Historically, Trump has cultivated a close relationship with Saudi Arabia, underscored by his first overseas visit as President to Riyadh in 2017, marked by a grandiose reception. However, the relationship saw tensions following the 2019 attack on ARAMCO’s oil facilities, criticizing Trump for a perceived lack of aggressive response. Despite past frictions, efforts to bolster ties have persisted, particularly through investment endeavors and construction deals involving Trump’s private business interests. Reports indicate Jared Kushner, Trump’s son-in-law, secured significant Saudi investments in his private equity firm, highlighting the intertwined economic interests.
In a related development at the World Economic Forum in Davos, Trump announced plans to press Saudi Arabia and OPEC to lower oil prices, which he argued could help resolve the ongoing Russia-Ukraine conflict. Trump proposed that Saudi Arabia increase its investment package in the U.S. to $1 trillion, a substantial leap from the initially reported $600 billion, citing the Kingdom’s strategic importance and past U.S. support.
Saudi Arabia maintains a dominant position in the global oil industry, primarily due to its remarkably low production costs, which are among the lowest worldwide at approximately $10 per barrel. This cost advantage allows Saudi Arabia to remain profitable even when global oil prices are relatively low, unlike U.S. shale producers, who require significantly higher prices to break even. With major export destinations such as China, India, and Japan, Saudi Arabia’s economic reliance is less on U.S. markets and more diversified, while U.S. efforts in light of Trump’s earlier comments to capture European markets may not significantly impact the Kingdom. Moreover, Saudi Arabia’s vast oil reserves, coupled with tax advantages and favorable extraction conditions, solidify its competitive edge.
Energy analysts suggest that oil price adjustments could impact global market dynamics significantly. Dr. Lisa Morgan, an energy policy expert, remarked, “Saudi Arabia’s role in stabilizing oil prices is pivotal, and any shifts in their strategy could have far-reaching implications for global energy security.”
As the dialogue between the U.S. and Saudi Arabia continues, the proposed economic initiatives will further cement the bilateral relationship, with an expected growth in trade and investments, notably artificial intelligence.
