Whither the Saudis?

Posted By Daniel W. Drezner Thursday, February 24, 2011 - 2:02 PM Share

In a lot of ways, Saudi Arabia has had a lousy six weeks.  Revolutions, protests and general unrest have spread across the region from far-away Tunisia to way-too-close-for-comfort Bahrain and Yemen.  You're starting to see mainstream meda reports suggesting that the Kingdom's influence is waning compared to Iran.  The region is clearly spooked enough to spend an extra $36 billion to forestall a massive turnout for the planned "Day of Rage" on March 11.    If that doesn't work, the king might have to fall back on The Onion's suggested strategy.

With all of this going on, however, I find this report by the Financial Times' David Blair,  Jack Farchy and Javier Blas to be veeeeerrrrryyy interesting:

Saudi Arabia is in “active talks” with European oil companies to meet the production shortfall left by Libya, the clearest indication to date that the leader of the Opec oil cartel is about to boost supplies to stop further rises in the oil price, which surged to near $120 a barrel on Thursday. 

Riyadh is asking “what quantity and what quality of oil they [the European refiners] want,” a senior Saudi oil official said on condition of anonymity....

Paolo Scaroni, Eni chief executive, on Wednesday made the most pessimistic public assessment to date of the impact of the Libyan crisis on the country’s oil output, saying the country was producing only 400,000 b/d, compared with 1.6m b/d before the violence erupted.

“The real phenomenon is there are 1.2m barrels less on the market,” Mr Scaroni told reporters in Rome, adding that the loss of Libyan production was “not a huge thing, but it is something and there is also a sense of general uncertainty in the region which can be the trigger for speculation”.

The shortfall means the world market is enduring its biggest oil crisis since hurricane Katrina in 2005 knocked out most US oil production in Gulf of Mexico.

Traders believe that Saudi Arabia has the capacity to increase production and also the oil of the right quality to meet the shortfall. The kingdom produces so-called Arab Extra Light and Arab Super Light, which through blending could be made to resemble the high-quality, light, sweet oil produced by Libya.

The Saudi move comes as oil prices reached levels that many economists believe will dramatically slow the global economy and potentially trigger a double-dip recession. Oil prices hit an all-time high of nearly $150 a barrel in mid-2008.

Here's my question:  why are the Saudis being so cooperative at this point?  There might be sound strategic reasons -- preventing a double-dip recession, assuaging longstanding allies, etc.  It could be that the Saudi leadershipis feeling secure enough to plan for long-term price stability.

Still, based on the recent reportage, I'm a little surprised that the Saudis aren't exploiting the current uncertainty to ensure the security of the current regime going forward. If I was a Saudi prince right now, I'd be blowing my fortune during a 72-hour blowout in Vegas involving Salma Hayek, Christina Hendricks, and all the shrimp I could eat making it very clear to my buyers just how important stability is in my neck of the woods. 

As an energy consumer, I'm grateful for the current Saudi behavior.  As someone who studies the global political economy, I'm surprised and puzzled by this same behavior. 

Am I missing anything?  

EXPLORE:AUTHORITARIAN CAPITALISM, AUTHORITARIAN GOVERNMENTS, ENERGY, GLOBAL POLITICAL ECONOMY, MIDDLE EAST
 

AMBASSADOR816

3:53 PM ET

February 24, 2011

Saudi Cooperation

I don't find the Saudi cooperation to be particularly puzzling, especially because of the fairly low cost of their doing so. Granted, exploitation of the current situation would net them a nice profit, but taking the risk averse position and publicly cooperating would make sense if they see any possibility of needing international intervention when conflicts escalate and spread further. Even if the conflict doesn't spread to their borders (or is quickly contained if it does), public cooperation may give them a better chance of having a subtle (or not so subtle) say in the restructuring of the affected countries in the area.

 

JPMORK010445

4:38 PM ET

February 24, 2011

The Real Question

I think it is more important that in the name of "cooperation", the Saudis aren't perceived as sacrificing the needs of their own people. Is anyone asking ordinary Saudis what they think of the USA these days? Also, the Saudis have multiple patrons now when emerging economies are growing faster than Europe and America. I think they have a more complex view than back when the USA was a bulwark of the family's rule.

 

DITIRMIND

1:26 PM ET

February 25, 2011

Saudi Cooperation Not Surprising

1) Being cooperative right now is showing the West how much it relies on the Saudi royal family. If they play hardball, the West may be more inclined to let them fail. Who wants an ally that tries to strong arm you?

2) Exporting more oil means they make more money. So, this is a self-enforcing type of cooperation. Plus, having that extra cash will certainly help them pay off their population to prevent future purposes

In sum, Dan - you forget that the strategies a state can follow depends on their perceived strength. They don't look super strong right now, so they can't act like they are.

 

RAMIREZ_CHRISTIAN

3:30 PM ET

February 28, 2011

Saudi Cooperation

I can see Mr. Drezner's point as something to keep in the back of our minds, but after reading the comments to follow, I would have to say that Saudi Arabia's decision to cooperate would be a better move for them politically overall. Seeing the political and economic climate currently in countries like Libya, Egypt, Lebanon, Yemen, etc., a country like Saudi Arabia has to ask themselves "What can we do to keep doing what do politically, without falling in turmoil?" Political support from power countries like the U.S., by helping them out economically would be a good start. Also in the future, when it comes to reconstructing the countries in the neighboring area, Saudi Arabia will definitely play a hand in influencing what they'll eventually turn into. To sum it up: A bird in the hand is worth two in the bush.

 

GROTA BUP

4:15 PM ET

March 23, 2011

Taking the risk averse

Taking the risk averse position and publicly cooperating would make sense if they see any possibility of needing international intervention when conflicts escalate and spread further. Even if the conflict doesn't spread to their borders.the Saudis have multiple patrons now when emerging economies are growing stavkove kancelarie faster than Europe and America. I think they have a more complex view than back when the USA was a bulwark of the family's rule.I would have to say that Saudi Arabia's decision to cooperate would be a better move for them politically overall. Seeing the political and economic climate currently in countries like Libya, Egypt, Lebanon, Yemen, etc., a country like Saudi Arabia has to ask themselves "What can we do to keep doing what do politically, without falling in turmoil?" Political support from power countries like the U.S., by helping them out economically would be a good start. Also in the future, when it comes to reconstructing the countries in the neighboring area.

 

Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.

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