Thursday, October 13, 2022

So.. what's up with the whole Saudi Arabia thing?


You may have heard in the news or on the screen about a "reevaluation" of the US-Saudi Relationship, and thought, "What the hell, we have a relationship?" So here is a super simple explanation of the relationship and the current issues.

Relationship Based on Mutual Needs

The relationship goes back to Saudi Arabia's independence and oil. The deal was:

  • The United States provided protection. Specifically from Iran and Iraq.
  • Saudi Arabia would ensure a safe supply of oil.

There have been more than a few bumps including: the Kashogi Murder, the Oil Embargo, 9/11 (12 of the 13 were Saudis), monetarily supporting terrorism. The US's support of Israel, attack on Iraq, support of Bahrain during their kurfulle.

But in general it has worked out. We ignore their support of Wahhabi extremism and they ignore our support of human rights and the condemnation that comes with it.

Problem Now

The US wants Saudi Arabia to continue current levels of oil production - and has asked them. This keeps the price low and further constricts Russia's ability to raise money from oil production.

Saudi Arabia wants to make more money by reducing the total amount of oil in the world, driving up their profits. And many see this as a sign of support for Russia.

  • But the Saudis and OPEC (Oil Producing Countries) plus Russia did decide to reduce production to raise prices. Russia will not have to do this, others - particularly Saudi Arabia - will cut production.  
  • Russia will make more money

The United States wants to express its anger / disappointment and has a couple of ways to do it. NONE of which have been approved and probably won't be.

  • The US is thinking about delaying purchase of promised weapons. If we do anything, this will be it.
  • We could stop future sales of weapons. This is a bigger deal than you think, because now all weapons systems are American, so adding Russian or Chinese systems would be a problem integrating.
  • We could cancel our security agreements with Saudi Arabia and leave our bases.

Why do oil prices go up in the United States - we don't buy Saudi Oil?

Oil is a global market commodity. That is, the price in the world is pretty much consistent because oil purchase prices are global. Why pay $120 per barrel from Saudi Arabia when you can pay less - say $90 - from Venezuela? You don't. And if we won't buy Venezuelan oil someone else will. So the prices from all countries stay roughly even.

Oil is mainly shipped by ship, so delivery costs are pretty much equal no matter if the oil comes from Saudi Arabia, Texas or Russia.

If this reevaluation means less cooperation, then it all goes in the shitter. Prices will go up for oil, and both Saudi Arabia and Iran will go nuclear for military deterrence. Which would not be a good thing.

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