Saudi Arabia looms large as Donald Trump moves back into the White House for a second term as US president, and there are many opportunities for cooperation along with significant challenges.
Since Trump was first elected in 2016, one would be “hard pressed” to name a more changed nation than Saudi Arabia, according to Richard Wilson, president of the Saudi-US Trade Group.
“Saudi Arabia will, first and foremost, want to affirm this is no longer a ‘little brother’ relationship,” he says. “Saudi Arabia sees itself as an up and coming Middle Power and envisions a relationship with the US along the lines of South Korea or Brazil.”
Among the foreign policy accomplishments of the first Trump administration was the signing of the Abraham Accords in 2020, which normalised diplomatic ties between Israel and the UAE, Bahrain and other Muslim nations.
Bringing Saudi Arabia into the fold is the obvious next step. Outgoing secretary of state Anthony Blinken said last week an agreement was “much closer” today despite the 15-month conflict between Israel and Hamas.
Dania Thafer, executive director of the Gulf International Forum in Washington, believes Trump will “push hard” to get the deal done, despite important disagreements over the fate of a Palestinian state.
“It’s going to be very interesting to watch how Trump is going to engage with the Gulf states, especially Saudi Arabia, in terms of expanding the Abraham Accords,” she says. “That’s going to be, I believe, his main goal as president when it comes to the Middle East.”
Trump’s incoming secretary of state Marco Rubio said during his January 15 confirmation hearing that clinching a deal would be a “historic” achievement and that, to get there, all parties must reap rewards.
“What benefits will Saudi Arabia derive for being in recognition of Israel and vice-versa?” Rubio said. “I can think of a variety of things: whether it’s advances in their investments in high-tech … the ability of cross-investments and also, frankly, of security.”
The ceasefire in Gaza may help the negotiations, along with developments in Syria and Lebanon. But closing the remaining gaps will be no easy feat for the returning US president.
A main pillar of the US-Saudi Arabia component of the three-part deal is bolstering bilateral trade and investment. Both President Trump and Saudi Crown Prince Mohammed bin Salman are eager to attract foreign funds.
According to David Hamod, president and chief executive of the National US-Arab Chamber of Commerce, investment is where the “real action” will be in the next four years.
The Vision 2030 giga-projects are a natural fit for US infrastructure companies, while the Public Investment Fund’s $1 trillion war chest may target American investment managers, Hamod says.
Saudi Arabia already has extensive holdings in the United States, but its capacity to hike them faces constraints.
Oil prices below its breakeven point and Vision 2030 spending are leading to slower growth and rising deficits. The PIF is reducing outlays overseas to concentrate on domestic projects.
“I do think these economic dynamics are going to mean the Saudis will have a lot less free cash sitting around ready to invest in the US than some of their peers, like the UAE and even Qatar,” says Rachel Ziemba of Ziemba Insights in New York.
Like for the UAE, building the technology industry in the face of stricter US export controls on artificial intelligence chips will be a major goal for Saudi Arabia during the second Trump administration, as will be navigating new US tariffs.
One subset is of interest to Saudi Arabia’s energy sector, according to Ziemba: the possible 25 percent rate on imports from Canada, “by far” the largest supplier of oil and gas to the US.
“Saudi Arabia doesn’t exactly have the fuel blends to replace it, but I’m sure they are looking at whether that might provide opportunities,” Ziemba says.
Energy will remain central to the bilateral relationship as opposing forces combine into a hard-to-predict outcome for the price of oil, renewables and other such issues.
Trump and his new team are climate change-sceptics and see fossil fuels as part of the energy mix for the long term.
“This conceptualisation will be welcomed by Gulf producers,” says Karen Young, a senior researcher at Columbia University’s Center on Global Energy Policy.
Less so will be Trump’s commitment to boost domestic production, though sources note private actors make the US market, leaving the government with little leverage.
The returning president’s approach to Russia and Iran – more sanctions? Conflict-ending deals? – will also have an impact on oil prices, although nobody yet knows in which direction.
More broadly, the US president’s promises to try to top wars in the Middle East and between Russia and Ukraine “alleviate” regional fears and “help” financial markets, according to Junaid Ansari, Kamco Invest’s director of investment strategy and research.
“We expect increasing investment in the region from international investors and higher FDIs in key projects as a result of his pro-business policies,” he says.
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