America Needs the Middle East to Grow

Skyline of Dubai, December 29, 2018. (Hamad I Mohammed/Reuters)
Its importance to the U.S. and the world goes far beyond oil.

It is an unpopular view in Washington now to say that the Middle East matters. But it does. War fatigue, American energy “dominance,” and a bipartisan campaign to increase burden-sharing, in which Arab state partners pay more and do more for their own regional security, are strong and widely supported arguments for America’s disengagement with the region.

The collateral damage of a persistent incompetence on the part of Saudi Arabia to manage its communications strategy and intelligence operations has made the U.S.–Saudi strategic partnership weaker than it was after September 11, 2001. American politicians of both Democratic and Republican affiliation want to wash their hands of our Gulf Arab partnerships. But these relationships are larger than current scandals, nascent leadership transitions, and the optics of being associated with governments that make poor choices and then fail to cover them up.

Our relationship with the Middle East, and especially with the Gulf Arab states, is vital to U.S. strategic interests. We are not an island, economically or politically. America’s position in the global economy and as a political hegemon depends on its recognition of how and where its power moves. And American power moves, and is strengthened, through the Middle East.

American connection to the Middle East goes beyond the war on terror, weapon sales, and barrels of oil. A growing sense of American isolationism rests on a belief that the U.S. economy can be decoupled from that of China and emerging markets. This is a dangerous kind of solipsism. The strength of the American economy relies on its access to — and command of — products manufactured abroad, many from emerging markets. We need the Middle East not for its oil, but precisely because it sits in the middle of a global market that secures our global energy supply, and even more important, because the Middle East facilitates the transit of the goods that we and other countries use to grow.

The pace and stamina of global economic growth depends on emerging markets. As analysts at HSBC have warned, the global economy runs on one engine — consumption. The U.S. economy is vulnerable to a global slowdown, and we all need an emerging middle class in Asia to continue apace. If oil prices accelerate too quickly or too severely, that growth will be in danger. In emerging markets, the risk of food-price inflation, as well as energy-price rises, would hurt that emerging middle class’s spending power. It’s not just oil and gas that pass through the Middle East; so does a lot of our global food supply.

In 2018, about 21 million barrels per day of crude oil and refined products flowed through the Strait of Hormuz, equal to about 20 percent of total global oil consumption. About one-third of the world’s liquefied-natural-gas cargoes also transit the strait, along with petrochemicals. But in that same critical geography of the Arabian Peninsula, 11 percent of globally traded rice transits the Strait of Hormuz, and about 18 percent of rice transits the Bab al Mandeb and the Suez Canal, along with 16 percent of globally traded wheat and more than 30 percent of trade in fertilizers, according to researchers at Standard Chartered and Chatham House.

The United States has not depended on oil from the Persian Gulf in large quantities for some time. As Anthony Cordesman has argued, the portion of U.S. petroleum imports coming from the Gulf has always been a relatively limited portion of total U.S. petroleum imports. It peaked at 24.5 percent of all U.S. petroleum imports in 1990 but averaged closer to 20 percent between 1960 and 2013, and was just 16 percent of reduced import levels in 2015. The United States spends less on energy imports now, thanks to the fall in global energy prices in late 2014 and its revolutionary growth in domestic shale-oil production. But that doesn’t make the United States energy independent.

As Jason Bordoff and others have consistently argued, energy independence does not mean price independence, as oil is a globally traded commodity. A crisis or supply disruption in one region of the world affects the pricing of the product, wherever it is produced. As Bordoff states, “The vulnerability of U.S. consumers to global oil price spikes depends not on how much oil the United States imports, but on how much it consumes.” As long as we need oil, we will be tied to its suppliers, its transit, its pricing, and its volatility.

But perhaps more than these two economic realities in global consumption and energy supply, we need to be present in the Middle East not with guns and soldiers, but with our ideas and values. The Middle East is a literal battleground for the future development models of the most populous and fastest-growing economies in the world. If you want to see a world that looks like China or Saudi Arabia — more authoritarian, less market-friendly — then believe that the United States is insulated from oil markets and how developing countries grow. If you want the United States to lead the global economy and shape it to the mutual advantage of growing countries, then the Middle East is at the center of our future.

Karen E. Young is a resident scholar at the American Enterprise Institute.

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