Saudi Arabia has more to lose than US from an economic showdown

Dubai

SAUDI ARABIA has more to lose than to gain from an economic showdown with its ally the United States, experts say, as the diplomatic fallout continues following the disappearance of dissident journalist Jamal Khashoggi.

Washington's top diplomat Mike Pompeo held urgent talks with King Salman on Tuesday after reports that Khashoggi was murdered two weeks ago inside the kingdom's Istanbul consulate. Both sides have "agreed on the importance of a thorough, transparent, and timely investigation that provides answers".

Khashoggi's disappearance shocked Saudi allies, prompting the US - the kingdom's top trading partner - to threaten "severe punishment".

Despite being the world's largest oil exporter, selling a million barrels per day to the United States, Saudi Arabia would gain little from using black gold as leverage, said Jean-Francois Seznec, a senior fellow at the Atlantic Council's Center for Global Energy.

That "would completely destroy its image as a 'reliable supplier'" and undermine the king's powerful son, Crown Prince Mohammed bin Salman, he said.

The affair has embarrassed President Donald Trump, who has made his personal relationship with the crown prince a pillar of his strategy in the Middle East, where his administration is seeking to rein in Iran with Saudi and Israeli support.

The US president has also been counting on Riyadh to plug any gap in world oil supplies as he prepares to reimpose a second tranche of crippling sanctions against Tehran in November following his abandonment of a landmark 2015 nuclear deal.

Members of the US congress - both Democrat and Republican - could vote to block arms sales to Riyadh, and the White House would be under pressure to punish Saudi individuals if they were proven to have played a role in Khashoggi's disappearance.

Mr Trump suggested on Monday that "rogue killers" could be to blame for Khashoggi's disappearance - an apparent row back from earlier threats of "severe punishment" against the Saudi government if it turned out Khashoggi was murdered.

"Trump is torn - he says everything and its opposite," said Francois Heisbourg, a special adviser at the Fondation pour la recherche strategique in Paris.

But, he added, Congress "will not let go".

The crisis has sent the Saudi stock market tumbling and reportedly threatened a US$400 million dollar deal between Riyadh's sovereign wealth fund and Hollywood's most powerful talent agency, Endeavour.

Yet, Saudi Arabia has remained assertive, with a senior official underlining the kingdom's "effective and vital role in the world economy" and threatening to "respond to any action with a bigger one".

Mr Seznec suggested that if the crisis escalated, the crown prince could even demand payment for oil in China's currency, the yuan, instead of dollars.

"That would destabilise the entire world economy and prompt the United States to take drastic measures" that could lead to a change of leadership in Riyadh, he said.

Richard LeBaron, a former US ambassador to Saudi Arabia's neighbour Kuwait and a senior fellow at the Atlantic Council, said Riyadh had "various ways" of responding to punitive measures. But "none of them would help them in the short or long term since such measures would reinforce the Saudi regime's growing reputation for unpredictability and brashness", he said.

He added that Riyadh is keen to attract international investors to support the crown prince's ambitious economic reform drive. AFP