NSS translation with a commentary by Vince Dhimos.
Further below is our translation of an analysis by Ivan Danilov pointing out that the sanctions threatened by US legislators against Saudi Arabia could have far-reaching consequences, notably driving Saudi into the Russian camp, an incalculable loss for the US. Though Danilov does not mention it, this could also have a devastating effect on the greenback. The proposed sanctions were aimed at hurting Trump, and indeed, they may affect the GOP’s chances in the November elections, potentially making him an even lamer duck than he has been, and increasing the chances of impeachment. Danilov realizes that the legislators’ crazed drive to bring down Trump has blinded them to the potential unexpected consequences for the US and world economy.
Trump’s reaction to the suspicion that Saudi crown prince MBS murdered journalist Jamal Kashoggi has been tepid to lukewarm. He has said that if Saudi is found to have murdered Washington Post journalist Jamal Kashoggi, “there will be severe punishment.” But he immediately followed this up saying he would not cancel arms sales to the Saudis, as demanded by a bipartisan group of senators, because “I don't want to hurt jobs.” Of course, since the Saudis have given millions in gifts to US presidents, including Obama (details here) and Trump himself (details here), Trump could also be looking out for number 1.
He is right, of course, to treat the Saudis with kid gloves, because, as New Silk Strategies reported in our 3-part series on the petrodollar (Part 1, Part 2 and Part 3), there is a myth widely believed by investors in US Treasuries, that the Saudis are needed to prop up the dollar by buying enormous sums of these Treasuries. The myth loses some of its pizzaz if we remember that China and Japan each hold twice as much in Treasuries as Saudi. And even so, US Social Security payees hold several times as much as all three. Thus, theoretically, the US economy would not need Saudi cooperation, but investors are driven not by reality but by perception. Thus, if the Saudis were to back out of the petrodollar agreement, a lot of earth-shaking events could be triggered, though some would be positive. Minus the incentive to “protect” the Saudis and their oil field, the US would have less motive to wage its endess wars. Anyway, Trump’s nervousness about sullying the Saudis is further evidence of just how much US presidents fear the loss of the Saudi relationship.
As Danilov points out, Trump also needs Riyadh to make up for the loss of Iranian oil in the world markets in order to keep oil prices from spiralling into the stratosphere, thus harming the economy by making everything too expensive.
Author Danilov correctly points out that if the US sanctions Saudi too severely and winds up alienating them, they could be driven into Russia’s arms. He doesn’t mention it but it could also drive them toward the Chinese. At any rate, if the US dollar survives this attack by the legislators, it will be a gratifying relief for the world economy.
The US wants to transfer the "oil kingdom" to Putin
Ivan Danilov, author of the blog Crimson Alter
US senators and congressmen want to push the price of oil far beyond $100 a barrel. The introduction of US sanctions against Saudi Arabia in accordance with the so-called "Magnitsky Act" will entail such consequences on the oil market that the current price increase will seem petty and insignificant. And if the sanctions are really strong, then $100 is not the limit. This will not be very profitable for the American economy, but when it comes to annoying the allies of President Trump, many American politicians and officials simply refuse to apply the brakes, and use common sense and an elementary sense of self-preservation.
President Trump will be against this scenario, but under current political conditions he often has his hands tied. The scandal surrounding the alleged murder of Saudi journalist and dissident Jamal Khashoggi (Kashikchi) in the Saudi consulate in Istanbul may serve as an ideal pretext for new sanctions, and there are already enough people who want to introduce them. In some ways, Riyadh is faced with the problem that Moscow is experiencing in its relations with the current American elite, which perceives sanctions as a way to resolve internal political conflicts and ignores any foreign policy consequences.
It is worth reviewing the plot of the scandal: in Istanbul after a visit to the Saudi consulate, the Saudi dissident and journalist Jamal Khashoggi disappeared. The Turkish authorities, the Western media, as well as some Western intelligence agencies suspect (or even argue) that he was killed on the premises of the consulate. The incident elicited international resonance because Khashoggi was not just an opponent of the Saudi leadership, but also came from a very rich family, and was a resident of the United States and a political columnist for the very famous and influential American publisher The Washington Post, considered one of the mouthpieces of the US Democratic Party. The disappearance of a dissident so deeply integrated in the American establishment could not go unnoticed, but the scandal quickly went beyond the diplomatic realm.
Considering that for Trump, the issue of cooperation and maintaining good relations with Saudi Arabia is of critical importance, his opponents in the American establishment immediately took the opportunity to strike at US-Saudi relations. Without the assistance of Saudi Arabia, Trump could not impose sanctions on Iran without causing catastrophic consequences for the oil market. Riyadh compensated part of the "fallen out" from the Iranian oil market. Because Trump does not want to notice the scandal and spoil relations with Riyadh, but they are trying to make him do it.
Senators Bob Corker, Bob Menendez (Chairman of the Senate’s Foreign Policy Committee), Lindsay Graham and Patrick Leahy (Chairman of the Senate Foreign Programs and Operations Committee) wrote a letter to Donald Trump requesting him to investigate a dissident’s disappearance in accordance with the “global Magnitsky Act,” which was actually adopted in Obama administration to back with legislation attempts to “punish” Russia for an independent foreign and domestic policy. By and large, they are trying to oblige the US president to launch a process that, within 120 days (this is precisely the term under the “Magnitsky Act”), end with the imposition of sanctions against Riyadh.
Journalists have already taken an interest in Trump’s response, and it was predictably negative. He pointed out several important points: the missing dissident is not a US citizen, and Saudi Arabia buys American goods and services (mostly weapons) for $120 billion a year, therefore, such a client should not be disregarded. Besides this, statements by the American leader remained the key role of Saudi Arabia in restraining the rise in oil prices after the introduction of tough anti-Iran sanctions. Moreover, it is impossible not to notice that this is far from the first scandal associated with the peculiarities of the observance of human rights in this region, but all of Trump's predecessors had also turned a blind eye to previous scandals. So, the current episode has a purely political background.
Turkey is not satisfied with Saudi Arabia’s explanations in the Kashoggi case.
The influential Republican senator Lindsey Graham has already “responded” to the president, referring to the quote of the late Republican senator and sworn enemy Trump John McCain, who said that in some cases it is necessary to focus exclusively on values and principles. Under the pretext of protecting values and principles, they are now demanding of the American leader to spoil relations with Riyadh. Moreover, the first real sanctions have already been introduced. Due to public and media pressure, Western companies such as the Virgin Group, founded by billionaire Richard Branson, and the Bloomberg agency, founded by Michael Bloomberg, are refusing joint projects with Saudi public and private entities. Even the first wrestling event, which the Saudi authorities have been organizing for several years, is at risk. Further pressure on US companies working with Saudi partners will only increase. Similar appeals are already being heard in the European Union, particularly since the European Parliament’s Human Rights Committee has weighed in on the scandal.
If you look at things pragmatically (and this is exactly how you should look at everything related to foreign policy), the isolation of Saudi Arabia, as well as possible American and European (formal and informal) sanctions against Saudi Arabia, provide quite extensive opportunities for Russia.
Their specific form depends on the specific problems that our Saudi partners will face.
The United States began to use the language of ultimatums even to partners, said Bogdanov [CEO of oil and gas company Surgutneftegas].
If they are disconnected from SWIFT, then you need to help them use the Russian equivalent.
If they are denied access to the real estate markets in San Francisco and London, then Russia can show the potential of Sochi and St. Petersburg.
If they are barred from investing in US and European securities, then they can and should be offered excellent investment opportunities in our companies and securities, including Russian bonds.
If the Americans and Europeans turn out to be completely reckless with their sanctions bacchanalia, then there may even be a chance for the accelerated creation of a "petro-rouble system." Sometimes errors of geopolitical opponents create conditions such that it is a sin not to take advantage of them. Russia will not miss the chance.
Danilov includes Kashoggi’s Turkish family name Kashikchi because his grandfather Muhammed Kashikchi (Kaşıkçı) was Turkish. Apparently this is common knowledge in Russia.