Sunday, July 14, 2024
Perfil

WORLD | 27-08-2023 09:45

Washington’s top Middle Eastern allies move closer to China

Some of Washington's top Middle Eastern allies are moving closer into the orbit of China and Russia, further complicating geopolitics upended by Russia’s invasion of Ukraine.

Some of the United States' top Middle Eastern allies — including the world’s biggest oil exporter — are moving closer into the orbit of China and Russia, further complicating geopolitics upended by Russia’s invasion of Ukraine.

Saudi Arabia, the United Arab Emirates and Egypt are set to join the BRICS grouping of major emerging markets, after being invited Thursday during a summit in South Africa. They’re likely to become members at the start of next year, along with Iran, Argentina and Ethiopia.

The move is part of a push by leaders of the BRICS nations — Brazil, Russia, India, China and South Africa — to increase the group’s influence and counter US power over the global economy and trade, including through the role of the US dollar.

It also signals the determination of Saudi Arabia, the UAE and Egypt to bolster their status as midsized powers while avoiding taking sides in a world increasingly split between Washington and Beijing.

The UAE said the invitation reflects its “keenness to champion the value of multilateralism.”

“The Gulf states have been reasserting themselves more forcefully on the global stage, taking a more independent path that serves their interests first,” said Bader Al-Saif, a professor at Kuwait University.

The United States has tried to play down the expansion of the BRICS, with National Security Advisor Jake Sullivan earlier this week saying Washington doesn’t see it as a budding geopolitical rival. 

The National Security Council declined to comment further on Thursday. But, in a statement after Sullivan met with counterparts from France, Germany, Italy and the United Kingdom, the White House said the Group of 20 was “the premier forum for economic cooperation.”

The G20 includes the US, European Union and all the BRICS, as well as Saudi Arabia and Argentina.

 

Dollar dominance

While Saudi Arabia and Russia already have plenty of clout in the oil market through their leadership of the OPEC+ cartel, the BRICS development puts greater focus on the dominance of the US dollar in energy trading. That’s particularly the case with both massive producers and importers being in the enlarged group. China is the world’s biggest buyer of crude, while Saudi Arabia is the top exporter.

China and other BRICS countries have expressed a desire to buy energy in other currencies. But any move to transform the long-standing petrodollar system would be complicated. Both Saudi Arabia and the UAE peg their currencies to the dollar. And they would need any other currency in which they were paid to rival the greenback in terms of liquidity and as a store of value.

As part of that, there would have to be greater demand for bonds issued in BRICS currencies, analysts at ING, including the bank’s head of markets, Chris Turner, wrote on Thursday.

Until then, “we suspect this will be a decade-long progression to a multi-polar world,” they said. It would be “a world in which perhaps the dollar, the euro and the renminbi become the dominant currencies in the Americas, Europe and Asia respectively.”

Still, being part of the BRICS will offer Saudi Arabia and the UAE the opportunity and flexibility to rely less on the dollar if needed. Both have expressed concern that the US’s imposition of export controls, financial sanctions and oil-price caps against Russia since it began the war on Ukraine could set a precedent.

“They are laying the ground for contingency planning in case relations with the US deteriorate significantly,” said Torbjorn Soltvedt, principal analyst for the Middle East and North Africa at the UK-based risk consultancy firm Verisk Maplecroft.

Saudi Arabia is spending trillions of dollars to diversify its economy, investing in everything from new cities to sports and electric vehicles. Crown Prince Mohammed bin Salman, the kingdom’s de facto leader, sees deeper ties with the likes of China and India as crucial to that goal.

“Our foreign policy is primarily focused on building strong economic partnerships, firstly to support the kingdom’s economic development,” Foreign Minister Prince Faisal bin Farhan told Saudi media. “BRICS has proven that it’s an important and useful channel for this,” especially among lesser-developed countries of the Global South.

Saudi Arabia and the UAE have already built up ties with BRICS members in the past decade, thanks largely to the vast oil flows that now go from the Gulf to Asia.

China and India are the top two trading partners for both Saudi Arabia and the UAE. Saudi trade with China and India reached a record of almost US$175 billion last year, according to UN data compiled by Bloomberg. It was barely US$5 billion at the start of the century.

Ties between Washington and the two Gulf states have been strained in the past 18 months — partly because of their refusal to sanction Russia over the invasion of Ukraine and their decision not to increase oil supplies when prices soared in the aftermath.

Those relations have improved in recent months, with the US and Saudi Arabia working on a deal that may result in the kingdom recognizing Israel in return for American security guarantees.

Moreover, Riyadh and Abu Dhabi have made clear they want the US and Western powers to remain strong economic and security partners.

“They are focused on balancing and maintaining ties with multiple powers, not picking sides and getting wrapped up in a greater power competition,” said Anna Jacobs, a senior analyst at the International Crisis Group.

related news

by Sam Dagher & Fiona MacDonald, Bloomberg

Comments

More in (in spanish)