Predictions that the United States may soon be able to scale back its costly Middle Eastern diplomatic and military engagements have also played well with politicians. In 2012, President Obama voiced the expectation that new energy sources would make the United States “less dependent on what’s going on in the Middle East.” Obama’s Republican opponent in the 2012 presidential election, Mitt Romney, largely agreed with his campaign, saying that America’s energy wealth would mean “the nation’s security is no longer beholden to unstable but oil-rich regions halfway around the world.” In 2016, Donald Trump’s campaign platform pledged to “become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.”
These leaders, and many others, will be disappointed. U.S. interests, and therefore engagement, in the Middle East will fluctuate based on the propensity of leaders, America’s strength at home, the sort of threats and opportunities emanating from the region, and other foreign policy challenges elsewhere. Energy, however, will remain more or less a constant driver of U.S. engagement in the region—despite new American resource riches.
It is true that the United States may no longer need to import any oil from the Middle East in the foreseeable future even if, as described in Chapter Four, the much coveted status of U.S. energy independence remains elusive. For most of the 2000s, the United States imported on average just over 2.3 million barrels per day—or roughly a quarter of its daily imports—from the Gulf region. Then, beginning with the economic slowdown from the 2008 financial crisis, U.S. imports of Gulf crude oil began shrinking significantly. That trend continued even as the American and global economy rebounded, as the swell of U.S. tight oil kept import levels low. By 2014, the United States was importing less than half the total volume of oil that it had been seven years earlier. U.S.-Saudi crude trade reflected this same trend, falling by nearly two-thirds from a peak in the spring of 2003 to the end of 2015. The IEA and some oil and gas experts such as Harvard fellow Leonardo Maugeri suggest that this trend could accelerate so rapidly that the United States may not import any oil from the Middle East in the coming decades.
Fretting over exact volumes, however, is a waste of time. If history is any indication, the volume of oil flowing between the Middle East and the United States will have little bearing on the quality of the overall relationship. Take the bilateral relationship between the United States and Saudi Arabia. Oil imports from Saudi Arabia fell to almost zero in 1985 on account of the massive Saudi rollback in production in the early 1980s, yet the bilateral relationship remained solid. From the first Gulf War in 1991 to 2009, U.S. imports of total crude and oil products from Saudi Arabia remained stable despite significant ups and downs in the relationship. They were approximately 1.4 mnb/d following the invasion of Kuwait by Iraq in 1990, when President George H. W. Bush told Saudi Arabia’s ambassador to Washington that “If you ask for help from the United States, we will go all the way with you.” And they were more or less at the same level after September 11, 2001, when tensions were so high that American soldiers who had received medals from the Saudi government in the first Gulf War returned them in disgust—in protest of the primarily Saudi group of terrorists that perpetrated the horror of that day.
In reality, factors other than the volume of oil trade matter much more in determining U.S. interests in the region. Many issues of critical importance have no direct relationship to oil. Fighting terrorism, resisting the proliferation of nuclear weapons, and supporting Israel are all American foreign policy priorities of the highest order that demand U.S. involvement of one sort or the other in the Middle East. ISIS and al Qaeda pose a threat to European and American cities; letting the vicious conflicts between these groups and Middle Eastern governments unfold without U.S. involvement would have adverse implications for regional stability and even U.S. homeland security. Iran’s regional ambitions threaten not only to destabilize a precarious balance among Middle Eastern powers, but could shatter a counter-proliferation regime that has helped minimize stray fissile material and technologies which could vastly increase the capabilities of groups opposing Western powers. Both developments could be devastating to Israel, an important partner of the United States.
The importance of the Middle East to American foreign policy—and the relative significance of oil—is captured in an illuminating study by American academics Mark Delucchi and James Murphy. They estimate the costs to the United States of protecting oil supplies in the Gulf by considering a number of different scenarios. Interestingly, they consider one scenario in which the Gulf exists, but has no oil. When they evaluated this scenario in 2004, they found that even were the Gulf to be oil-free, the United States would still spend substantial amounts on security (not to mention diplomacy and economic engagement) to advance its interests there. They reckon that the United States would still spend 25 to 40 percent of current peacetime expenditures in the Gulf in this scenario—all for non-oil purposes.
In addition to having interests in the Gulf unrelated to oil, the United States continues to have energy interests there that go beyond petroleum imports. The Delucchi and Murphy study also highlights this nicely in examining another scenario in which the Gulf does have oil, but the United States does not consume it (although other countries do). The price tag for this arrangement differs considerably from the scenario where the Gulf is bereft of oil, illustrating that several energy concerns necessitate U.S. engagement, even if America is not consuming a single drop of Middle Eastern oil.
The reality is that the global nature of the oil market ensures that the United States will be interested in Middle Eastern stability, regardless of the direction of the flow of oil. Even if the United States meets all of its energy needs in the future by relying only on its own resources and those of Canada and Mexico, it will still be connected to the global market; the prices its consumers and companies pay will therefore be determined by global supply and demand. If a major disruption of any sort sharply curtails oil supply from the Middle East, global prices will rise accordingly. The United States will be better insulated from some of the downsides of a price spike thanks to its new energy riches. (For instance, rather than having dollars flow out of the United States to oil-producing states, they will stay inside the country, and accrue instead to oil companies and beneficiaries there.) But most of the dangers of a sudden price spike for the economy will remain the same, making the United States almost as keen as ever to see stability in the Middle East.
More tangibly, while the United States may soon no longer look to Middle Eastern countries to directly supply its consumption, many U.S. allies will be more dependent than ever on that volatile region. This will be particularly true in a persistently low-oil-price environment, as higher-cost producers outside the region are squeezed out. Asian dependence on Middle Eastern oil in particular is set to rise. By 2040, one of every two barrels of internationally traded oil will be destined specifically for China and India. Given China’s function as the engine of global growth, a sharp rise in price induced by supply disruptions in the Middle East could have devastating effects well beyond Asia if it slows China’s economy. America’s energy boom may allow it to curb its own dependence on external sources of oil, but the United States will be in no position to substitute for large volumes of crude that a Middle Eastern crisis might take offline; gone are the days of the 1956 Suez Crisis when booming U.S. oil production enabled America to organize the Oil Lift to replace the Arab oil denied to France, the U.K., and Israel after their invasion of the Suez.
As discussed in Chapter Five, the United States will also continue to have strategic interests in the oil of the Middle East, even if it does not have big commercial interests there. As was the case concerning Iraq in 1990–1991, the United States will be concerned about any single leader or country controlling a disproportionate amount of global oil reserves or production, particularly if that entity is an adversary of the United States or its allies. True, to the extent t
hat the production of unconventional oil becomes a global phenomenon, a smaller percentage of overall global production could be located in the Middle East. But, at least for the coming decade and likely beyond, the highest concentration of oil production and proven reserves will still be in the Middle East. For instance, growing Iranian influence in Iraq is worrisome to the United States for many reasons, but high on the list is the fact that if Tehran were to control Iraqi oil policy, it would double the proportion of world reserves, as well as the level of oil production over which it has sway.
Adjusting to a New Balance of Power
In the coming decade, advancing U.S. interests—both energy- and non-energy-related—will require American involvement in the region. But rather than simplifying Washington’s relationships with Gulf capitals, the new energy abundance will add fresh complications to the relationship. For decades, Saudi Arabia and the United States had a symmetrical relationship. One side offered to be a swing producer as described below; the other side offered security. The energy glut is changing that relationship. As Joe Nye of Harvard mused, “Power rises from asymmetries in interdependence.” No longer a relationship of symmetrical interdependence, Washington’s position vis-à-vis Riyadh will be enhanced.
Thanks to the new energy abundance, the United States is far less likely to be the supplicant it has found itself to be so many times over the past decades. Over the course of multiple administrations, American presidents and diplomats have made the fourteen-hour plane journey to Saudi Arabia with a single request. Each time, they asked the kingdom to increase global oil supplies—either in anticipation of a coming disruption, such as the 2003 war against Iraq, or as a means of easing tight markets like as those resulting from unexpectedly robust demand growth in the mid-2000s.
Riyadh’s ability to respond to these requests has been a huge source of political power and geopolitical stature for the kingdom, even more so than the large volume of oil it produces or the exports it generates. Being responsive has required the maintenance of spare capacity—the building and maintaining of oil fields and infrastructure that are not generally used for regular production, but can be brought on line in short order. Only a few countries—Saudi Arabia, the UAE, and Kuwait—have been willing to voluntarily incur the expense associated with holding this spare capacity. Doing so, however, has allowed them to react to changes in the global market, bringing new production to market to curb price peaks that otherwise would have only eased through a much slower process of eventually spurring new investment to increase production and dampening consumption to decrease demand.
In an energy abundant environment, there may be little reason to implore the Saudis to increase production. If anything, we may see a repeat of the soft message Vice President George H. W. Bush delivered to the Saudis in 1986 to decrease their production in order to protect the U.S. oil industry. American leaders will need to knock less frequently, if at all, on Riyadh’s door with a special plea to dip into its spare capacity and produce more oil.
As a result, there will be greater opportunity for the United States to raise other matters in the relationship. As all envoys—from the junior to the presidential—know, there is a limited number of issues that can be raised seriously in any one meeting. When a president meets a king, the president rarely has the luxury of giving serious treatment to more than a few subjects; rarely is a laundry list of concerns rattled off in the hopes that one of them makes an impression. Instead, American government figures carefully select the issues of greatest concern to the United States and seek to impress upon their interlocutors the importance of those few issues. Tumultuous times in the region ensure there will be no shortage of issues for U.S. and Saudi leaders to discuss in the years ahead.
The new energy realities do not, however, translate into all good news for the United States in the conduct of its relationship with Saudi Arabia and other Gulf powers. First, U.S. leaders may wield less heft in the eyes of Saudi sheikhs now that America has lost the special status as Saudi Arabia’s largest oil importer. Asian nations have become the new consumers ensuring Middle East security of demand and—as King Salman’s monthlong trip to Asia in 2017 suggests—the Gulf will lavish more time and attention on the countries to its east. In addition, the perception—whether founded or not—that Middle Eastern countries are less important to the United States has already affected their behavior in ways America may not appreciate. During a trip I made to Turkey with a small delegation in mid-2016, one of Ankara’s most senior diplomats summed up the view of many in the region nicely; he said, “Leadership is needed. And that leadership must come from the United States. And when you decide not to lead, it all falls apart. Maybe you think you are living in a new reality now. You are no longer dependent on the region for oil. So maybe in this context you think that you do not need to care about the Middle East. Perhaps this is how you see things now.”
Gulf countries in particular were not prepared for their largest customer to become their competitor. Even before King Abdullah’s death and the rise of a more assertive Saudi leadership in 2015, the kingdom acted with greater independence in the region, in part due to the perception that the United States was no longer invested in regional outcomes to the same extent as in the past. Whereas Riyadh and Washington had long sought to tackle problems in tandem, the House of Saud has increasingly charted its own course. It provided billions of dollars to the government of Egyptian president Abdel Fattah al-Sisi, at a time when the United States sought to use its more modest economic leverage to orchestrate a return to democracy. And it finalized deals to buy billions of dollars of advanced U.S. weapons at the same time it sought increased military partnerships with China. The perception of diminished U.S. interest in the Middle East may have made a bigger difference to regional affairs than any increase in American leverage in the U.S.-Saudi relationship; surprising some, the United States may have less influence in the region now that it will be less dependent on its oil.
Finally, U.S. leaders will need to face up to the challenge of explaining to Americans why the Middle East still matters in a new world of energy abundance. The average U.S. citizen could resist future efforts to involve the United States deeply in the region now that oil no longer plays the same role. U.S. presidents will need to be sensitive to this perception—however erroneous—and work hard to explain the continued importance of this troubled part of the world. But continuous and mounting political pressure will also lead future U.S. administrations to seek the help of other countries to share burdens America has traditionally shouldered alone. It will take time for these efforts to bear fruit, given Europe’s weakness and China’s reluctance. But when they do, the usual challenges of coordinating multiple actors in a complex environment will apply.
Middle East Oil: Even More Important in Some Scenarios
David Ottaway’s book The King’s Messenger opens with the recounting of a scene that is bound to make U.S. policymakers squirm. Ottaway describes how, in the waning days of the summer of 2001, Saudi Ambassador Prince Bandar bin Sultan delivered a letter from Crown Prince Abdullah to President George W. Bush. The crown prince, who effectively ruled Saudi Arabia at the time, was outraged that the United States was doing nothing to restrain Israel in the face of the outbreak of the second intifada. The letter allegedly presented an ultimatum to President Bush: either the United States take action to secure a lasting agreement between the Israelis and Palestinians, or the Saudis would use their oil weapon and wreak havoc on the American economy reminiscent of the 1973 and 1979 energy crises. According to Ottaway, Prince Bandar “watched with enormous relief as Bush and a lethargic White House had jumped into action,” crafting a new initiative within days to spur an Israeli and Palestinian peace.
One would expect that, at a minimum, such blackmail would be a thing of the past in an era of energy abundance. Certainly, neither Saudi Arabia nor other countries can effectively threaten to cut exports to American customers if such flows have dwindled or ceased. But, with
a number of important caveats, Saudi Arabia and other Middle Eastern producers could still exert significant leverage over the global economy in the medium to long run.
As mentioned, this will be particularly true if the new energy abundance ushers in a long-term era of very low prices. The IEA created a “Low Oil Price Scenario,” in which prices stay between $50 and $60 a barrel well into the 2020s, before rising to $85 by 2040. If prices remain this low, for this long, they will inevitably affect global production patterns. In this scenario, low-cost producers in OPEC and the Middle East will account for a larger share of total global output, with high-cost U.S., Canadian, and European producers accounting for less. Correspondingly, the Middle East’s share of global crude oil exports rises significantly in this situation. According to the IEA, by 2040, the Middle East would be the source of 57 percent of all inter-regional trade in the low-oil-price scenario, in comparison to just half in the most-likely, reference case (higher price) scenario. Asia in particular becomes more vulnerable to Middle East disruptions, as by 2040, 85 percent of the crude sourced by Asian refiners could come from the region in this low-oil-price scenario.
Theoretically, Asia’s increased dependence on Middle Eastern oil could make it susceptible to the sort of political blackmail reportedly threatened in the Saudi letter to President Bush. But the caveats are important. First, any embargo of an Asian economy would not be limited to the target country; because of the global nature of the oil market, all economies would suffer the effects of an overnight embargo if the oil was completely withheld from the market. Second, such a move—and the price increase that would accompany it—would only add urgency to the already ardent search for alternative, non-fossil-fuel energy sources, a push no oil producer should be willing to give. And finally, as discussed elsewhere in this book, tight oil’s quick response to higher prices would at least mean that the pain of a price spike would be alleviated much sooner by an increase in U.S.—and possibly other-country—tight oil than has been the case in the past.
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