US/Saudi Relations Shredding

Joe Biden's attacks on the Saudis is causing the Saudis to run into the arms of the Chinese. This is a significant global shift in geo-economic power.

Biden's attacks include:

• Saying the Saudis are pariahs and should be treated as such
• Attaching fossil fuels which is, of course, the life blood of Saudi Arabia
• Restarting the negotiations with Iran in which Iran basically spits in the facr of Biden. But Iran is a mortal enemy of Saudi and the Saudis don't want Iran to have a nuclear bomb when the US won't allow Saudi to have one.
• Not supporting Saudi and the UAE in their proxy war with Iran in Yemen.

Several items on this list could be considered existential threats to Saudi Arabia. As a result, Saudi Arabia has snubbed the American president and has turned toward China to ally itself with. It is not a done deal but the Americans are doing nothing to patch up the rift.

The Saudis are meeting with the Chinese at this very moment. Chinese president Xi arrived in the country yesterday, his second trip there. Here is the crux, from the Economist:

"The challenge for Gulf states is how to balance these two views of China. The first has become increasingly alluring. China is a big export market and a major source of investment in the Gulf. The second, in which China serves as a strategic hedge against an erratic America, is less compelling: China is no easy substitute. Moreover, in trying to play one power off against the other, Gulf leaders may hasten America’s abandonment of them, which they fear."

But they are certainly on track to try to do this.

China is now selling armed drones to the UAE to be used in the war in Yemen replacing US help.

The Biden Administration is concerned with the growing closeness between the two countries but has not walked back any of the Biden insults at the top of this page. Until they do, look for China to increasingly replace the US with Saudi Arabia.

How do we make money on this? Frankly hard to. Obviously it is bullish for Chinese businesses but only has a diffused effect. We could also buy some Saudi public companies but that is hard to do. I think we just have to monitor the situation and be opportunistic when we see something easier to invest in.