Saudi Arabia’s Survival Depends on King Salman/Putin Summit

Saudi Arabia’s Survival Depends on King Salman/Putin Summit

Today King Salman of Saudi Arabia and Russia President Vladimir Putin kick off a three-day summit at the Kremlin in Moscow.  This will be the first official visit of the King of Saudi Arabia to Moscow ever.

Its importance cannot be understated.

This has been a long time coming.  Crown Prince Mohammed Bin Salman has met with Putin a number of times as have other high-ranking Saudi officials.  The purpose of those talks was for the loyal U.S. satrap to try and pressure Russia into cutting oil production and/or threaten a price war.

Putin repeatedly turned them away with little to nothing.  Now, King Salman in likely his last major diplomatic trip, must negotiate for his country’s future.  These negotiations are too important to leave to the hot-headed and inexperienced Crown Prince.

As I’ve pointed out previously, the Saudis are in deep trouble financially.  Their national budget is predicated on much higher oil prices.

Decades of extracting wealth from the ground and not sharing it with the populace has left the House of Saud in a very vulnerable position.  Not building a sustainable economic infrastructure with an educated and dynamic workforce has forced them in recent years to simply expand ‘entitlement’ funding to quell civil unrest.

With oil in the sub-$60 range for the foreseeable future, Saudi Arabia is trapped by its relationship with the United States and the petrodollar. 

So, King Salman is visiting Moscow not to threaten nor to extort.  He’s going to bend the knee to Putin.  He realizes that the U.S.-led Syrian gambit to compete with Gazprom for the European gas market has failed.

His Crown Prince has embroiled the country in untenable diplomatic and military quagmires.  And Salman now must attempt to extricate his family’s rule from self-inflicted Gordian Knot.

“Shto Petrodollar?”

The Saudis cannot weasel their way out of their predicament without creating stronger ties to Russia.  Their currency peg to the U.S. dollar, the cornerstone to the global petrodollar system that prices oil in dollars and recycles trade surpluses back into dollars, is gutting their finances.

Saudi Arabia could balance its budget on lower oil prices if it did what Russia did in late 2014, allow the Riyal to float freely on the market. This move allowed Putin and Russia to weather the financial storm and afford to intervene in Syria.

In the process it and China began building the financial and regulatory infrastructure to successfully move the oil trade step-by-step away from U.S. dollars, thereby breaking the monopoly and weakening the U.S. financially.

But, the Saudis can’t de-peg.  It’s part of their implicit deal with the U.S. to be our vanguard in the Middle East. But the failing war to oust Assad in Syria revealed a United States unable to project power any further than it had.

Syria will become the U.S. Deep State’s Waterloo; the height of the U.S.’s ability to project power overseas.  Putin’s dramatic U.N. speech on September 28th, 2015 and the subsequent military intervention were the turning points.

Afghanistan will be seen historically that way because of the coming dramatic collapse of our campaign there.  But, Syria was the moment the U.S. was revealed to be over-extended.

Russia Ascendant

Even Bloomberg has finally admitted that Russia is emerging as the master of the Middle East.

…the Israelis and Turks, the Egyptians and Jordanians – they’re all beating a path to the Kremlin in the hope that Vladimir Putin, the new master of the Middle East, can secure their interests and fix their problems.

And the Saudis know it.  So, King Salman will go to Moscow to fix some of the things his Crown Prince has broken in his over-estimation of the U.S.’s commitment to Saudi Arabia at the expense of the rest of the Arab world.

The timing of this meeting is fortuitous with President Trump and most of our government focused on domestic crises in the wake of a trio of major hurricanes and the worst mass shooting in the country’s history since Wounded Knee.

Putin will extract a heavy price from him.  Expect nothing less than lifting of the financial blockade against Qatar and an end to the War in Yemen, which is draining the Saudi treasury as well as the U.S.’s patience.

But, for all of that, Putin will allow King Salman to save face.  Russian diplomacy understands this imperative.  It won’t save the Saudis, they still have a lot of work to do, but not having Russia as an adversary is a crucial first step.


Follow Tom’s work at his blog Gold Goats ‘n Guns as well as his contributions at Russia Insider and Seeking Alpha.  Support his work at his Patreon page where  you can receive the first issue of the monthly Gold Goats ‘n Guns Newsletter for just $1/month. 

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About the Author

Tom Luongo

Tom Luongo is a contributor at Newsmax Media for Financial Intelligence Report. He also writes regularly at Seeking Alpha and Russia Insider. Tom is a professional chemist, amateur dairy goat farmer and outspoken Austrian Economist. You can follow him at:
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