Sunday, May 7, 2017

Trump’s Good cop/bad cop Approach to Saudi Arabia - Robert Caskey

by Robert Caskey

Trump’s approach to U.S.-Saudi relations might look incoherent, but the good cop/bad cop strategy is a smart one.

Staying true to his unpredictable approach to politics, Trump has been keeping us guessing on where he’ll go with his administration’s Saudi policy. During his campaign, he went where few politicians dare to tread when he said the Kingdom wasn’t pulling its weight in covering the cost of the U.S. security umbrella. He took a more balanced approach during Deputy Crown Prince Mohammed bin Salman’s official visit to Washington in March, when they agreed on the major security threat posed by Iran. Then, just a week ago, Trump veered back towards his campaign rhetoric against the House of Saud, saying that the U.S. was losing a “tremendous amount of money” defending the desert kingdom.

While Trump plays bad cop, he’s letting James Mattis and Rex Tillerson play nice. The secretaries of State and Defense travelled to Saudi last month, where Tillerson acknowledged the Kingdom’s worries by calling Iran “the world’s leading state sponsor of terrorism” and announcing a government-wide review of U.S. policy on Iran.

Trump’s approach to U.S.-Saudi relations might look incoherent, but the good cop/bad cop strategy is a smart one. By using it, Trump is getting the point across that free riding won’t be tolerated, while Mattis and Tillerson smooth any ruffled feathers and move ahead with priorities in bilateral relations: collaboration on Iran, defense, and investment. This dynamic keeps Riyadh on our side, but also keeps them on their toes.

Assisting Trump is that, at this point, the Saudis have much less to offer in return for our political and military support. Thanks to the shale revolution, Saudi oil exports to the U.S. have fallen by 24% over the past 10 years -- while American production has doubled during the same period. Where the Saudis used to be able to dangle their oil reserves over our heads, we now have the upper hand in the relationship. This has become even clearer since the fall in crude oil prices, blowing a hole in Saudi Arabia’s budget and setting off an economic crisis there.

In response, last April, the Saudi government announced a plan known as “Vision 2030” to reduce economic dependence on oil, attract outside capital, and open up the Kingdom’s highly conservative society. As part of the plan, the government plans to sell a 5% stake in state oil giant Aramco. That IPO, estimated to be worth at least $1 trillion, could be the largest in history and has already attracted interest from the New York Stock Exchange -- something that Trump’s businessman reflexes surely noticed. During his tour in the Kingdom, Tillerson touted American companies as “partners you can count on” and said Saudi Arabia would find numerous opportunities in the U.S. in a speech at the U.S. Chamber of Commerce.

But the U.S. isn’t the only country with a stake in these new investment opportunities. Other countries, including the UK but also China, have been lining up to take advantage of opportunities offered by a more liberalized economy. In the past six months alone, Theresa May has made two state visits to the Persian Gulf. Saudi Arabia is London’s biggest trading partner in the Middle East, and May wants to increase trade and business ties even further. Last December, she attended the annual Gulf Cooperation Council summit to discuss the creation of a GCC-UK free trade space, while her second visit last month included the chief executive of the London Stock Exchange (there to try and win the Aramco IPO for the LSE). The Chinese, meanwhile, inked $65 billion in investment and business deals back in March, when the Saudi king Salman visited Beijing on an Asia-wide tour. Going beyond economic ties, both the British and the Chinese have stepped up their military presence in the vicinity.

For all the skepticism about Saudi-American relations, Trump and his cabinet secretaries know that Riyadh is on track to becoming one of the world’s biggest economies by 2050, equal to France. The Chinese clearly recognize this and are acting accordingly, and so the administration wants to make sure we keep our place at the table by making up for the damage done during the Obama years. Fortunately, we now have more leverage than we’ve had in decades and can extract better terms for our businesses -- all while containing Iran. If all goes well, Trump may soon be able to point to the Saudis as an example of what “America First” actually looks like in foreign policy: America’s interests secured via partnerships with allies that finally pay their fair share.

Robert Caskey


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