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Why Is Saudi Arabia Being So Helpful?

by Michael Levi
February 25, 2011

Saudi Arabia appears to have boosted its oil production and is in talks to increase deliveries to Europe. Dan Drezner is puzzled:

“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 leadership is 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 making it very clear to my buyers just how important stability is in my neck of the woods.”

Dan asks: “Am I missing anything?” Let me take a stab.

First, the strategic incentives that Dan cites for Saudi Arabia to intervene – particularly the risk of a double-dip recession – are pretty significant. Oil prices could fall precipitously if the world reentered recession. That said, the Saudis could have waited a couple weeks to respond without running particularly high global economic risks, if they wanted to spook people. Direct economic interests can’t explain everything.

What I suspect matters more is that Saudi Arabia derives much of its influence from its perceived role as the central bank of oil. If it monkeys around too much by letting prices rise considerably higher, others will start to rely on it less, which will weaken its long term influence and bargaining power. Moreover, if Saudi Arabia doesn’t take action, and a strategic stockpile release by the United States and others calms the markets, Riyadh will be shown to be less strategically important than previously believed. It has a lot of incentive to not let things come to that.

I’m also not sure precisely what Saudi Arabia would be able to extract by letting things get uglier. Oil markets are behaving badly precisely because people are worried about Saudi stability. If unrest actually migrated to the desert kingdom (a development that I still think is extremely unlikely), I think you’d start to see Saudi take very different steps with its oil. At that point, Riyadh would probably impress on the world that it needed support if they didn’t want to see prices get out of control. That would be a credible threat, and could result in a very concrete set of responses. Short of a similarly acute situation, though, Saudi Arabia would seem to strengthen its influence by responding quickly, rather than by letting things get worse.

Post a Comment 2 Comments

  • Posted by Emad Saudi

    lool that’s so full of crap
    Saudi Arabia interest in stabilizing Bahrain is so that it doesn’t fall into a new Iran state such as what US did with Iraq. it’s kinda funny how US always says Iran is bad and the whole propaganda but under the table US always support them and provide more power to their influence in the Middle East.
    Maybe you should write about that, oops you will not? what a surprise ;P

  • Posted by jim hardy

    i saw King Abdulla on Charlie Rose. He comes across as a thoughtful and kind man.

    Could it be simply he doesn’t want to see things in the world go more badly than they already are?

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