The Fuse

Why the U.S. Can’t Escape Its Unhealthy Co-Dependent Relationship with the Middle East

March 22, 2016

Guest Post by Thomas Buonomo | @thomasbuonomo

Thomas Buonomo is a geopolitical risk analyst with Stratas Advisors.

In his April 2016 edition article for The Atlantic, “The Obama Doctrine”, Jeffrey Goldberg writes, “For Obama… the Middle East is a region to be avoided—one that, thanks to America’s energy revolution, will soon be of negligible relevance to the U.S. economy.”

If only it were so. Although the president has communicated his intent to reduce the U.S. military’s frontline commitments to the region, this should not be interpreted as disengagement or withdrawal. The president’s implicit shift to a posture of defender of last resort of the region’s oil exports and U.S. allies is arguably wise from both a fiscal and strategic standpoint, albeit full of risk.

From a fiscal standpoint, the U.S. is $19.3 trillion in debt and the Congressional Budget Office estimated in January 2016 that this year, federal debt held by the American public would rise to 76 percent of GDP—the highest since the WWII-era, when it peaked at 106.1 percent in 1946.  It notes, “In CBO’s baseline projections (which incorporate the assumption that current laws will generally remain the same), growth in spending—particularly for Social Security, health care, and interest payments on federal debt—outpaces growth in revenues over the coming 10 years….  The projected cumulative deficit between 2017 and 2026 is $9.4 trillion. The projected deficits would push debt held by the public up to 86 percent of GDP by the end of the 10-year period….”

CBO warns that if this trend continues, “There would be a greater risk that investors would become unwilling to finance the government’s borrowing needs unless they were compensated with very high interest rates; if that happened, interest rates on federal debt would rise suddenly and sharply.”

Addressing the U.S.’s security “free rider” problem, as President Obama describes it in his interview with Goldberg, is one way to alleviate the country’s fiscal burdens.

It is clearly necessary to bring the federal budget back into balance. Addressing the U.S.’s security “free rider” problem, as President Obama describes it in his interview with Goldberg, is one way to alleviate the country’s fiscal burdens. This is easier aspired to than achieved, however, considering that the U.S.’s Middle East partners are operationally unprepared to bridge the gap between U.S. military capabilities and their own in the short- to medium-term. These states also have a much higher threat perception of Iran due to their geographic proximity, demographic vulnerabilities, and internal political dynamics that exacerbate these vulnerabilities.

These two variables arguably increase the risk that Saudi Arabia in particular will continue to respond to Iran’s provocations in a manner that is further destabilizing to the region, e.g. by backing radical Sunni Islamist proxies that have historically had the highest battlefield motivation and perseverance owing to their religious fervor.

Saudi Arabia is undoubtedly attempting to cultivate such proxies even within Iran itself as Iran increases its support for the Houthis in Yemen, loyal or beholden militias and military and intelligence officials in Iraq, and the disenfranchised Shi’a populations of Saudi Arabia’s oil-rich eastern province and neighboring Bahrain.  These populations, estimated at ~67% in Iraq10-15% in Saudi Arabia, and ~70% in Bahrain, will grow increasingly restive in the latter two countries as these governments continue to respond to calls for political and economic inclusivity with repression, disregarding U.S. appeals for reform.

The regional Sunni-Shi’a conflicts playing out in Iraq are also contributing to intra-Shi’a tensions in Baghdad and Basra, exacerbated by low oil prices, high unemployment and poverty, corruption, competition for power, and a lack of basic public services could yet push the country back over the edge.  This would introduce a far more disastrous dimension to Iraq’s civil war, which has thus far largely spared its oil production centers.

The behavior of Saudi Arabia to date indicates that it will continue propagating its highly xenophobic strain of Wahhabi Islam across the world independent of challenges from Iran, effectively guaranteeing a limitless pool of potential recruits for Daesh, Al Qaeda, Al Nusra, Ahrar al-Sham, or ideologically aligned groups.  The Saudi monarchy is certainly more pragmatic in its international relations than Daesh, which aims to overthrow it, but there is nevertheless little ideological difference between the two, which is what makes Daesh such a grave threat to the kingdom and its oil exports.

The kingdom’s commutation of its death sentence against Palestinian poet Ashraf Fayadh for apostasy and accommodation of women on impotent local councils is hardly a reassuring indicator of any progressive political trajectory. Even if the monarchy were inclined to make serious attempts at political reform, it would risk provoking its retrogressive religious establishment to foment unrest against it.

The American foreign policy establishment has directed significant criticism against the Obama administration for appearing to create some distance between itself and the Saudi monarchy, despite the fact that the U.S. continues to support Saudi-led military operations in Yemen. It is questionable why the U.S. should unconditionally and uncritically support such an anachronistic political system that is holding the rest of the region back through the influence of its religious ideology however. Effectively unconditional loyalty to traditional U.S. partners and allies has also come at the expense of improving relations with Iran or at least improving the prospects of doing so.

The Obama administration has been attempting to achieve a regional rebalancing but it is unclear whether the next U.S. administration will continue this effort or revert back to an ultimately untenable status quo.

While one should be under no illusion that pursuit of rapprochement with Iran has been or will be risk- or cost-free, it is not a zero-sum game between the GCC states, Israel, and Iran. The Saudi monarchy and the Netanyahu administration in particular view it this way and the U.S. will have to engage in skillful diplomatic cat-herding to persuade these governments to reassess their cost-benefit analyses, but they should be cognizant that the regional “status-quo” is illusory. Iran will likely either have to be accommodated to a reasonable extent or tensions will eventually culminate in direct military confrontation that could prove highly destabilizing to the global economy. Iran will of course also have to accommodate Israel and the GCC states but it is more likely to do so if all parties reciprocate through moderation of their domestic and foreign policies, namely toward the Shi’a, in the case of the GCC, and on Palestine and Jerusalem, in the case of Israel.

The Obama administration has been attempting to achieve a regional rebalancing but it is unclear whether the next U.S. administration will continue this effort or revert back to an ultimately untenable status quo. Certainly, achieving a strategic rebalance will be a highly complex, arduous, and taxing political endeavor that will last beyond the Obama administration’s tenure.

However these countries proceed, neither the Obama administration nor its successors will be able to quit the Middle East for the foreseeable future. Neither the EU, Russia, or China has the power projection capability to fill a power vacuum created by an actual U.S. withdrawal from the region, nor would the U.S. want to trust them to replace it (although it would like these countries to share the security burden in cooperation with it). Within the region, sectarian, ideological, and ethnic fault lines as well as unstable power dynamics between these countries make the risks of actual U.S. disengagement (distinguished from the political framing of the term) too high.

In more quantifiable terms, the International Energy Agency notes that in the Low Oil Price Scenario of its 2015 World Energy Outlook, “demand is pushed up to over 107 mbd by 2040… While oil consumers and importers benefit economically, the consequent rise in dependence on supply from the Middle East may raise concerns over oil security. Oil producers and exporters are worse off, as the volume gains from higher output are more than offset by the effect of lower prices.”

According to OPEC’s Annual Statistical Bulletin 2015, the major oil-producing countries of the Gulf contributed a total of 22.307 mbd of supply to the global economy—20.8 percent of global demand forecasted for 2040.

gulf producers

These countries have some of the largest oil reserves and lowest production costs in the world and therefore act as economic gravity wells, pulling consumer countries back into them when oil prices fall low enough over too extended a period of time to support more costly production in other regions of the world.

These countries have some of the largest oil reserves and lowest production costs in the world and therefore act as economic gravity wells, pulling consumer countries back into them when oil prices fall low enough over too extended a period of time to support more costly production in other regions of the world including North America. And unfortunately, because of their geographic proximity and political interconnectedness, external threats to or internal instability in one state could have quickly destabilizing effects on another. This could lead to dramatic and sustained oil price increases that could destabilize consumer countries including the U.S. and its major trade partners.

Regardless of President Obama’s purported views of the region and Americans’ exasperation with it, this is a structural problem that the U.S. will not be able to escape from for decades to come. The only way it could do so is if it and other major consuming countries decided to take the preventive energy security measure of subsidizing spare oil production capacity sufficient to offset Middle East oil supply in the event of a major disruption likely brought on by U.S. disengagement from the region. This would be a massive financial commitment indeed.

Considering the probable costs of attempting to maintain an untenable status quo on the one hand and actually disengaging from the region on the other, the U.S. and the countries of the region will have to make compromises to preclude getting drawn further into the moral black holes of Iraq and Syria and perhaps into direct conflict with each other. One can only hope that moderate voters in the U.S. will act to sideline aggressively militaristic leaders, whose cavalier attitude toward conflict contrast sharply with their strategic acumen and political courage.

Thomas Buonomo is a geopolitical risk analyst with Stratas Advisors. His views are his own and do not represent those of Stratas Advisors.

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