Recently a debate took place between myself and a British expert on the topic of the United States giving up on the Middle East. This well-known expert bases his conclusions on information that seems to be available only to him and not to me. But the most important thing here is the logic upon which his conclusions are based.
The first point in this logic is that America’s interest is primarily oil. Since the United States has become the largest producer of oil, eliminating its need for Arab and Iranian oil is now a distinct possibility.
Most importantly, the United States has lifted its ban against exporting oil to other countries. It will become nearly the largest supplier of oil − even bigger than Saudi Arabia. This means that America will move away from being in a trade deficit situation. The deficit is now almost zero after having exceeded $500 billion at the turn of the century. Thus, America will soon be able to repay its foreign debts, leaving only its domestic public debt, which will also gradually diminish.
This expert said that thanks to superior American technology, the U.S. will be in a position to sell oil at $30 per barrel in the global market. It’s been ages since the cost of extracting oil from shale and oil sands exceeded $70 per barrel.
In Saudi Arabia, the price of extracting oil is less than $30 per barrel. But Saudi Arabia also depends on income from oil and would suffer from a huge budget deficit if it sold its oil for less than $60-$70 per barrel.
On the other hand, America has other concerns. There is China, which primarily sees its war with the United States as a technological war in areas such as electronics, space, renewable energy, communication and information, among others. The trade and currency wars are only a manifestation of this technological war.
The British expert estimates that the U.S. loses more than $600 billion each year to the so-called Chinese piracy of American technologies. Because of these losses, the United States implemented a ban on exporting computer chips and similar products to China where they are disassembled and copied.
Naturally, the United States is concerned about what is happening in China’s neighborhood as well as in Russia.
Therefore, the expert concludes, the United States will withdraw from the fragmented Middle East. It will reduce its capabilities and its military presence in the region. The British expert’s logic here appears to be very strong and realistic. But he does not provide all the facts.
First, the expert says that the domestic public debt in the United States reached $22 trillion at the end of 2018. According to some sources, this is equal to 78% of the gross domestic product.
This does not match up with the numbers. America’s GDP was only $21 trillion at the end of 2018, which makes the public debt equal to more than 100% of GDP. It is expected to rise through 2029.
Commenting on the Democratic presidential candidate debates, other experts have said that America borrows $1 million every second. If this is true, then what the British expert said about the impending elimination of American debt is not accurate.
Second, the U.S. trade balance has managed to reduce its monthly trade deficit in both 2018 and 2019. But this deficit is still around $50 billion monthly. While it is true that the deficit with China is shrinking and might be a “candidate” for further reduction in the future, the trade deficit will not reach zero, especially if China and America eventually reach some sort of agreement.
Importantly, a lack of trade with China will reduce American exports and American companies’ profits. These companies re-export goods from the United States to the rest of the world at a high profit, especially in the clothing, sports, furniture, leather products and building material sectors, among others.
As for America giving up on the Middle East − one hopes that this is true. Then there’s Israel and its future. That may explain why America is urging Arab countries to reach an understanding with Israel and accept America’s conditions for ensuring Israel’s security and military superiority.
In addition, leaving the Arab world behind means giving China a historic opportunity to interact with West Asia through the “One Belt, One Road” project and by increasing its demand for Arab oil in the region.
This is especially so if the oil supply and demand model changes such that prices are no longer decided at the global level but rather by region.
What we have here before us is a major political and economic question. Centers for strategic studies must examine these matters closely.
Dr. Jawad al-Anani is an economics expert, deputy prime minister, and former chief of the Royal Court of Jordan.