Assessing Risk and Reward in the Saudi Megadeal

In recent weeks, the United States and Saudi Arabia have continued to explore a potential “megadeal” that would see the Saudis recognize the state of Israel. National security adviser Jake Sullivan traveled to the Saudi capital Riyadh in late July to discuss a “more peaceful, secure, prosperous, and stable Middle East,” and some White House officials seem to be particularly eager to advance a process before the end of 2023. The next few months provide an opportunity for the administration, and Congress, to use discussions on normalization to align priorities around a relationship with Saudi Arabia and ensure the talks contribute to—rather than disrupt—a vision of peace, prosperity, and stability in the region.

First, reaching this vision in the long term rests on a de-escalation of regional hostilities, with rapprochement, if not cooperation, between Israel, Saudi Arabia, and Iran. Second, a prosperous region is one better equipped to grapple with complex crises, including food, water, migration, and climate insecurity; with the Biden administration incorporating climate policy into its priorities more than any previous administration, Gulf states must engage more earnestly and honestly in these efforts toward a regional—and global—green energy transition. And finally, a stable region is impossible without greater movement toward democratic reform—and away from political alignment with authoritarian countries such as Russia and China. This requires strengthening rule of law, ending repression of dissent, and engendering more openness and transparency in the political economy.

Regional developments and outlook

While these imperatives may seem a far cry from the current state of the region, there is some positive movement: The Saudis and Israelis, along with other neighbors, are already experiencing greater cooperation than ever, and Iran and Saudi Arabia have exchanged ambassadors, in a cooling of tensions since a March agreement brokered by China. And at this September’s Group of 20 (G-20) summit in New Delhi, President Joe Biden announced joint investments in a Partnership for Global Infrastructure and Investment to connect India and the Gulf.

Still, it’s important to stay clear-eyed about Saudi Arabia’s potential as a partner. The Saudi state has become increasingly personalized in Crown Prince Mohammed bin Salman, often referred to by his initials MbS, who has proved unreliable and destabilizing. MbS rebuffed Washington when he drove a cut in oil production at OPEC last year, at a critical moment for the Biden administration. Despite signing key bilateral agreements on cybersecurity with the United States during President Biden’s visit to Riyadh last July, the Saudis have continued to make concerning deals with China on telecommunications and technology; Huawei, for instance, has just announced that Riyadh will be its regional hub for cloud computing. And MbS has presided over a political crackdown that has extended to U.S. soil, as the crown prince has targeted anyone who might deliver concerns over his rule—including, horrifically, Washington Post journalist Jamal Khashoggi.

Asks and opportunities in the megadeal

Against this backdrop, the megadeal presents an opportunity for the administration to level-set a relationship with Saudi Arabia that recognizes both the kingdom’s role as a regional power and its poor track record in advancing shared priorities. Thus far, several asks are on the table: for the Saudis, nuclear cooperation, including domestic uranium enrichment; a security guarantee; and advanced weapons systems. In addition to recognition of the state of Israel, Washington seeks commitments to refuse Chinese military bases, to refuse to price oil in Chinese yuan, and to limit cooperation with China in emerging technology and telecommunications. The Palestinian Authority (PA) has presented its asks as well, including control over parts of the West Bank, a halt to settlement expansion, and a resumption of Saudi funding to the PA.

Riyadh’s approach to diplomacy has been to exploit the harbinger of China’s rise as a stick and the promise of normalization with Israel as a carrot to gain concessions, but these should be considered in context. The Saudis depend on American defense articles, many of which, for multiple reasons, cannot be replaced by Chinese or Russian weapons. Similarly, though Riyadh has suggested it may price oil in Chinese yuan, the Saudis would lose far more than they would gain in de-dollarization. And, as the United States continues a path toward a green energy transition, its relationship with petrostates such as Saudi Arabia will change, with less reliance on fossil fuels and an opportunity to set the terms of trade in renewable energy and critical minerals markets.

These dynamics suggest Washington should approach any negotiations with high guardrails on Saudi asks and a high bar for its own asks to move toward, rather than away from, a long-term vision for the region:

• To further de-escalate regional hostilities, the United States should consider options for regional protection that would avoid any mutual defense The threat of Iranian aggression has driven interest in a security guarantee, but any agreement risks undermining the tenuous steps toward de-escalation between Tehran and Riyadh. Particularly with the U.S. Department of Defense stretched to prepare and respond to active threats from Russia and China, the agreement would also risk overextension with engagement in a third theater. These risks are elevated given MbS’ role in fueling instability elsewhere in the region—often in ways that contravene U.S. interests. For example, the Saudis led a military coalition that engaged in conflict in Yemen against Iranian-backed Houthi rebels for nearly a decade, attacking civilian infrastructure and contributing to one of the world’s worst humanitarian crises—a conflict that would have had disastrous implications had a security guarantee been in place. The United States should thus consider security solutions that would address regional concerns over Iran, including outlining conditions for major non-NATO allyship, without committing to any mutual defense.
• To encourage a phase-out of fossil fuels while avoiding regional insecurity, the United States should agree to cooperate on a nuclear program—without Saudi uranium enrichment. Nuclear power in Saudi Arabia may play a role in addressing energy and water needs, but MbS has been forthcoming about the potential to develop weapons capabilities—with significant objection from the Israeli opposition and others, though Israeli Prime Minister Benjamin Netanyahu remains more favorable. But with the kingdom also looking to other potential suppliers, including China, the United States should position itself as a partner in responsible nuclear cooperation. In 2009, the United Arab Emirates (UAE) entered into a nuclear cooperation agreement with the United States that prohibited UAE domestic enrichment or reprocessing—a gold-standard agreement that may be reopened should the United States negotiate more favorable terms with another regional government. To place necessary guardrails for nonproliferation, both for Riyadh and the rest of the region, cooperation should begin with this gold standard for adherence to the U.S. Atomic Energy Act Section 123, which would also require ratification of the International Atomic Energy Agency’s Additional Protocol. This agreement should establish good faith to build trust and ensure mutual benefit in nuclear cooperation, without risking concerns over a regional arms race.
• To encourage greater movement toward democratic reform, the United States should push Saudi Arabia to release prisoners held as political pawns or in acts of state hostage taking. The 2023 Conventional Arms Transfer Policy established a number of human rights and humanitarian criteria related to weapons transfers, including reference to statutes such as the Arms Export Control Act, which prohibits sales to countries that intimidate or harass individuals on U.S. soil. Even though evidence of Saudi Arabia’s targeting of dissidents, activists, and others in the United States exists, the statute has never been applied. Just last Thursday, the U.S. State Department notified Congress of a $500 million sale of weapons to Saudi Arabia, despite the country’s abysmal human rights record. Before the United States considers continued weapons sales or cooperation under a major non-NATO ally status, Saudi Arabia should be encouraged to address human rights concerns and demonstrate its commitment to allyship by releasing prisoners held for political reasons, such as the children of former Saudi spy chief Saad al-Jabri, Omar and Sarah al-Jabri; the aid worker Abdulrahaman al-Sadhan; and the Saudi preacher Salman al-Odah. This would be an important step for Saudi Arabia to demonstrate its commitment to real reform, and continued benchmarks on progress should be included as conditions to advance further energy or security cooperation.
• To encourage Saudi Arabia to play a positive role in addressing the region’s complex crises, any deal should bring benefit to the Palestinian people. Netanyahu’s government has presided over a period of serious erosion of democratic norms and institutions, and normalization during his tenure risks bolstering his power, as well as exacerbating historic inequities, encouraging continued illegal settlement expansion, and legitimizing abuses against Palestinians. To move forward, the deal will need to pass a gauntlet of both U.S. and Israeli legislative approval—a dynamic that some in the United States hope could drive realignment toward a more moderate Knesset. The United States should encourage Riyadh’s regional influence and deep pockets to support Palestinian development needs and advance a solution for Palestinian political independence, while also ensuring that key concerns such as settlement expansion remain centered in negotiations.

Conclusion

In working toward regional peace and security, policymakers and legislators will face difficult assessments in these negotiations, which could bring the United States closer to a state that President Biden once vowed he would make a “pariah.” While engaging with the Saudi government may be necessary to advance regional priorities, ensuring that we do not trade long-term interests and values for short-term gains will be paramount.