How Will Bin Salman’s Agreement to Join the ‘Shanghai Cooperation Organization’ Affect the Relationship With Biden?

The decision by the Saudi government to join the Shanghai Cooperation Organization (SCO) has sparked global controversy, with discussions revolving around the potential implications of this move, such as an increasing alignment between Saudi Arabia and China, and a perceived distancing from the United States.

The Saudi cabinet approved the decision to join the SCO on March 29, 2023, at a time when Riyadh is building a long-term partnership with China despite American security concerns.

The official Saudi Press Agency said the kingdom had agreed to a memorandum on granting Saudi Arabia the status of a “dialogue partner” in the SCO.

Reuters reported on March 29 that being a dialogue partner will be the first step within the organization before granting the kingdom full membership halfway through the term.

The decision came one day after Saudi Arabian oil giant Aramco announced it had increased its investments in Beijing by several billion dollars by completing a joint project planned in northeastern China.

It also came after China mediated a deal between Saudi Arabia and Iran, two rival enemies, to restore official diplomatic relations in March following a seven-year rift.

This was considered an unexpected political achievement by observers, who wondered whether this mediation was the beginning of a decline in American influence in the Gulf.

The Shanghai Cooperation Organization is a political, economic, and security bloc founded in 2001, consisting of China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, and Uzbekistan.

It has since expanded to include India and Pakistan and aims to play a greater role in confronting Western influence in the region.

Other dialogue partners include Armenia, Azerbaijan, Cambodia, Egypt, Nepal, Qatar, Sri Lanka, Turkey, Belarus, and Mongolia.

The Shanghai system is seen alongside its counterpart BRICS (Brazil, Russia, India, China, and South Africa) as an alternative to their Western counterparts led by the United States, such as the G8 system, the North Atlantic Treaty Organization (NATO), and the old global financial system that was established after World War II.

Its importance goes back to China’s rapid rise to the world throne, gradually pulling the carpet out from under the feet of the United States, currently engaged in an economic, political, and military attrition war with Russia in Ukraine.

 

Separation from America?

Questions have been raised about the significance of Saudi Arabia joining the Shanghai Cooperation Organization (SCO), which is led by China. Some wonder if this means a separation from the United States, or if it is just a way for Crown Prince Mohammed bin Salman to challenge President Joe Biden’s administration, using strong political and economic tools.

Saudi Arabia and other Gulf states have expressed concerns about what they see as a U.S. withdrawal from the region, and have moved to diversify partners. However, Washington has stated in several official statements that it will remain an active partner with those countries.

According to Reuters on March 29, 2023, the growing relationship between Riyadh and Beijing is causing security concerns in Washington, Riyadh’s traditional ally, which says its policy toward the Middle East will not change.

Analysts for the American magazine, Newsweek, explained on the same day that this move is part of a broader effort in Saudi Arabia and some neighboring Gulf states to expand diplomatic partnerships beyond traditional Western allies toward the East.

Relations between the United States and Saudi Arabia have soured since Joe Biden took office two years ago after he made electoral promises to make the Gulf kingdom an outcast due to its human rights record.

Newsweek quoted Saudi political analyst Ali al-Shihabi as saying that the kingdom is pursuing a more diversified approach to develop its links with other strategic partners to complement its relationship with the West.

He explained that Saudi Arabia’s diversification strategy is trying to fill the gaps left by the United States’ lack of interest or will in maintaining the current situation in the region.

He added that China’s heavy reliance on Gulf oil has made it the world’s most interested party in stabilizing the current situation.

Therefore, Saudi Arabia worked to bring Beijing into a more active role in helping to stabilize this troubled region, according to his assessment.

Despite analysts’ confirmation that Saudi Arabia’s joining of the SCO will not affect its strategic relationship with the United States, an analysis by the Raialyoum newspaper in London on March 30 suggests that this move may be a warning to the United States.

According to a Saudi newspaper, the recent moves by Saudi Arabia against the United States confirm the acceleration of steps toward political, economic, and security disengagement between the two countries after an alliance that lasted nearly eighty years. The newspaper emphasized that the economy and the U.S. dollar will be among the biggest victims in the foreseeable future.

The Wall Street Journal reported on March 29, 2023, that Saudi Arabia’s joining of the Shanghai Cooperation Organization and its move toward China and Russia could be met with a powerful reaction from Washington. The report explained that the latter is concerned about the traditional security partners’ dealings with its global competitors in the region.

The National Interest also confirmed on March 23, 2023, that China’s role in brokering the Saudi–Iranian agreement led to some excessive concern in Washington.

But, Americans have begun to say that there is no problem because America no longer needs Saudi Arabia, according to the magazine.

The magazine also said that the United States only thinks of the Arabian Gulf as a region that is special to it, maintains a very large military presence there, and tends to engage in wars in the region.

For decades, the United States has been the primary guarantor of unimpeded access to Gulf oil to world markets.

On the other hand, American political influence is dwindling in the Middle East, and China is rising, according to National Interest. Therefore, the magazine titled its report with a significant phrase that says It’s a Good Time to Leave the Persian Gulf and it considered the rapprochement between Saudi Arabia and Iran through Chinese mediation not bad news.

“In fact, it presents a golden opportunity for the United States to engage in a long-overdue reassessment of its military and political commitments in the region,” according to the newspaper.

It continued: “Regarding the Gulf, the United States is now in the position summarized by Bob Dylan: ‘I used to care/but things have changed.’ World energy markets have been transformed. The United States is now the world’s third-largest oil exporter and second-largest exporter of natural gas.”

However, the irony is that this American trend, even if only in the media, serves China and replaces Washington in the Middle East.

 

Losses and Conflicts

The effects of Saudi Arabia’s joining the Shanghai Cooperation Organization have raised questions about other economic implications that the West had feared, such as the adoption of other Asian currencies instead of the dollar by Shanghai countries. This would be an economic blow to the U.S. dollar.

Commenting on this, Monica Crowley, former Assistant Secretary of State for Public Affairs at the U.S. Department of the Treasury during the previous administration of President Donald Trump, said that one step by Saudi Arabia in joining America’s enemies and dealing in a currency other than the dollar will turn the global economic system upside down.

On March 25, 2023, she warned of “catastrophic” consequences if the dollar loses its position as a reserve currency in the world.

“It’s really hard to overstate exactly how catastrophic the abandonment of the U.S. dollar would be as the world’s global reserve currency,” according to her.

This will mean the end of the dollar, she said, expecting a complete collapse of the global economic system.

Monica Crowley was responding to a question from Fox News about what would happen if emerging economies moved away from the U.S. dollar toward the Chinese yuan, and it is no longer the dominant currency in the world.

She emphasized that the status of the dollar as the reserve currency in the world was a real privilege, but the reckless monetary and fiscal policy of the United States for many years, and what she called “Biden’s weakness,” have lowered the value of the currency.

She said: “Now you do have this perfect storm of Biden’s weakness, his war on American domestic energy production, the Ukraine war…Because of all of these things, we’ve got America’s enemies, led by China, forming a new economic bloc.”

She stressed: “If that were to happen, there would be a complete implosion of the global economic system, but certainly the American economic system. And if that were to happen, you’d be looking at sky-high inflation just raging, Weimar Republic kind of inflation. If you think inflation is bad right now, just wait.”

On March 15, 2022, The Wall Street Journal reported, citing informed sources, that Saudi Arabia, the world’s largest oil producer, is considering accepting the Chinese yuan instead of the dollar in oil sales to China.

It said that the kingdom is in active talks with Beijing to price some of its oil sales to China in yuan, a move that would reduce the dominance of the dollar in the global oil market and represent another shift by the largest crude source to Asia.

The American newspaper explained the Saudi move, if it were to happen, by asking: “Is Saudi Arabia using China to pressure America?”

However, a senior American official described the idea of the Saudis selling oil to China in yuan as “highly unlikely,” pointing out that the Saudis had raised the idea in the past when there was tension between Washington and Riyadh.

The official told the Wall Street Journal that converting millions of barrels of oil from dollars to yuan every day could harm the Saudi economy, whose currency, the riyal, is linked to the U.S. dollar.

Observers believe that Saudi Arabia is unlikely to give up the dollar for the Chinese yuan, as it would be economically harmful.

They said that China needs Saudi oil imports more than the kingdom needs the Chinese local currency.

The Wall Street Journal report indicates that Riyadh is unlikely to abandon the dollar, citing Saudi Arabia’s foreign currency reserves, which reached $472.8 billion in 2020.

These precautions could comfortably cover Riyadh’s external debts, giving it a level of stability that would prevent it from considering replacing the dollar compared to other OPEC countries that suffer from significant trade and financial deficits.

A report by the U.S. agency Bloomberg in March 2022 indicates that the percentage of yuan used in global trade transactions does not exceed 2.7%, which is a modest percentage compared to 41% for the U.S. dollar, which ranks first for contracts, and 36.6% for the euro.

According to the Organization for Economic Cooperation and Development, China is the largest importer from Saudi Arabia with $45.8 billion, followed by India with $25.1 billion, then Japan with $24.5 billion, South Korea with $19.5 billion, and finally the United States with $12.2 billion.

Saudi Arabia is the world’s largest oil producer, with a value of $145 billion, and China is its largest buyer at $204 billion annually, according to figures provided by Eurasia Review on March 30, 2022, but these figures are for the year 2019.

American analysts confirmed to CNN on March 31, 2023, that it is unlikely that the Saudi–China relationship will become a comprehensive alliance because the kingdom’s economy is linked to Washington, and its currency is linked to the dollar. Saudi Arabia also sells its oil to China in dollars, and its defense infrastructure relies heavily on American equipment.

All of this led observers to suggest that Saudi Arabia’s steps toward closer ties with China, Russia, and Iran are part of a political game to prevent U.S. pressure on the kingdom.