The Kingdom Of Oil

Saudi Arabia is widely regarded as the world’s most important oil exporter. Through its own production and as the de facto leader of OPEC and OPEC+, Saudi Arabia can have more influence over international oil markets than most other producers – even countries that do not directly import Saudi oil are therefore affected by Saudi oil policy. In light of Russia’s full-scale invasion of Ukraine in February 2022, and as energy security has become a top priority for Western governments, the UK and others across Europe and beyond have turned to Saudi Arabia, calling for it to increase production in order to bring down global oil prices.

Oil revenues have historically fuelled Saudi Arabia’s social contract, and they are now the indispensable source of funding for the Kingdom’s Vision 2030 reform agenda. Although the Saudi Vision 2030 reform agenda ultimately aims at diversifying the Saudi economy, income from oil exports remains the all-important enabler of Saudi Arabia’s political and socioeconomic development in the absence of sufficient foreign direct investment.

This paper analyses Saudi Arabia’s oil policy and how it interacts with the Kingdom’s domestic and foreign and security policies. The following is a summary of the paper’s findings:

• Saudi Arabia’s central role in global oil markets is a key source of the Kingdom’s geopolitical power and importance (in addition to its status as the custodian of Islam’s holiest sites). Oil has shaped Saudi Arabia’s foreign relations. Most notably, it has facilitated its bilateral relation with the US. For most of the post-1945 era, Saudi Arabia–US relations have been encapsulated in an oil-for-security pact – Saudi Arabia sought to influence international oil markets in line with US interests, while the US provided the Kingdom with political, defence and security support.

• In recent years, Saudi Arabia has adopted a “Saudi First” approach. This does not constitute a wholesale overhaul of Saudi oil policy and overall foreign political orientation, but rather reflects a reordering of the Kingdom’s strategic priorities that results in Saudi policies that are less directly aligned with US interests. The “Saudi First” approach is driven by a focus on the Vision 2030 reform agenda; a perception that the US is less willing and able to guarantee the Kingdom’s security; an assessment that the US’s “shale revolution” has made international oil markets more competitive and volatile; and a conclusion that global economic shifts, especially the emergence of China as the most important buyer of Saudi oil, necessitate the building of more extensive relations with non-Western powers.

• Saudi Arabia’s partnership with Russia, manifested in the two countries’ joint leadership of OPEC+, is best understood as a marriage of convenience. From Saudi Arabia’s perspective, OPEC+ increases its ability to influence international oil markets by extending OPEC’s coordination of production quotas to more producing countries. Riyadh opposes oil-related sanctions on Russia as destabilising interventions in the market. However, Saudi–Russian relations have been far from straightforward, and there is scope for future disagreements to emerge, including over competition for market share in Asia.

• Both climate change and climate action – specifically pressure for the decarbonisation of the global economy – constitute a major challenge for Saudi Arabia. In recent years, the Kingdom’s approach towards international climate action has shifted from mostly resisting decarbonisation efforts to trying to actively shape the international debate while still advocating for the continued importance of fossil fuels. This also includes beginning attempts to capitalise on potential opportunities in the global energy transition.

• Saudi Arabia is set to remain one of the most influential players in global oil and energy markets. Understanding – and taking seriously – its evolving strategic calculus must therefore be a key task for policymakers in the UK and across Europe as they seek to safeguard their countries’ energy security.

Introduction

In the context of Russia’s invasion of Ukraine in February 2022, and the spike in international oil and gas prices that followed, the subject of energy security and the link between energy and geopolitics has jumped to the top of the agenda for governments around the world, including the UK. As part of this shift, policymakers in London, other European capitals and beyond have naturally turned their attention to Saudi Arabia. The question of how much oil Saudi Arabia produces and why – that is, identifying the economic and political drivers behind the country’s oil-related decisions – has become infused with renewed importance.

This paper analyses Saudi Arabia’s oil policy and how it interacts with the country’s domestic and foreign/security policies. The paper forms part of RUSI’s UK National Security and the Net Zero Transition project and is published alongside a paper that focuses on the linkages between Russia’s energy policies and its foreign/security policy behaviour. Together, the two papers examine how Saudi Arabia and Russia – which, along with the US, are the world’s leading oil exporters, being jointly responsible for around 20% of global production – approach their roles as energy superpowers; how their energy-related decision-making has evolved in recent decades and in light of the Ukraine war; and how their foreign policies and conduct in international forums, including on climate change and other major global issues, will continue to have global implications. It should be noted that this paper was drafted prior to the Hamas attack on Israel on 7 October 2023, and the subsequent war between Israel and Hamas in Gaza (still ongoing at the time of this paper’s publication). The analysis in the paper is therefore not reflective of the impact of conflict on regional dynamics, or on Saudi Arabia’s oil and foreign policy.

Saudi Arabia has rarely been out of the international spotlight in recent years. From the civil wars in Syria and Yemen, to the efforts to contain Iran’s nuclear programme, Saudi Arabia has been a key stakeholder – and active participant – in many of the conflicts and geopolitical issues that have occupied the centre of UK (and European) foreign and security policies over the past decade. The murder of Saudi journalist Jamal Khashoggi by Saudi government agents in the Saudi consulate in Istanbul in 2018 led many Western governments to seek to distance themselves politically from the Kingdom; then-presidential candidate Joe Biden vowed to treat it as a “pariah”. But Russia’s war against Ukraine has not just changed the European and global security environment: it has also contributed to a shift in the debate about Saudi Arabia.

Since the start of the invasion, Western leaders, including US President Biden, then-prime minister Boris Johnson (and other UK ministers), French President Emmanuel Macron and German Chancellor Olaf Scholz have travelled to Saudi Arabia for talks with King Salman and Crown Prince Mohammed bin Salman. Energy – specifically, the hope that Saudi Arabia would increase oil production in order to bring down international prices – was a key driver behind this diplomatic re-engagement with Riyadh. Since early 2022, Saudi Arabia’s every move – on oil especially, but also with regard to its ongoing friendly relations with Russia, its efforts to expand ties with China, and its various diplomatic initiatives in the Middle East region – has been scrutinised by policymakers in London and across Europe, as well as in the Western media.

This renewed focus on Saudi oil policy by the UK and its European partners is not only – and for many countries not even primarily – driven by the need or desire to buy more Saudi crude. Russia’s invasion of Ukraine has triggered a diversification race, as European states scramble to reduce (and ideally end) hydrocarbon imports from Russia in order to deprive Moscow of revenue and reduce its leverage over them. Germany, for example, received 31% of its oil and 60% of its gas from Russia in 2021. The UK was comparatively less affected by this dynamic: in 2021, only 9% of the UK’s oil and 4% of its gas imports came from Russia, and by January 2023 this had been reduced to zero. Saudi oil exports to Europe have increased since February 2022, but much of the gap in European oil supplies has been filled by crude from Norway, the US, West Africa and other Middle Eastern producers.

Yet, regardless of how the UK and its European partners replaced imports from Russia, they all felt the impact of the surge in oil and gas prices sparked by Moscow’s war. In the 12 months leading up to the invasion, the price of a barrel of Brent crude oil increased from just over $63 in February 2021 to over $92, driven, among other factors, by the recovery of the world economy from the Covid-19 pandemic. Prices for natural gas were on a similar trajectory. But Russia’s war sent prices soaring even higher – Brent reached $119 per barrel in early June 2022. As the conflict has continued into its second year, oil prices have returned to pre-war levels, but towards the end of 2023 they remained in the $85–$95 range, significantly higher than they were in most of the previous decade. Ultimately, in the context of globalised energy markets, the UK is not only exposed to disruptions to its direct oil imports, but also to flows and prices of hydrocarbons everywhere around the world. And few players have as much influence over the flows of globally traded oil as Saudi Arabia.

Saudi Arabia is an oil superpower. It holds the second largest proven oil reserves in the world after Venezuela, and its national oil company Saudi Aramco is one of the largest companies in the world – and by far the most profitable. Having established itself as the world’s swing producer, it has invested in maintaining a level of production capacity that has been – and is currently – significantly higher than its actual production, giving it the unique ability to both decrease and increase output.

Moreover, besides itself accounting for up to 12 million barrels per day – or roughly 10% – of global production capacity, Saudi Arabia is also the de facto leader of OPEC and co-leader of OPEC+, alongside Russia. OPEC accounted for around 36% of global production in 2022 (and 80.4% of global reserves), while OPEC+, which was formed in 2016 and includes nine other non-OPEC producers besides Russia, accounted for around 59%. OPEC+ decisions to adjust production quotas, including for example the significant cuts announced in October 2022 and June 2023, tend to be understood – by governments and the media around the world – as reflecting, to a significant degree, Saudi Arabia’s decision-making, albeit within the context of bargaining with the grouping’s other members.

In addition to Saudi Arabia’s role in influencing day-to-day global oil prices, the Kingdom’s wider geopolitical posture and behaviour are increasingly a focus for UK and European policymakers. The Kingdom’s regional foreign policy continues to affect regional stability in the Middle East, which, in turn, has implications for UK and European security; and its positioning vis-à-vis the US (and the wider West), Russia and China, and the Global South, are seen as indicators of the posture and direction other countries in the Middle East might adopt in a changing global order. Further, as a hydrocarbon superpower, Saudi Arabia is clearly a major stakeholder in international efforts to combat climate change and decarbonise the global economy.

Structure and Methodology

This paper is divided into three chapters. The first examines Saudi Arabia’s relationship with oil, and traces how revenues from crude exports have shaped – and continue to shape – the Kingdom’s social contract, including their envisaged role and importance in the government’s root-and-branch political, economic and social reform agenda, Vision 2030. The second chapter looks at the linkages between oil and Saudi Arabia’s national security and foreign policy, including within the context of OPEC+. The final chapter focuses on how Saudi Arabia is navigating the dual challenges of climate change and climate action.

The paper argues that Saudi Arabia continues to see itself as the crucial stabiliser of the international oil market. However, its leadership’s ambitious political and socioeconomic domestic agenda, along with its perception of the changing international environment (and its vision for the Kingdom’s role therein) has led to a reorganisation of priorities. The outcome of this is a more unapologetically self-interested and less obviously Western-aligned energy and foreign policy.

The paper is primarily based on desk-based research, consulting open source journals, books, statements from Saudi officials and media reporting. It also draws on 15 supplementary interviews conducted by the author, and more informal engagement with subject matter experts and officials in the Gulf, the UK, Europe and the US, including during two visits to Saudi Arabia in 2023.

I. A Kingdom Built on Oil

In many ways, Saudi Arabia has been defined by, and was built on, its oil wealth – the country has developed symbiotically with its oil industry, which has fuelled the global economy for most of the past century.

Initially, it was US oil companies that first struck oil in Saudi Arabia in 1938 and established the country’s oil export infrastructure. Having secured the concession for Saudi oil at a bargain price, these companies also built much of Saudi Arabia’s early infrastructure so as to maintain good relations with the king and his government as the scale of the Kingdom’s resource wealth became more apparent. Through the 1960s and 1970s, however, the Saudi state gradually moved to take control: by 1976 it had taken full ownership of Aramco – the Arabian American Oil Company, established in 1944 by Standard Oil of California (today’s Chevron) and the Texas Company (Texaco, now part of Chevron). In 1988, the state finally created the Saudi Arabian Oil Company to take over all of Aramco’s assets, including its name – by which Saudi Arabia’s national oil company is still known today.

Oil, Islam and the Social Contract

Oil and the revenues from its export are a key foundation for Saudi Arabia’s political and socioeconomic development model and for the social contract between the ruling Al-Saud family and the population. It is the income from oil exports, rather than money raised through taxation, that has paid for the Kingdom’s modern infrastructure, the formation of its state institutions, and the extensive package of services and cradle-to-grave welfare benefits they have traditionally delivered to Saudi citizens. It has also paid for large quantities of modern Western military hardware, and for a foreign policy that has, as one of its main tools, the ability to provide financial and material support to partners and allies in the Middle East region and beyond (discussed in more detail in the next section).

Traditionally, oil has also been an important factor in the relationship between the Saudi government (and general state apparatus) and the Kingdom’s conservative religious establishment. Long before the discovery of oil, Islam was a central source of legitimacy and identity for the Al-Saud and their Kingdom (and its previous iterations). Saudi monarchs have derived power and status from their role as the political masters of Islam’s holiest sites in Mecca and Medina; except for King Khalid (ruled 1975–82), all Saudi monarchs since King Faisal (ruled 1964–75) have assumed the title of Custodian of the Two Holy Mosques as their primary honorific. Domestically, religion provided the ideational link between the ruling family and its subjects, with clerics holding positions as crucial intermediaries. For decades, Saudi domestic politics and foreign policy have both been dominated by competing pressures from this powerful constituency; and from the Kingdom’s integration into a rapidly globalising and, for a long time, US/Western-dominated world. Oil revenues gave the Saudi leadership the means to navigate this space.

With the 1973 oil embargo, Saudi Arabia tried to use its oil-based geopolitical weight to affect the great regional cause of the time, the Arab and Palestinian struggle against Israel (which had an obvious religious dimension). Previous embargoes in the contexts of the 1956 Suez Crisis and the 1967 Six-Day War had been ineffectual, but the 1973 embargo was accompanied by a 25% cut in OPEC production that sent oil prices skyrocketing. The embargo largely failed to achieve its immediate political objective of curbing Western support for Israel, but it effectively announced Saudi Arabia’s arrival on the global stage as a power to be reckoned with, and one that the US and its Western allies resolved it would be best to maintain close relations with. Domestically, the resulting oil revenue windfall fuelled an urbanisation and modernisation boom.

But by the 1980s, the dual shocks of the Islamic Revolution in Iran and the seizure of the Grand Mosque in Mecca by Islamic extremists, both in 1979, led to a course correction. The Saudi leadership doubled down on religious conservatism by diverting oil-derived state funds to be spent in line with the priorities of the clerical establishment. Internationally, Saudi Arabia walked a tightrope between relying on the US and other Western partners for its defence and security needs and taking on the mantle of leadership for the Arab and Islamic worlds (with particular responsibility for related political and religious causes). The Kingdom turned to Washington to protect it from the fallout of the Iran–Iraq War in the 1980s and from Iraq’s subsequent expansionist ambitions (which led it to try to annex Kuwait in 1990); and it worked closely with the US to support the mujahedeen in Afghanistan against the Soviet Union. But Saudi Arabia also invested heavily in internationally focused Islamic institutions such as the Muslim World League, the University of Madinah and the World Assembly of Muslim Youth, all of which were regarded as promoting the conservative views of the Kingdom’s religious establishment.

The Vision 2030 Revolution

Over the past decade, Saudi Arabia’s approach – including to oil-related decision-making and to how it defines its international role – has changed: subtly in some regards, but more dramatically in others. King Salman (who ascended to the throne in 2015) and especially his son, Crown Prince Mohammed bin Salman, have made their Vision 2030 the North Star of their domestic and foreign policy. They have radically disempowered the Kingdom’s clerical establishment; declared economic development and diversification to be the primary national objectives; and adopted a more unapologetically self-interested and assertive international posture.

Economic diversification – the idea of reducing the economy’s dependence on oil exports – has long been on the Saudi agenda, at least in theory. In practice, however, very little progress has been made over the decades, with efforts to diversify essentially fluctuating inversely to international oil prices: when prices were low, diversification was in; when prices were high, it dropped down the list of priorities. Vision 2030 appears to have altered this dynamic: a number of path-breaking economic reforms have already been implemented; the government seems to be serious about curbing some aspects of the oil-financed cradle-to-grave welfare state; and there is an intense flurry of activity across the Kingdom to build and invest in new commercial sectors (for example an entertainment industry) and various mega projects (including, most prominently, the Red Sea city NEOM).

However, all these efforts remain inextricably linked to oil. In the absence of sufficient foreign direct investment, oil revenues are the most important source of funding for everything the government is trying to achieve. Through a set of centralising political reforms, Saudi Aramco and the Saudi oil industry have been put in the service of enabling Vision 2030. Key steps in this regard have included: the creation of the Council of Economic and Development Affairs, chaired by Mohammed bin Salman, to streamline all decision-making related to Vision 2030, which effectively encompasses all domestic and economic policy fields; the sale of almost 2% of Saudi Aramco in an initial public offering in 2019 and the transfers of two 4% stakes in Saudi Aramco to the Kingdom’s Public Investment Fund in 2022 and 2023, respectively; and the restructuring and rebranding of the Ministry of Energy, which oversees Saudi Aramco. In 2019, the Ministry of Petroleum and Mineral Resources was split up to create the Ministry of Energy and the Ministry of Industry and Mineral Resources. The energy minister, Prince Abdulaziz bin Salman, son of the king, half-brother of the Crown Prince and the first member of the royal family in this ministerial position, has worked to give his ministry a new brand identity, stressing that its focus is on energy writ large, rather than oil alone. He has also presided over Saudi Aramco’s expansion to become a more integrated oil company by investing in both upstream production and downstream means of value generation such as refining capacity and petrochemical production.

Economic diversification is the central mantra of Vision 2030, which has itself become the defining feature of Saudi Arabia’s domestic politics and national agenda. To commit to this, Saudi Arabia must maintain oil prices at a relatively high level. In the long run, the government hopes that Vision 2030 – and its successors – can modify or replace the old social contract in the Kingdom. While Islam will remain one of the most important features of Saudi identity, the government has felt confident enough about its modernisation agenda’s attractiveness to the population to dismantle the religious establishment as a political force in the Kingdom. Yet, throughout all of this, the Saudi leadership remains aware that the production and export of oil remains the all-important enabler of their Kingdom’s political and socioeconomic development.

II. Oil, Security and Power

For Saudi Arabia, there has always been a direct connection between its oil industry (and status as a world-leading oil producer) and the country’s national security. As outlined above, oil has been and remains the foundation for the Saudi economy and the social contract between the Saudi state and its people; as such, it is inseparable from domestic political stability and security. In terms of foreign affairs, oil has similarly been at the heart of the Kingdom’s most important bilateral relationships, most obviously the one with the US. At the same time, its oil and derived wealth have also been a key source of Saudi Arabia’s geopolitical weight, influence and power on the global stage.

The Oil-for-Security Era

For most of the past century, the link between Saudi Arabia’s oil policy and its foreign, defence and security policy has been most obviously apparent in its relationship with the US. The February 1945 meeting between King Abdulaziz Ibn Saud and US President Franklin D Roosevelt on the USS Quincy, during which the two men forged the oil-for-security bargain around which bilateral relations between Riyadh and Washington have revolved ever since, is part of the folklore of modern Middle East politics. The Carter Doctrine, proclaimed in 1980, made the US’s commitment to the security of the Gulf region – and therefore also to Saudi Arabia – even more explicit, clarifying that “an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force”. President Jimmy Carter also emphasised that the US would expect “the participation of all those who rely on oil from the Middle East” in these efforts to ensure the uninterrupted flow of hydrocarbons from the Gulf to international markets. Although the Doctrine was initially formulated with the Soviet Union in mind as the threatening “outside force”, the US-led campaign to liberate Kuwait and protect Saudi Arabia from potential further Iraqi aggression in 1990–91 was arguably its most tangible manifestation.

Saudi Arabia has generally held up its side of the bargain. Except for the US position on the Israeli–Palestinian conflict, which precipitated the 1973 embargo and production cut described earlier, Saudi Arabia was generally committed to accommodating the US’s interest in maintaining the steady flow of affordable oil to fuel the American economy and, ultimately, the global economy. Energy expert Daniel Yergin has described Saudi Arabia as being akin to the “central bank of world oil”. Saudi Arabia was never under the illusion that it alone – or any other producer or consumer – could ultimately control the highly dynamic international oil market. On several occasions, the decisions to adjust production failed to have their intended effect, either because of miscalculation or because of geopolitical and global economic developments that had much greater impact on energy markets. But in principle at least, Saudi Arabia – through its position at the helm of OPEC, and embracing its status as the great swing producer capable of quickly increasing or decreasing its output – sought to contain oil price fluctuations as much as it could.

These efforts to bring a degree of balance to the international oil market were shaped by more than the desire to retain US favour. Most obviously, Saudi Arabia needed to sell oil to sustain its domestic economy and social contract. That meant, and still means, trying to keep prices high enough to cover its government budget – often referred to as the “break-even price” – and stable enough to allow a degree of planning security. Yet Saudi Arabia also made a conscious effort to prevent prices from climbing too high. Although higher prices would translate to higher revenues for the Saudi state (at least as an immediate consequence), the Kingdom has long urged moderation, lest overly high energy costs slow the global economy and eventually dampen demand or provide additional incentives for the development of alternative energy sources.

In sum, Saudi Arabia has traditionally understood its hydrocarbon wealth as giving it special responsibilities that went far beyond those an ordinary state might have to its people, instead extending to the health of the global economy. In this context, it also regarded US commitments to Gulf security as being about more than the preservation of the Kingdom’s own national security. From Saudi Arabia’s perspective, the oil-for-security bargain was not just a bilateral pact serving the interests of two countries, but a critical component of the post-Second World War global order – with the Kingdom as the world’s pivotal energy provider.

The Emergence of a “Saudi First” Approach

In June 2023, after announcing another major production cut, Saudi energy minister Abdulaziz bin Salman declared that the Kingdom and its partners within OPEC and OPEC+ would “do whatever is necessary to bring stability to this market”. He explained that the decision was based on projections of weak global demand in the context of a slow global economy. This was Saudi Arabia playing its traditional role as balancer. The minister and other Saudi leaders made the same arguments to justify the other two recent production cuts, in October 2022 and April 2023. Yet, in the context of Russia’s invasion of Ukraine and the subsequent spike in energy prices, all three announcements attracted vocal criticism. Many observers suggested that the cuts represent a change in Saudi policy, arguing that instead of acting as the pro-Western oil central banker of yesteryear, the Kingdom had adopted a more resource-nationalist “Saudi First” approach aimed at keeping prices elevated, and potentially even favouring OPEC+ member Russia’s interests over those of the US and other Western countries.

Assertions that there has been a wholesale overhaul of Saudi oil policy and overall foreign political orientation go too far, but it is true that there has been a change in what the Kingdom regards as its main strategic priorities and how it believes it can best achieve them. The shift in Saudi domestic politics described above, encapsulated in the proclamation of Vision 2030 as the Kingdom’s all-encompassing national development roadmap, also finds expression in how Saudi leaders approach oil export decisions, and in Saudi foreign policy more generally. As noted earlier, the need to fund the long list of socioeconomic reforms and development projects represents a renewed incentive to maximise oil revenues. Whereas in the past Saudi leaders might have looked to find a balance between their financial needs and their strategic alignment with the US, the pursuit of Vision 2030 now trumps all other considerations. From decisions on oil production and the willingness to work closely with Russia to coordinate outputs across OPEC+, through the agreement to normalise relations with Iran under the auspices of China, to the re-engagement with Syrian President Bashar Al-Assad’s regime – if Saudi Arabia believes that an action serves Vision 2030, it is prepared to act in a way that might prompt criticism or opposition from Washington and elsewhere.

This approach is shaped by Saudi Arabia’s perception of key trends in the global environment that have serious implications for its national security. Most importantly, Saudi Arabia has lost confidence in the US’s willingness to hold up its side of the old oil-for-security bargain. Saudi Arabia is aware that the US, with its extensive basing infrastructure and thousands of deployed troops, remains the single most powerful military power in the Gulf region. The Kingdom does not believe that any other external power – not China, not Russia – is prepared (or able) to take over the role the US has played in upholding maritime security in the region, and it is still looking to purchase weapons from the US (and European partners) to strengthen its defence capabilities. Yet, from Saudi Arabia’s perspective, the US commitment not just to be present in the region, but to exercise power and to do so in line with the Kingdom’s conception of regional security and stability, has eroded over the past two decades.

According to Riyadh, the George W Bush administration dismissed Saudi Arabia’s warnings that regime change in Iraq would unleash regional instability; Riyadh also holds that the Obama administration allowed the regional order to unravel further by abandoning the Mubarak regime in Egypt, not intervening decisively against the Assad regime in Syria and ignoring regional concerns in negotiating the 2015 nuclear agreement with Iran; finally, Riyadh’s view is that the Biden administration never attempted to hide its dislike of the Kingdom. Even the Trump administration, which had initially appeared to be more responsive to Saudi concerns, did nothing when Iran attacked Saudi Aramco facilities in Abqaiq and Khurais on 14 September 2019. This was a watershed moment for Saudi Arabia: from the Kingdom’s perspective, there could hardly be a more obvious reneging on the oil-for-security bargain than a non-response to an attack that took more than 5 million barrels per day – roughly half of Saudi production – offline.

As well as being prompted by the changes the Kingdom perceived in its bilateral relations with the US, recent shifts in Saudi Arabia’s oil-related decision-making and foreign policy have also been a response to how the Kingdom has experienced developments in the US’s energy industry over the past decade. From Riyadh’s perspective, the shale oil and gas revolution in the US has dramatically altered the dynamics of international markets, rapidly increasing overall global production capacity (affecting international prices) and turning the US into a net exporter of hydrocarbons (and therefore a competitor for market share). Moreover, the shale revolution has increased price volatility, partly because shale production has shorter timelines than traditional extraction projects, which contributes to more fluctuations in supply levels, and partly because the companies involved in the US oil industry are mostly private entities operating outside the constraints of the kind of production quotas that Saudi Arabia and its fellow OPEC members have long used to exert influence over the global market.

In fact, Saudi Arabia has regarded recent US government decision-making related to the management of international energy markets as hypocritical and wilfully destabilising. In its view, Washington has refused to rein in the US oil industry to prevent the oversupply of the market (though this is arguably hardly possible, as the US oil industry is mostly privately owned and therefore not subject to government-set quotas), and then turned to Saudi Arabia to call for production cuts when prices fell so low as to threaten the viability of US oil companies. The most obvious example of the latter pattern was President Trump’s appeal to Saudi Arabia and Russia to end their price war in April 2020. Moreover, Saudi Arabia feels that the actions the US and other Western governments have taken to deal with the increase in prices since Russia’s 2022 invasion of Ukraine, and to try to target Russian energy exports through sanctions, have equated to precisely the kind of politicisation of energy policy that the Kingdom has been accused of. Riyadh regards the substantial release from the US Strategic Petroleum Reserves since February 2022, and the US–European attempt to impose a price cap on Russian oil, as blatant and politically motivated manipulations of the market.

The overall result, from Saudi Arabia’s perspective, is a more competitive and volatile market in which the Kingdom is still expected to (and indeed wants to) maintain a degree of balance and stability, while others – the US government and US energy companies in particular – take no such responsibility. The decision to expand the coordination of production levels beyond OPEC by creating the OPEC+ grouping with Russia, and Riyadh’s insistence on continuing to work with Moscow after February 2022, despite intense criticism from the West, has been a key element of how Saudi Arabia has tried to respond to these new dynamics. This is discussed in more detail below.

A third, related, key driver of changes in Saudi Arabia’s international positioning, including as an energy producer, is the Kingdom’s understanding of the ongoing shifts in the global political and economic order. Long before the shale revolution in the US, the West’s importance as a customer of Saudi – and Middle Eastern – hydrocarbons had declined significantly; as of 2021, the vast majority of Saudi crude exports went to Asia (250.4 million tonnes, with only 72.8 million tonnes going to non-Asian countries; China alone accounted for 87.6 million tonnes). Renewed European interest in Middle Eastern oil and gas following Russia’s invasion of Ukraine has not changed the fact that Saudi Arabia (and most other hydrocarbon producers) continue to see markets in Asia as their main priorities and future growth areas. The Western approach to climate change and the energy transition, discussed in the next section, is an important factor in this calculus. Ultimately, Saudi Arabia judges that while the US and the West are still important, including for its defence and the success of its Vision 2030, it is in the Kingdom’s interest to diversify its international relations, not least by forging closer relations with its most important oil customer, China. In Riyadh’s view, this does not imply that it has to position itself against the US, but it does mean that it is determined to resist pressure to conform with what it regards as an emerging Western with-us-or-against-us attitude vis-à-vis Beijing (or Moscow).

The notion that Saudi Arabia has adopted a “Saudi First” approach in recent years is somewhat misleading, in that it suggests that the Kingdom’s foreign policy and decisions on oil exports were previously guided by anything other than what Saudi leaders regarded as their – and their country’s – interests. During the oil-for-security era, Saudi Arabia generally determined that its interests were best served by aligning itself as closely as possible with the US, including in how it exercised its role as an oil exporter committed to stabilising and moderating international prices as much as possible. Indeed, Ibrahim Al-Muhanna, a long-time adviser in the Saudi Ministry of Energy, suggests that Saudi leaders were even prepared to occasionally accommodate requests from US politicians to try to nudge energy prices downwards to help with US election campaigns. Over the past decade, and most obviously since the rise to power of Crown Prince Mohammed bin Salman and the proclamation of his Vision 2030, Riyadh’s calculations have changed. The perceived unreliability of the US as a security provider, changes in the global balance of power and the need to fund Vision 2030 are key factors driving an approach that is less US-centric and more focused on maintaining a higher level of prices if possible.

Saudi Arabia and the OPEC+ Connection with Russia

The Saudi–Russian partnership, manifested in the countries’ joint leadership of the OPEC+ grouping, is best understood as a marriage of convenience, rather than an expression of a wider strategic alignment – certainly not one that even approaches the importance of the Kingdom’s relationship with the US, or with China, for that matter. OPEC+ was formed in 2016 in response to the disruption to the global oil market caused by the US shale revolution. By increasing the number of countries coordinating production levels, the members of OPEC+ sought to expand their ability to control the supply side of the market and thereby regain a more substantial ability to influence and stabilise international prices. By themselves, Saudi Arabia and its fellow OPEC members accounted for around 36% of global production; bringing Russia and nine other producers into the fold increased that share to 59%.

The strategy worked, at least to an extent. OPEC+’s supply-side interventions in themselves were not enough to control international oil prices, but they generally succeeded in reducing market volatility. However, the brittleness of the alliance was demonstrated in the price war between Moscow and Riyadh in March and April 2020. As the global economy shut down with the onset of the Covid-19 pandemic, prompting oil prices to fall, Russia – seeing an opportunity to deal a blow to the US shale industry – refused to go along with Saudi-proposed production cuts. Saudi Arabia, though not necessarily opposed to hurting shale producers, opted for a show of force vis-à-vis Russia. It ramped up production to deliberately push prices down even further so as to force Moscow to relent. It took an intervention from the Trump administration in Washington to convince Saudi Arabia and Russia to return to cooperating with one another, ultimately brokering an unprecedented 10 million barrels per day cut by OPEC+ members in April 2020.

In the years since, and thus far unperturbed by Russia’s invasion of Ukraine, OPEC+ coordination has been much less fractious. Many of the grouping’s members have struggled to fulfil even their reduced production quotas, and there has been persistent speculation that the UAE – after Saudi Arabia and Russia, one of the most important members of the alliance – could consider leaving OPEC in order to more independently and immediately monetise its expanding production capacity. Overall, however, OPEC+ and the Riyadh–Moscow relationship at its apex have held together, even in the face of significant Western political pressure on Saudi Arabia after February 2022. From the Kingdom’s perspective, the expanded supply-side market influence that Russia brings to OPEC+ remains highly valuable; Riyadh may also judge that Moscow can exert a degree of leverage over Iran, an OPEC member with at least the potential capacity to substantially affect global supply even as it remains hamstrung by US sanctions. However, this aspect could become less important to Riyadh, as its own relations with Tehran have become more constructive following the March 2023 Beijing Agreement.

It is also important to note that the Saudi–Russian bilateral relationship extends beyond oil. Ever since King Salman’s unprecedented visit to Russia in 2017, the two countries have worked on expanding economic cooperation more generally, including with discussions about joint investments in Russia’s agriculture and energy sectors, for example – though Saudi Arabia has generally been less vocal about these plans than Russia. Moreover, Saudi Arabia has at least reluctantly appreciated Russia’s return to the Middle East as a security actor over the past decade. It did not like Russia’s intervention on the side of the Assad regime in Syria in 2015, at a time when the Kingdom was still committed to an opposition victory in Damascus, but from Riyadh’s perspective Russia was also prepared to stand by its partners in the region, reliably and consistently oppose all forms of destabilising regime-change efforts in the region, and refrain from criticising the Kingdom; all in marked contrast to the US, whose commitment to regional stability seemed less certain, as discussed above.

As Russia’s war against Ukraine goes on, and particularly if Russia’s economy suffers further and its military struggles continue, Saudi Arabia’s belief in the usefulness of the non-energy components of the bilateral relationship could be eroded. Even then, though, energy and the two countries’ shared leadership of OPEC+ remain powerful connectors, as does the fact that Saudi Arabia is uncomfortable with some of the geopolitical developments surrounding the war. As previously mentioned, Riyadh has been vocal in its opposition to some of the Western sanctions on Russia’s energy sector, particularly the attempt to impose a price cap on Russian exports. Saudi Arabia worries that this could set a precedent for politically motivated interventions in global energy markets by buyers of hydrocarbons that could one day affect the exports of other producers too. Indeed, the Kingdom’s unwillingness to pick sides between the West and Russia goes beyond energy – and Russia, for that matter. In an increasingly competitive and polarised global environment, Saudi Arabia is determined not to be forced to choose between West and East, insisting that it will chart its own path in a multipolar – not bipolar – future world order.

But Saudi–Russian cooperation within OPEC+ may not continue forever. The 2020 price war showed that Riyadh is prepared to turn against Russia when it sees its own interests threatened. Russia’s expanding market share in Asia, as it sells its crude at discounted prices to major consumers like China and India, could fuel discord, particularly if Saudi Arabia were to see its own market share in Asia – the continent it sees as the centre of gravity for future exports – become affected. For the moment, Saudi Aramco appears to be managing this risk, not least by buying up Russian crude and selling it on (Saudi Aramco is not just the largest oil producer in the world, but also a leading oil trader). Still, the “Saudi First” approach, the primacy of pursuing its own interests, applies just as much to its cooperation with Russia and other OPEC+ members as it does to its response to Western calls for changes to the Kingdom’s policies.

III. Between Climate Change and Climate Action

Saudi Arabia’s evolving oil-related decision-making and foreign policy must also be understood in the context of the dual challenge that climate change and climate action pose to the Kingdom. In the past, Saudi Arabia has generally approached the climate debate from a defensive position. Given the centrality of its oil industry to its political and socioeconomic development model, it has, like Russia, long regarded international (and especially Western) calls to decarbonise the world economy and limit – and eventually end – the extraction of fossil fuels as a near-existential threat. Until the diversification of Saudi Arabia’s economy progresses further than it has to date, oil exports will remain strategically indispensable for the Kingdom.

Nevertheless, Riyadh has changed its tone somewhat in recent years. In 2021, it announced 2060 as its target to reach net zero emissions and announced the Saudi Green Initiative and the Middle East Green Initiative to accelerate climate-and sustainability-related development efforts in the Kingdom and the region, respectively. Critical observers have dismissed such announcements as efforts at “greenwashing”, but this analysis is too simplistic. Besides an obvious interest in preserving the future viability of oil as an energy source and its own status as a leading producer, three key factors appear to be shaping Saudi Arabia’s changing position.

Firstly, there is a growing recognition that climate change poses a significant physical threat to Saudi Arabia itself. Together with the wider Middle East region, the Arabian Peninsula is among the parts of the world where the effects of climate change – particularly rising temperatures and more unpredictable weather patterns, including extreme weather events – have already been acutely felt. Climate change and environmental security may not yet be regarded as being on a par with the threat that anti-hydrocarbon climate action represents, but they are becoming more important in the Kingdom’s calculations.

Secondly, over the past decade the Saudi government has grown increasingly aware of the need to rein in unsustainable domestic energy consumption. Improving energy efficiency and investing in renewable energy generation are seen as being necessary to reduce emissions and prevent ever more Saudi oil from being diverted to the domestic market rather than being exported to generate revenues.

Finally, Saudi Arabia also sees opportunities in the global energy transition. The feasibility of hydrogen (and its derivatives) becoming a commodity that will eventually be traded like oil may still be unclear, just as the export of solar- and wind-generated electricity remains limited by infrastructure constraints, but Saudi Arabia is confident that if/when technological barriers are overcome it is in a prime position to be a major player in both fields. This belief is reinforced by the self-perception and self-confidence that Saudi Arabia has always been an energy power and therefore “gets” energy – whether derived from hydrocarbons or otherwise.

Saudi Arabia has resolved that it must become a more active participant in the international climate debate. How exactly it intends to do so remains to be seen, but the basic contours of its approach are already emerging. Saudi Arabia (and its fellow OPEC oil producers, including COP28 host the UAE) will likely push back against any efforts to make the total phasing out of hydrocarbons an internationally agreed climate action objective. Riyadh will argue for an inclusive approach to the global energy transition that leaves no-one behind, including hydrocarbon exporters; and it will present itself as the producer capable of providing the cheapest and most emission-efficient oil, and as the one that might even eventually produce carbon-free oil once carbon capture and storage, which Saudi Aramco is investing considerable resources in, are achieved. At the same time, Saudi Arabia will also likely expand its hydrogen- and renewables-related efforts, not to curry favour with international audiences but to capitalise on potential economic opportunities. Within the context of the international climate change/climate action debate, Saudi Arabia will remain a defender of hydrocarbons and resist calls for their complete phasing out.

Conclusion

Among Western policymakers and in international media outlets, the notion of “the oil weapon” is arguably more closely associated with Saudi Arabia than with any other country. The 1973 oil embargo has become almost legendary, and many remember the Kingdom’s price war with Russia in March and April 2020. Saudi Arabia’s refusal to ramp up oil production in the wake of Russia’s invasion of Ukraine in February 2022, and its subsequent decisions to repeatedly cut production, all in the face of loud Western protestations, have fuelled debate about the extent to which Riyadh might use its influence over oil markets in ways that are antithetical to Western interests. Other foreign policy moves, both within the Middle East region and towards engaging more closely with Moscow and Beijing, have spurred further speculation about Saudi Arabia moving away from – and perhaps even against – its traditional Western partners. Yet, as this paper shows, much of this speculation is exaggerated and, if anything, reflects an overly Western-centric assessment that fails to understand how Saudi Arabia sees itself and its position in the changing global environment.

For Saudi Arabia, whose economic fortunes and international status will likely remain inextricably linked to its world-leading oil industry, the health and relative stability of the international oil market is of utmost strategic importance. Its commitment to Vision 2030, the new all-important North Star of the Kingdom’s domestic and foreign policy, means that Saudi Arabia needs to try to keep oil prices at a relatively high level, if at all possible. Within the context of the international climate change/climate action debate, Saudi Arabia will remain a defender of hydrocarbons and resist calls for their complete phase-out. At the same time, it feels that both its economic and security needs require it to diversify its international relations beyond its traditional reliance on the US and the wider West, even if that means forging relations with countries that Washington or European capitals consider to be beyond the pale.

Yet, with all that said, Saudi Arabia’s Vision 2030, for all its transformational intent, is ultimately the development agenda of a status quo power. The Vision 2030 agenda has been constructed in the context of an international environment in which the international rules-based order is upheld sufficiently to prevent any conflict that would have catastrophic implications for the Saudi or global economies. It is built on the principles of globalisation and requires the Kingdom to build relations with everyone, West and East. Riyadh may try to intervene in the oil market to secure its interests, but is not, and is unlikely to become, a revisionist power – even as it cooperates with revisionists like Russia.

This has important implications for the UK and its partners in Europe and beyond. Even if the UK were never to import a single barrel of Saudi oil again, the complex and global nature of international energy markets means the behaviour of the hydrocarbon superpower that is Saudi Arabia will substantially impact on the UK’s energy security, including the prices consumers pay to operate their cars or heat their homes. Moreover, the Kingdom’s calculations vis-à-vis its relations with Russia and China will have consequences for the changing global order that the UK too will have to navigate; and Saudi Arabia’s decision-making regarding climate change will significantly shape this global debate and struggle, in which the UK remains committed to playing a leading role.

UK–Saudi relations have deep roots, are multifaceted, and have grown in importance in recent years – according to statements from London. However, to maintain this relationship and perhaps even have some degree of influence on Saudi Arabia in areas that matter to the UK – from energy, through geopolitics, to climate change – policymakers must continuously refine and update their understanding of – and moreover take seriously – Saudi Arabia’s own strategic calculus. For the foreseeable future, the key to this is likely to be how confident the Kingdom feels about the success of its domestic transformation project.

Tobias Borck is Senior Research Fellow for Middle East Security Studies at the International Security Studies department at RUSI. His main research interests include the international relations of the Middle East, and specifically the foreign, defence and security policies of Arab states, particularly the Gulf monarchies, as well as European – especially German and British – engagement with the Middle East.