Geopolitics and Markets Review - 20th November 2023

Wider Middle Eastern Consequences of Conflict and The Arab League Summit Takeaways

Contents

1)      The New Axis of Resistance

2)      The OIC and Arab League Summit: Key Takeaways

3)      Concluding Remarks

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The New Axis of Resistance

Proxy wars have been the way wars have been fought post-World War Two. If The United States saw a state rising that challenged its hegemony, or even that acted against its interest, proxy wars were often the way to slow down these movements. Wars are expensive, so engaging an aggressive state in a long, drawn-out stalemate will naturally weaken them. The United States debt levels however are looking unsustainably large, and no matter how many wars Janet Yellen says the United States can fight, unless she’s got stacks of cash hidden in her secret piggy bank, there isn’t a lot of evidence to support her claims. The strategy of fighting through proxy wars was highlighted clearly in the Russia-Ukraine conflict, and so many historical examples before today, but after World War Two.

Photo by Andre Taissin on Unsplash

Iran is also an unfriendly state to the United States, with sanctions directed in the way of the Iranians. Iran is an aggressor towards Israel, stating if the Gaza Strip is occupied by Israel post-conflict, they will escalate. U.S. support for Israel places it in a position in the Middle East from which it can oppose and survey Iranian actions and interests, especially with its assets currently in the Eastern Mediterranean likely pointing Iran’s way.

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The OIC and Arab League Summit: Key Takeaways

The role of Iran in the conflict is an interesting one, and it's multilayered. At the summit in Riyadh this past week with the Organisation of the Islamic Cooperation (OIC) and the Arab League, both Syria’s demand for breaking relations with Israel and Iran's wish to impose an oil embargo on Israel were rejected. There are a few conclusions I take from this:

1. The Saudi-Iran brokered peace deal by China has shifted sands in the Middle East. It was Saudi Arabia who rejected Iran’s proposal for an oil embargo. Saudi Arabia is the de facto leader of the Middle East, that is clear. One issue is if an oil embargo would even work today as it did in the 1970s. There are other large oil players in the World, and most importantly, Saudi Arabia has been cutting production all year. To some, this might seem like an aggressive move to keep the price of oil higher and maintain inflation. But view it on the flip side. Saudi Arabia is building up spare capacity. Should conflict arise elsewhere, leading to skyrocketing oil prices, or if Iran were to escalate in the conflict and Iranian oil facilities were attacked, Saudi Arabia could quickly hike production again since they’re producing below their maximum capacity. They’re not weaponizing oil, they’re providing the oil markets a lifeline in rising global conflicts. The world has changed since 1973, when the oil embargo was a consequence of $2.2B of US military support for Israel in the Yom Kippur War. The reaction to this current conflict, outside Iran’s response, signals the declining trend of Arab Nationalism.

   

   Photo by Zbynek Burival on Unsplash

2. The Saudi-U.S. relationship is also a deeply interesting one. The “secret” 1974 meeting between Saudi Arabia and the United States ended the oil embargo. The United States received cheap oil, and Saudi Arabia received military support and defence. After the United States founded its shale revolution, it came to question how this strategic partnership would change. It was said that the Israel-Saudi peace talks were related to the Saudi defence partnership. If the U.S. possessed strong partnerships with Israel and Saudi Arabia in the Middle East, firstly many other states would follow suit in normalizing relations with Israel, and the United States would have a stronger foothold in the Middle East. Saudi Arabia wishes for defence against Iran. Even with the China-brokered deal, conflicts between Iranian Shia Muslims and Saudi Arabian Sunni Muslims are historically deep and need hedging against by the Saudis. A battle for de-facto leadership of the Middle East was also a key component of the rivalry. I believe this has now tipped in the direction of Saudi Arabia.