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The Tale of Two Countries: The US & UK Sleepwalked in Foreign Oil Needs – Now They Have Cap in Hand – Irina Slav

These translations are done via Google Translate
by Irina Slave

The UK’s Prime Minister last week visited Saudi Arabia and the United Arab Emirates with a mission. The mission was to secure more oil for the country that has one of the most ambitious energy transition targets including a ban on ICE car sales.

The UK is a net importer of oil. Some 8% of those imports used to come from Russia but now that these were happily banned (gradually), the UK urgently needs a replacement. So does the United States. For both, the first and most logical stop was the Middle East. Only it looks like things have changed a bit from the times when it was enough for London or Washington to say the word and the Middle East delivered.

Here’s what the Wall Street Journal wrote about Boris Johnson’s visit to Riyadh, citing the Saudi state news agency:

The Saudi state news agency said Mr. Johnson and Prince Mohammed discussed international issues, including the situation in Ukraine, but made no reference to the oil markets. Saudi officials familiar with the talks said the British leader had walked away from the meeting empty handed.

The report also noted that Johnson’s visit was not only on behalf of the UK. It followed the refusal of the Saudi and Emirati rulers to talk to President Biden. Johnson, in other words, went to the Middle East to try and persuade these rulers to respond to Biden’s requests.

The situation has an oddly familiar feel. It reminds me of countless mob movie plots. Side A and Side B work together and they work well to mutual benefit. Then something changes in Side A and it no longer wants to work with Side B. Drama ensues. Eventually, Side A realises it cannot function without Side B but since it has been reduced to a beggar by its own wrong decisions it does just that, beg.

These are strong words, perhaps, and an oversimplification of a complex situation, some would say but the situation is, in fact, pretty simple. For decades, the U.S. and the UK — as well as Europe — have been working quite well with Middle Eastern kingdoms. The latter supplied the former with fossil fuels. The former supplied the latter with weapons, technology, and experts.

The system worked well until the incoming Biden administration openly accused the de facto ruler of Saudi Arabia of killing journalist Jamal Khashoggi. That came after Congress had passed a law that allowed Americans to sue the Saudis for 9/11 and was not taken well. Very much like the showdown between Europe and Russia, the U.S. — and the UK, apparently — put themselves in a position to see who needs who more.

Shockingly for those expecting unwavering cooperation from the Gulf kingdoms, it appears that the large developed G7 economies are the ones that need the less developed, oil-dependent economies of the Gulf more than the latter need them.

The relationship of non-equals — and the shift in the balance of power within it — was even clearly demonstrated by Crown Prince Mohammed in his first interview for a Western outlet. Here’s one of the most telling quotes from The Atlantic interview:

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We asked whether Biden misunderstands something about him. “Simply, I do not care,” he replied. Alienating the Saudi monarchy, he suggested, would harm Biden’s position. “It’s up to him to think about the interests of America.” He gave a shrug. “Go for it.”

Needing something as crucial as crude oil from someone who doesn’t particularly like you is not the best place to be. Yet this is exactly the place that the U.S. and the UK have put themselves in, and they didn’t even notice how they ended up there. Why? Because of complacency.

The U.S. and the UK were certain the Middle East will be there for them when they need it. Yet the Middle East has been undergoing changes. The 2014 oil price crash had a pretty sobering effect on the region and spurred the kingdoms into action. Granted, this action has been reluctant, slower than it could have been but Saudi Arabia and the UAE in particular have been quite active in their transformation efforts.

The UAE is already a luxury tourism hub, a growing tech hub, and now Saudi Arabia is working to turn itself into one as well. The Kingdom is also working on its transformation from a major oil supplier to the world into an equally major metals and minerals suppliers. The Emiratis and the Saudis, in other words, have been busy ensuring they don’t suffer as badly in the next oil market downturn.

In the process of this transformation, they also seem to have revised their traditional alliances. Both are part of the OPEC+ group, which also includes Russia. In fact, the OPEC+ alliance is commonly seen as one led by Saudi Arabia and Russia who call the shots together even if there were missteps along the way.

Saudi Arabia is forging closer relations with China as well: the Kingdom said this month it was discussing payments in yuan for some of its oil exports to China. This constitutes a market pivot away from traditional Western allies. It could be seen as a sign of pragmatism, with China likely to remain not only one of the biggest importers of energy for the foreseeable future but also one of the biggest investors in energy and mining. Russia, on the other hand, seems to be a good replacement of the West as an arms supplier to the Kingdom.

The UAE, meanwhile, has said it was keen on working with Russia on improving global energy security. And this didn’t happen years ago. It happened just this week, with the keenness expressed by the Emirati Foreign Minister after a meeting with Russia’s Sergey Lavrov.

In a recent overview, Reuters described a changing geopolitical landscape in the Middle East. The UAE and Saudi Arabia have shunned calls from the U.S. and the UK for more oil production and now it seems they are brushing off attempts to pressure them into playing along. Instead, they are turning to the countries that the West has come to view as sworn enemies.

The EU sleepwalked into a dependence on Russian oil and gas. The U.S. sleepwalked into an overdependence on OPEC oil despite the boom in local production. The UK also seems to be more depend on foreign oil than befits such a big producer of both oil and gas. The collective West took its eyes off the geopolitical ball for too long and other players used the time to score some goals. It may well be that payback time for complacency has come.

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