Ref: AD-2990
Summary: with relations with the UAE further strained and the Yemen conflict still unresolved Saudi Arabia must perform a challenging balancing act as an end to the Iran war continues to be elusive.
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Helen is slightly unkind to the Sa’udis when she writes that “Alongside other powers, it merrily ignored the obvious vulnerability of the Hormuz strait, noticeable with the most superficial of glances at a map.” As she notes, there is the East West Pipeline. There have also been persistent reports over decades of an attempt to bring a pipeline to the Indian Ocean shore in al-Mahra (eg https://thecradle.co/articles/bypassing-hormuz-saudi-arabias-pipeline-push-in-yemens-al-mahra), although that has yet to happen.
She correctly notes that “Most recently the US has threatened to resume bombing should the Huthis attack any US shipping.” However, the US capacity to carry out sustained attacks on Yemen is greatly reduced by the massive expenditure of materiel in the attacks on Yemen in 2025 (https://www.nytimes.com/2025/04/04/us/politics/us-strikes-yemen-houthis.html) and subsequently on Iran this year (https://www.csis.org/analysis/last-rounds-status-key-munitions-iran-war-ceasefire)
She writes that “Interestingly, this time, even the UAE joined Saudi Arabia and Qatar in calling for negotiations,”. Trump is in a cleft stick of his own making with limited potential to escalate (short of an invasion), and needing both to get a better deal than Obama’s JCPOA, and not to be seen to be a loser in front of the US electorate before the mid-terms. His claim that he was going to attack but was held back by the Arab monarchs (whom he had presumably thus informed in advance) sounded more like someone trying to find an excuse for inaction rather than a genuine concern for the Arab monarchs’ wishes.
I agree totally with James Spencer’s comment that Donald Trump’s claim that he pulled back from launching more pointless air attacks on Iran earlier this week after representations from GCC members sounded “like someone trying to find an excuse for inaction”, i.e. yet another TACO. Quite why he did pull back isn’t clear. There may well have been representations from the GCCs; but, based on his ignoring such before 28 February, there is no reason to suppose that these alone would have sufficed. More likely, in my view, is what must surely by now be a growing realisation in Washington that the futures market is not a crystal ball and that the oil price is likely to jump sharply in June, as the IEA forecasts in its May market review. As this would coincide with the start of the US driving season Mr Trump may be discovering that he does need to consider the impact on ordinary Americans of rising gasoline (and diesel) prices after all. As a supposedly ‘Trumpy’ Fed chair put in place to slash interest rates despite his hawkish record on inflation, the new Fed chair Kevin Walsh faces an interesting challenge. Coupled with increasing signs of dissent among Republicans in Congress (notably House leaders pulling a vote last night because they could not block a bill to stop the war) Mr Trump is indeed now finding himself caught very much in James Spencer’s “cleft stick”.
As usual, this is a well informed and clear analysis. I have one serious reserve.
The statement that Saudi Arabia is committed to a two state solution needs qualification. To what ultimate goal is MbS really aiming? What were the purposes of the discussions with the US that led to the Abrahamic Accords? My view is that his long term vision is of a region dominated by KSA and Israel with the US as Guarantor. The Palestinians may be offered a fig leaf and funding for their compliant leadership but no more. To achieve this successfully MbS has to get the Saudi population, including the Family, the Clerics and the younger generation to acquiesce; his reform and development programmes need to succeed. He also needs some cover against a wider Islamic backlash and rejection of Saudi claims to global Islamic leadership; a modus vivendi with Iran is an important factor, backed by lavish use of oil wealth. Meanwhile, the declared commitment to a negotiated two state Palestinian settlement is a shibboleth and nothing more, as it has been in many diplomatic exchanges for two decades or more. Above all there are no Arab or islamic armies prepared to fight for Palestine.
The Editor notes that Mohammed bin Salman pushing the two state solution, cynical though it is, is however a useful weapon in the growing rivalry between Abu Dhabi and Riyadh with Mohammed bin Zayed’s closeness to Netanyahu causing unease and in some quarters anger across the Arab world.
Further to Helen Lackner’s excellent newsletter today, my piece tomorrow offers more analysis on Saudi Arabia’s economy, primarily in the light of the PIF’s latest five-year strategy which was published on 15 April. In particular, I mention (albeit en passant) the boosted importance of the Bab Al-Mandab to the Kingdom not only today (when, as Ms Lackner notes, it is the main channel for Saudi oil which, according to my sources, is being exported – as opposed to produced – in greater quantities than at any time since April 2023) but also for years to come potentially. It is also worth recalling in this context that, although the Huthis have indeed largely stayed out of the current conflict, they were responsible for the Abqaiq/Khurais strikes in 2019.
Additionally, Ms Lackner rightly refers to Riyadh “needing giga funds to finance its remaining grandiose projects”. This goes to the heart of tomorrow’s newsletter as I argue that an even more fundamental review of future expenditure may yet be required than the one we have just seen completed. What I did not specifically mention but will take this opportunity to sweep in is what she (again correctly) refers to as the “outrageous bribes” the Saudis offered Donald Trump in 2025; irrespective of where Riyadh finally comes down on future relations with the Washington these stand little, if any, chance of being delivered beyond minimally as the PIF trims the international share of it US$925bn portfolio from 30 percent to 20 percent.