saudi Arabia from close alignment on U.S. policy to de-alignment. If one remembers the cut-throat war that this country waged against Russia over the issue of oil prices in the spring of 2020, one can only be surprised at what seems to be a current growing alignment with this country and with China. But the competition on the oil markets between two of the most important exporters should not hide the underlying geopolitical movements.
Saudi Arabia's first decision to cut oil production in April 2023 came weeks after news that should have caused a stir. On March 10, it was announced that, under the aegis of China, Saudi Arabia and Iran would resume diplomatic relations. Considering the fierce opposition that characterized relations between these two countries, an opposition that led to the dramatic war in Yemen, which caused more civilian deaths than the current conflict between Russia and Ukraine, we can only be struck by the importance of this real turning point. In fact, we should have been able to notice warning signs between these both countries.
The BRICS angle. In Moscow, information has been circulating since the first days of last January about a simultaneous membership application—the word simultaneous has its importance here—from Saudi Arabia and Iran to the BRICS organization (BRICS is an acronym for five regional economies: Brazil, Russia, India, China and South Africa). This information was confirmed by February, and relayed by the press, describing a process of accession to the BRICS of countries such as Algeria, Egypt, and also the United Arab Emirates. Other facts should also have been taken into account.
The fact is that the United States reversed its policy, which tried to isolate Saudi Arabia following the assassination of journalist and opponent Jamal Khashoggi, assassination perpetrated at the Saudi consulate in Istanbul during 2018. In 2022, the U.S. government tried to get closer to Riyadh in the wake of sanctions imposed on Russia and their impacts on the oil and gas markets. This was a loss of face. President Jo Biden's trip to Jeddah on July 15, 2022, took on the dimension of a trip to Canossa: a diplomatic humiliation. This was, indeed, how it was perceived by the Saudi leadership. When, the following November, Saudi Arabia decided to cut production to support oil prices, Joe Biden's fury was public, but without effect. Saudi Arabia's misalignment with the U.S. had become evident, and it only deepened.
China has become Saudi Arabia's leading supplier, and relations with Russia have developed very rapidly since 2021. This has not been analyzed sufficiently. Relations between Russia and Saudi Arabia have improved greatly since the spring of 2020. The turning point was clearly written on the wall. The war in Ukraine had simply accelerated this process. Saudi Arabia then announced other cuts during April (1.6 MMbopd). They were not effective, because of low oil demand in Asia. In Vienna, at the last OPEC+ meeting (June 4), Saudi Arabia announced another 1-MMbopd cut to be implemented next July. Saudi Arabia has thus doubled down and wants to keep the market “in suspense,” Prince Abdulaziz said.
The current situation is instructive. Saudi Arabia will, therefore, join BRICS, just like Iran, but also other countries, such as Indonesia, and even Mexico, will joint, too—a new setback for Washington, if confirmed. This is clearly a success for China and Russia, as they try to develop what they call a “multipolar world.” What lies behind these membership movements is, nevertheless, deeper. Saudi Arabia is gradually abandoning the dollar for payment of oil. It has decided to use the Yuan (the convertible Renminbi) including transactions with customers other than China. At the beginning of April, TotalEnergies concluded its first transaction with Saudi Arabia in Yuan. Other currencies also could be used—the Indian rupee is one of them.
What is, therefore, emerging is a form of de-dollarization of trade. If this movement spreads to other countries—and on this specific point it will be important to monitor the attitude of the United Arab Emirates and Qatar—we would be faced with a major change. Russian President Vladimir Putin, in his presentation of the “new concepts” of Russian foreign policy, clearly made this de-dollarization one of his major objectives. That it finds such an echo in the world tells us a lot about the loss of influence of the U.S. and, generally, of what is called in Moscow “the collective West.”
Further moves. This decision by Saudi Arabia to join BRICS has two other implications that are no less important. The first is that under the aegis of Moscow this time, Syria and Saudi Arabia have decided to resume diplomatic relations. It is an undeniable diplomatic success for Moscow and for its protégé, Assad. It is also a new sign of the misalignment of Saudi politics. The second, which has only been confirmed so far by Chinese sources, would be the possible request for an observer post at the Organization for Cooperation and Security, also known as the Shanghai Cooperation Organization (SCO). If confirmed, this information would have considerable symbolic significance. On the one hand, it would balance out with Iran, which became a full member of the SCO some years ago. On the other hand, it would move relations with China and Russia from the economic terrain, even if the latter has obvious geostrategic implications, to the security terrain which was, until recent months, the prerogative of the U.S.
The changes underway, as we can see, go far beyond the question of oil prices. Saudi Arabia, and a number of other countries, are choosing sides in the wake of the war in Ukraine. And this camp is not—is no longer—that of the U.S.
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