The U.S.-Saudi Arabia alliance, which survived the oil embargo in 1973 and the attacks on September 11, 2001, in which fifteen of the nineteen passenger jet hijackers were Saudi citizens, has passed through some recent strains. A new generation of Saudi leaders, adjusting to what it had seen as a resurgent Iran and a retreating United States, chafed at President Barack Obama while pursuing an aggressive military posture in the region. The Obama administration, for its part, charged that Saudi Arabia had exacerbated regional conflicts and undermined U.S. interests while under the protection of the U.S. security umbrella. President Donald J. Trump, by contrast, has made Saudi Arabia the first foreign country he will visit since taking office and has pledged to take an aggressive posture toward Iranian expansionism.
Modern Saudi Arabia traces its roots to an alliance between the Saud family and descendants of Sheikh Mohammed Ibn Abdul Wahab, a prominent Hanbali Muslim cleric, who follow the most conservative school of jurisprudence in Sunni Islam. This pact has endured for centuries, influencing the country's domestic and foreign policy. Saudi authorities ban women from driving cars and deny them other rights, and its government champions its interpretation of sharia, or Islamic law, by funding religious schools around the world.
The United States, first through its oil industry and then via government contacts, established a relationship with Saudi Arabia's founder, King Abdulaziz, and his successors that evolved into a close alliance despite a stark clash in values. U.S. businesses have been involved in Saudi Arabia's oil industry since 1933, when Standard Oil of California (now Chevron) won a concession to explore in eastern Saudi Arabia, discovering oil in 1938. U.S. companies were preferred to European drillers operating in Iraq and Iran because Saudi Arabia's founder was wary of colonial powers that controlled much of the region at the time.
President Franklin D. Roosevelt's meeting with King Abdulaziz aboard the USS Murphy in Egypt in 1945 solidified the relationship. Saudi Arabia was officially neutral during World War II but allowed Allies to use its airspace, according to Rachel Bronson, author of Thicker Than Oil: The U.S. and Saudi Arabia.
The Arabian American Oil Company, or Aramco, established by Standard Oil and three partners—who would later become Texaco, Exxon, and Mobil—discovered the kingdom's reserves in 1944 and made the country the world's largest oil exporter. Saudi Arabia gradually bought out foreign shareholders by 1980, and the company is now known as Saudi Aramco, but U.S. energy companies maintained business interests in Saudi Arabia. Chevron, Dow Chemical, and ExxonMobil continue to be involved in refining and petrochemical ventures.
Saudi Arabia is the world's largest holder of crude reserves. It exported 7.55 million barrels in February 2016, according to the Joint Organizations Data Initiative, which compiles information about global energy production. The scale of the kingdom's energy output gives it great influence over energy markets, and protecting Saudi Arabia and other Persian Gulf producers has been a cornerstone of U.S. foreign policy for decades.
Since the early 1970s, Saudi Arabia and the Organization of Petroleum Exporting Countries, or OPEC, have tried to steer oil markets, first by setting prices and then adjusting supply. OPEC actions, such as keeping prices high in the 1970s and in the run-up to the 2009 global recession, directly affected U.S. consumers and prompted President George W. Bush to complain to Saudi Arabia's king about its oil policies in 2008. Saudi Arabia's ability to quickly boost production led to the collapse of oil output in the United States in the 1980s as prices plummeted by more than 60 percent over a six-month period.
In 2014, Saudi Arabia and OPEC faced a new challenge: the U.S. shale revolution. Amid rising U.S. shale production, Saudi oil exports to the United States declined by more than 50 percent from April to December 2014, dropping to 788,000 barrels per day in January 2015, according to the U.S. Energy Information Administration. Oil prices crashed from a June 2014 peak of $110 per barrel to less than half that in 2015 and less than $27 per barrel in early 2016.
Balancing the oil market, or making the price "fair" for producers and consumers, is the stated goal of Riyadh's energy policy, with a price of $100 per barrel considered fair [PDF]. As crude oil topped $100 a barrel in the previous decade, U.S. officials urged Saudi Arabia to boost supply and bring down prices. Those calls became muted this decade, as high prices helped spur investment in U.S. "tight" oils, particularly those from shale formations. In 2014, facing a glut in supply, Saudi Arabia and OPEC once again faced calls to curb production. In November 2014, Saudi oil minister Ali al-Naimi persuaded OPEC to keep pumping to force high-cost producers—those exploiting shale, oil sands, and deep-sea resources—to reduce their output. Naimi called it a "historic decision" for OPEC to rely on market forces rather than controlling prices as a swing producer, or balancer of supply and demand.
Oil prices subsequently fell to record lows around $35 a barrel, and in a December 2016 reversal, Saudi Arabia pressed OPEC members to collectively curb their production. The six-month agreement, which went into effect in January, has so far held, defying some analysts’ expectations. The cartel’s eleven member states have reduced their collective output by nearly thirty million barrels per day, and by the spring of 2017, oil was trading at more than $50 a barrel.
Defense and Counterterrorism
Providing security for the oil-rich Persian Gulf region has been a U.S. foreign policy priority since World War II. U.S. companies were responsible for much of the oil produced in the region through the 1970s, and after Saudi nationalization of its oil industry at the end of that decade, the Saudis became an important U.S. partner in the Cold War. The United States had for many years relied on Iran under the rule of the shah as part of a “twin pillar” policy of stabilizing the region. However, Iran’s Islamic revolution in 1979 upended that approach, leaving Saudi Arabia as the main U.S. ally in the region for the past three decades.
U.S.-Saudi military cooperation peaked in the first Gulf War in 1991 under a U.S.-led coalition that expelled Iraqi forces from Kuwait. More than half a million U.S. troops flooded into the region, with many based in Saudi Arabia. The presence of U.S. soldiers in the kingdom drew ire from conservatives there and reinforced Wahhabi arguments that the Saudi elite was too accommodating to Western and non-Muslim interests.
The United States, Saudi Arabia, and Pakistan supported Afghan resistance to the Soviet occupation of Afghanistan, which lasted from 1979 to 1989. Cash and weapons flowed to the Afghan jihad, which attracted thousands of Sunni Muslims from the Middle East and North Africa. Saudi-born Osama bin Laden, son of the founder of the largest construction company in the region, joined the jihad in the 1980s and was an important recruiter of Saudi fighters to Afghanistan.
Bin Laden returned to Saudi Arabia a hero, and his years of service in Afghanistan provided him close links to the kingdom’s intelligence officials. But his experience in Afghanistan put him at odds with the Arab states. He left the country by early 1992 and was stripped of citizenship in 1994. From his new base in Afghanistan, and protected by that country’s new Taliban leadership, bin Laden issued a fatwa against “Americans occupying the land of the two holy mosques” [PDF], or Saudi Arabia, in 1996. Al-Qaeda, the terrorist network established by bin Laden, announced plans to attack U.S. forces in Saudi Arabia and accused King Fahd bin Abdulaziz al-Saud of governing outside of sharia and being hostile to Muslims.
Saudi Arabia was defensive about its role in the rise of global jihadi terrorism, and a wave of popular anti-Saudi sentiment in the United States following the 9/11 attacks damaged relations between the countries. The Bush administration’s omission of twenty-eight pages from the 9/11 Commission Report fueled speculation that the U.S. government was covering up evidence that Saudi officials were complicit in the attacks. In 2016, the U.S. Congress passed legislation, over President Obama’s veto and Saudi threats of economic retaliation, that allows the families of 9/11 victims to sue the kingdom, an exception to the principle of sovereign immunity. But the version of the bill that was ultimately passed, said legal scholar Stephen I. Vladeck, makes it more likely that even if the plaintiffs were awarded damages, they would never be able to collect on them.
The United States ended its military operations in Saudi Arabia in 2003, a move that tempered domestic criticism against Saudi rulers, while the kingdom improved its intelligence cooperation with the United States, which helped thwart attacks. Saudi Arabia maintains a “robust counterterrorism relationship with the United States,” according to a June 2015 State Department report [PDF].
Saudi Arabia is the top destination for U.S. arms, purchasing 9.7 percent of U.S. exports from 2011 to 2015. Saudi Arabia's total arms imports increased by 275 percent between 2006 and 2010, according to the research organization SIPRI [PDF]. The United States also helps Saudi Arabia secure its oil assets by providing training and advisors to Saudi security forces.
U.S.-Saudi relations have never been in complete harmony. The Israeli-Palestinian conflict has been a source of contention from early days in the relationship. During the second intifada, Riyadh proposed the Arab Peace Initiative, under which Arab countries would normalize relations with Israel in exchange for its withdrawal from occupied territories and a “just solution” for Palestinian refugees. Elements of the initiative were adopted by the Bush and Obama administrations, and may inform the Trump administration as it considers embarking on an initiative of its own.
Terrorism financing, the export of the kingdom’s austere interpretation of Islam, human rights abuses against women, and the lack of democratic representation (as documented annually by the State Department) have also created friction in the relationship.
Although the United States and Saudi Arabia have shared objectives of regional stability and containing Iran, they differed on core issues during the Obama administration. Saudi Arabia was dismayed by the lack of U.S. support for ousted Egyptian President Hosni Mubarak, and the kingdom urged a greater U.S. role in toppling Syrian President Bashar al-Assad, whose regime is aligned with Iran. Saudi Arabia was not included in initial negotiations on Iran’s nuclear program, which were conducted in secret in Oman in 2013.
Saudi Arabia's intervention in Yemen’s civil war in 2015 marked a shift from checkbook diplomacy to a more militaristic posture in the region. The Obama administration provided Saudi Arabia with arms, intelligence, and aerial refueling to prosecute the war, but there were underlying disagreements between U.S. and Saudi policymakers. Washington called for restraint amid high civilian costs, including the destruction of hospitals and infrastructure needed to transport food to populations on the verge of famine. The Obama administration, in its final months, suspended the sale of precision-guided missiles to Saudi Arabia. The Trump administration has moved to reverse this, prompting lawmakers to press for congressional scrutiny of the Saudi campaign. U.S. Defense Secretary Jim Mattis, visiting the kingdom in April 2017, offered his support for the war as a way of pushing back against Iran.
Analysts view the shift in the kingdom's foreign policy as a reflection of the growing power of a new generation of princes and technocrats, solidified in the April 2015 appointment of Mohammed bin Nayef as crown prince and Prince Mohammed bin Salman as second in line to the throne and defense minister. Still, analysts say both men will likely maintain close ties to the United States and share Washington's core security concerns, especially in confronting al-Qaeda and the self-proclaimed Islamic State, which has attacked both Sunni and Shia mosques in the kingdom.
Common economic, security, and geopolitical interests are likely to maintain strong ties between the countries for the foreseeable future. Saudi government officials and businessmen, both royals and commoners, have deep ties to the United States. Saudi ministers, including those of finance and petroleum, have degrees from U.S. universities. Fahad al-Mubarak, the central bank governor who controls over $700 billion in reserves, mostly in U.S. Treasuries, was previously chairman of Morgan Stanley's unit in Saudi Arabia. Prince Alwaleed bin Talal, the kingdom's most famous billionaire investor, owns stakes in Citigroup and Twitter.
These ties, along with the large number of wealthy families in Saudi Arabia, have long made the country a source of investments in U.S. companies. No international fundraising "road show" for private equity firms or hedge funds is complete without a stop in Riyadh, or at least without the bankers who manage money for Saudis in Dubai.
As the kingdom's economy expanded over the past decade and its stock market opened to investors in 2015, many U.S. and European banks are expanding operations in Saudi Arabia. Bank of America has been preparing for the Saudi market opening for years, and Morgan Stanley and Credit Suisse have shifted staff from Dubai to Riyadh.