Petro-Determinants of Alliances: Revisiting US Power in the Middle East

• In Event: Alliance Dynamics and Foreign Policy

Abstract

The international order is undergoing a transition from the US-led unipolarity characteristic of the post-Cold War era towards multipolarity. This fuels a ‘great-power competition’ narrative implying a shifting United States (US) foreign policy strategy in light of China’s rise as a challenging global power or Russia’s resurgence. The region often at the center of debates around shifting international politics in the Middle East. International Relations (IR) scholars foresee a diminished US commitment or even retrenchment from the region. The perceived decline of US influence in the Middle East paved the way for external powers such as Russia and China to increase their reach and establish themselves as alternative sources of support for authoritarian governments within the region. Concurrently, regional powers have demonstrated more policy autonomy and deployed consciously economic foreign policy activities to hedge against the perceived decline of US influence and the rise of China as a major economic and military power.

We ask, what can capital flows tell us about regime security and alliance robustness, durability and transformation? Strategic hedging theory has risen to prominence in IR scholarship to make sense of states behavior in navigating great power competition. Hedging theory predicts that in a multipolar world, states are likely to engage in economic balancing to diversify ties and reduce overreliance on a single actor to mitigate security risks associated with power shifts in the international system. We probe this hypothesis using primary data on Saudi transnational capital flows from 2015 to 2022. We find that despite a shift toward Asian markets reflecting the Saudi-China rapprochement, the US remains the most important investment geography for continued flows, confounding predictions from hedging theory. These dynamics reflect historical patterns of petrodollar interdependence, albeit in a different form; Saudi sovereign wealth moved from US Treasury bills to market-based financial assets in response to financialization of the US economy but also in support of domestic state-led industrial policies.
In making this argument, we attempt to change our understanding of how alliances form and persist. We do this by moving beyond system-level explanations to place added emphasis on the role of regime security imperatives in shaping foreign policy outcomes. This in turn shifts our current understanding of US power in the Middle East, the pivot to Asia and retrenchment narratives prevalent in academic and policy circles. If conventional wisdom takes the retreat of US power as a given, we contend that an analytical focus on security concerns of military capacity risk overlooking the recalibration, rather than demise, of long-standing American influence in the Middle East.

Authors

• Lucy Abbott, University of Edinburgh

• Alexis Montambault Trudelle, University of Edinburgh