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Wally Adeyemo supports imposing sanctions on buyers of Russian oil, but said more diversified energy at home will give the US a stronger geopolitical advantage.
President Trump has ended the federal government’s use of the "social cost of carbon" (SCC), an official estimate of the harms caused by carbon dioxide emissions.
Countries around the world, including the US, are rushing to secure critical mineral supply chains. As these essential resources, which are key to building clean energy infrastructure, become...
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Saudi Arabia is experiencing a significant economic transformation under its Vision 2030 plan to reduce the country’s dependence on oil revenues by diversifying its economy. The Saudi government’s introduction of a value-added tax (VAT) and successful debt issuances have already diversified revenue sources, lowering oil’s share of total revenue to below 70 percent, even during periods of high oil prices.[1] But challenges remain. Saudi Arabia’s fiscal break-even oil price—the price per barrel needed to balance the budget—has risen, indicating continued sensitivity to oil price fluctuations. Its external break-even oil price has also increased, reflecting ongoing reliance on oil exports to finance imports. These challenges underscore the need for policies that enhance fiscal resilience, particularly in the face of potential future oil shocks.[2]
One approach Saudi Arabia has adopted is investing heavily in renewable energy, particularly through partnerships with China. This has had the effect of accelerating the country’s progress in renewable energy, with far-reaching implications for global geopolitics and energy markets. Specifically, Saudi Arabia is increasingly becoming aligned with China while China is gaining greater access to Middle Eastern markets and greater regional influence.
Saudi Arabia’s Renewable Energy Ambitions
Saudi Arabia has established a goal to source at least 50 percent of its power from renewable energy by 2030, expanding its capacity to 130 gigawatts (GW), 58.7 GW of which is expected to come from solar and 40 GW from wind.[3] This target is the most ambitious of its kind among Gulf Cooperation Council (GCC) countries (Figure 1).
To achieve it, Saudi Arabia is prioritizing a range of renewable energy production and infrastructure initiatives (Table 1).
Saudi Arabia intends to use the renewable capacity it develops from these initiatives not only to power the country but also to export renewable energy to the world.[4]
New Strategic Partnerships and Their Geopolitical Implications
Saudi Arabia has also been forming significant partnerships with leading Chinese renewable energy companies undergirded by substantial investments (Table 2).
These partnerships provide Saudi Arabia with advanced technology and financing options while allowing China to secure vital energy resources, strengthen its Belt and Road Initiative, and gain greater access to Middle Eastern energy markets.
Saudi Arabia’s new alignment with China on renewable energy could have powerful and lasting geopolitical implications. Through this relationship, China is expanding its influence in Saudi Arabia and the broader Middle East region. This poses a major strategic challenge to the United States, which has long been a key strategic partner and ally to Saudi Arabia and the dominant external player in the region. If the US intends to maintain its regional foothold going forward, US policymakers may want to consider how they can enhance economic engagement with and/or offer competitive partnerships to Saudia Arabia and other nearby countries.
Moreover, Saudi Arabia’s localization efforts, supported by Chinese partnerships, could significantly alter global supply chains in the clean energy sector. The country aims to transition from a renewable technology importer to a renewable technology exporter, potentially making the Gulf region a central hub for renewable energy components.[5]
Conclusion
Saudi Arabia’s aggressive investment in renewable energy and strategic partnerships, particularly with China, represent a significant development with global implications. The move aligns with the country’s goal of economic diversification and positions it as a potential leader in the global energy transition. By challenging traditional geopolitical alliances, it may also lead to a more multipolar balance of power in the Middle East, which in turn could prompt global powers, especially the United States, to reconsider their strategic approach to the region.
Foundations and Individual Donors Anonymous Anonymous the bedari collective Jay Bernstein Breakthrough Energy LLC Children’s Investment Fund Foundation (CIFF) Arjun Murti Ray Rothrock Kimberly and Scott Sheffield
China’s dependence on the energy supplies that move through the Strait of Hormuz makes it especially vulnerable to any possible closure of the waterway by Iran in retaliation for attacks by Israel and the United States.
