Analysis & Opinions - Foreign Affairs

Saudi Arabia’s Empty Oil Threats

| Nov. 01, 2018

The brazen murder of Washington Post journalist and U.S. resident Jamal Khashoggi has elicited that rarest of reactions in contemporary U.S. politics: bipartisan consensus. Both Republicans and Democrats in the House and the Senate have condemned Saudi Arabia for the assassination operation in Istanbul, with the ever-colorful Lindsey Graham urging that the United States “sanction the hell out of” the Saudi government.

President Trump’s administration, however, has adopted a notably restrained response thus far: it is considering sanctioning the low-level operatives who carried out the killing but has given little indication that it will hold Crown Prince Mohammed bin Salman personally responsible. One explanation for this reticence is that the administration fears that punitive steps could complicate its Iran policy. Senior administration officials, including Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin, have alluded to such concerns when pressed on the Khashoggi case.

Administration officials reportedly worry that by applying too much pressure on the kingdom, they could inadvertently “jeopardize plans to enlist Saudi help to avoid disrupting the oil market.” The Trump administration has been counting on Saudi Arabia, as the world’s swing producer, to increase its oil production to help offset the anticipated loss of Iranian supply come November 5, when sanctions lifted under the Iran nuclear deal are re-imposed.

U.S. officials reportedly fear that an offended Saudi Arabia could undermine this plan by refusing to increase its oil production—or even cutting production (to spite its face). Such action would likely cause a dramatic spike in global oil prices. The American people would be forced to pay more for fuel; European countries displeased with the U.S. withdrawal from the nuclear deal would have further incentive to subvert sanctions; and Iran would enjoy greater revenues from whatever oil it could still sell. This chain of events would pose a fundamental challenge to President Trump’s entire plan for confronting Iran, of which a key component is ramping up economic pressure in an attempt to alter Tehran’s policies.

Elements of the Saudi monarchy are well aware of the administration’s fixation on Iran and seem to want to stoke these fears. In an October 14 statement, the official Saudi Press Agency alluded to the so-called “oil weapon,” reminding the United States that “the kingdom’s economy has an influential and vital role in the global economy.” The general manager of the Saudi-owned Al Arabiya news network went even further, threatening that the kingdom would reconcile with Iran in response to U.S. pressure and warning, “If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure.”   

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For Academic Citation: Nowrouzzadeh, Sahar and Andrew Miller.“Saudi Arabia’s Empty Oil Threats.” Foreign Affairs, November 1, 2018.