The Peter Zeihan Podcast Series - The Future of Saudi Arabia || Peter Zeihan

Episode Date: September 18, 2024

The US has become largely self-sufficient when it comes to oil, and it was never really reliant upon Saudi oil in the first place. Back in the day, the US formed a relationship with Saudi Arabia not for itself, but instead to provide US allies with oil during globalization. Times are changing and so is this relationship, so what does the future of Saudi Arabia look like? Full Newsletter: https://mailchi.mp/zeihan/the-future-of-saudi-arabia

Morning everyone, Peter Zion here coming to you from waterfall camp just above the Merced Canyon. That's the one that stretches pretty much the entire length of the North country and ends up down in Yellowstone Valley. Today we're taking entry from the Ask Peter Forum about the Middle East, specifically the Persian Gulf. What's the future of relations between the United States and the countries in the region, specifically the Arab states, most notably Saudi Arabia? Well, if you're an Arab in the Persian Gulf, the news isn't great. During globalization, the United States needed oil from the Persian Gulf, not for itself, but for its allies, for everyone from Japan to including China, to Korea, to Taiwan, to France, to Germany, to Italy, to Britain, all of them. These were countries that did not have sufficient oil capacity for themselves, and to induce them to join the global order and the Cold War against the Soviet Union, part of the deal was that we will

keep you fueled. You will not need to have a Navy to go out and get the oil yourself. We will take care of that. So the oil was, yes, for the United States, but not directly. The United States has always gotten most of its oil from within North America and then to a lesser degree countries like Venezuela, and then a little bit from Africa. We never got more than maybe 20% of our crude from Middle East at all. Well, as the shale revolution kicked in, the volumes of crew that the United States got from the Middle East basically dropped to zero. The Saudis got in the habit of parking supertankers off the coast of Louisiana waiting for them to be needed. And after a while, when it turned out that they weren't needed anymore, those stopped it altogether. In addition, the stuff from Africa went away, Venezuela committed national suicide.

And now the United States plus Canada is pretty much self-sufficient. There's a lot of rounding errors and caveats. in that statement, but that's kind of the core position. In the shift through Barack Obama and Donald Trump, the United States became far more disengaged from the world. And we went from having a carrier, maybe two carriers at a time in the Persian Gulf, to now really never having one there unless there's something flaring up at the moment. This is reflecting the shift of strategic priorities.

The United States is far more concerned with things at home at the moment, and then to a lesser degree what's going on in East Asia. So, for example, when the Kuwaitis discovered a big oil field offshore last month, the Americans were like, whatever. You can't develop that yourself. Kuwait has no offshore capability. Yeah, maybe some of our firms will be involved, but the security guarantee is gone. And then there's Saudi Arabia, which is, of course, the big one.

The Saudis are a little cocky because they control the holy sites and they claim to control the religion of Islam, or at least speak for it. that is of course a hotly contested topic in the region but the united states has bent over backwards over the course of the last 75 years to keep the Saudis happy because that was the single biggest play in the region for crude if you could get the Saudis on board you could pretty much guarantee that the Kuwaitis and the Emirates and the Qatari's would join as well

and then you'd have everything that you needed well that doesn't necessarily play in a post-globalized world. In a post-globalized world where the United States is self-sufficient in energy and actually has a sufficient exports to supply a handful of choice allies, the United States actually enters into the role of disruptor where having reliable energy supplies on a global scale is no longer perceived as strategic necessity. Now, once that happened, the United States goes from the greatest guarantor of security

the world has ever known to something closer to the opposite. And when that happens, the relationship with Saudi Arabia will absolutely tank. The Saudis can barely operate some of their easier fields. They need a huge army of expats in order to keep it going. So simply denying them the staff would be enough to cripple production. But more likely, you know, all of this stuff is exported just through a few export terminals and the Saudis don't have a navy that's worthy of the name. So take the world's greatest naval power against a desert power that doesn't really have military.

I mean, you do the math. I'm not saying the U.S. is going to conquer Saudi Arabia. There's no point in that. But embargo, destroy some off-store loading facilities, grab the tanker says they leave. These are all options for the future. Because, you know, at that point, when we decide we don't want the oil and we don't want someone else to have the oil, all this is is a country that lives in the desert. I mean, if you guys seen Sireana, it kind of summed it up.

How did Mount Damon put it? The view of the business communities, the people in your country were living in tents and the desert a century ago be heading to one another, and you're going to be doing that again in a century. That's pretty much where we are when it comes to American views of this region. Because if you take away the oil, all that's left is a pension for domestic violence that we don't really like either. So that relationship in time is going to break, but in time is the key word. We are not there yet. As the Biden administration has vividly shown over the last two, three years, there is still.

still need for an alliance structure to achieve certain things, most notably in the Ukraine war, also in terms of boxing China in when it comes to semiconductors. And as long as the United States does perceive a value in its alliance structure, then there is a value in crude continuing to flow unimpeded out of the Persian Gulf. But we should be preparing for a middle ground between the completely cutting them loose and kind of tolerating them. In the middle is where we're we force this region by hook or crook to be a little bit more selective to where they sell their crude. And should things with the Chinese ever get to the point of shooting, which I don't anticipate, but can't rule it out, one of the first things the United States is going to do is put a few ships in the street of Hormuz and make sure that crude cannot get to China at all.

And that'll shut the entire place down within three months. And that's a very different relationship. Now, we're not there yet, but it's something to think about. One more thing. Oh, yeah, Lewis Canyon. We have to do this from the Saudi point of view. The Saudi position is that since they sit on the world's largest exploitable deposit of oil, that they should just be able to pay people to defend them. And their belief right up until the Iraq War 2003

that the United States was basically a bunch of mercenaries. So we'll buy a bunch of their equipment, we'll shrink rapid, We'll put in air-conditioned warehouses, and when we want them to fight our wars for us, we'll call up the American press and they'll do it. And they didn't think the Iraq war was a good idea, and it happened anyway, and they were violently disabused of their position in the world.

As the United States steps back, the Saudis are going to need a different security guarantor, and there isn't a very long list of candidates. It's got to be somebody with a blue one. Navy who can deploy a long distance or march to Saudi Arabia. The problem is that there's really only four. China doesn't have the range. Japan does, but they haven't moved far enough past their pacifist position to actually

invest in an army. And it looks like the United States and Japan are basically to settle for co-dominion over the Pacifics and that will include, for example, energy security from Japan. So that probably doesn't work. Next up are the Brits of the French. The United Arab Emirates has already decided to get into bed with the French, and there's already a military cooperation in their base in the UAE. But the Saudis would really rather not go with the European.

The only other option is Turkey. Now, Turkey wouldn't need a naval force to sail around the Arabian Peninsula to get to the Persian Gulf. They would just have to march through Iraq directly to Riyadh. But that would generate the one thing that Saudi Arabia, Arabia does not want a superior military power with easy access to everything that's Saudi. Because if you're Turkey in that scenario, why in the world would you defend Saudi Arabia and not just take it over again?