Moral Hazard: the United States and Saudi Arabia (Marcellus Policy Analysis)

By Fiona Harrigan, Fall 2020 Marcellus Policy Fellow

Over the course of President Donald Trump’s tenure, the United States and Saudi Arabia have experienced an unprecedented level of partnership. It has seemingly also been Saudi Arabia’s most controversial era on the world stage, with its continued military campaigns in the Yemeni Civil War, involvement in the killing of Jamal Khashoggi, and blockade of Qatar. These actions have largely been met either with apathy or support from senior Trump officials and there have been few tangible challenges to the kingdom’s conduct from the current administration.

This cycle of permissiveness on the part of the United States and subsequent recklessness from the emboldened kingdom is an example of moral hazard, which refers to an arrangement in which actors
are not incentivized to guard against risk because they perceive they will be shielded from the consequences of their actions. The United States’s financial ties to the kingdom through arms deals––and the fact that its relationship with Saudi Arabia is a counterbalance to Iranian influence in the region––is effectively the kingdom’s insurance policy. With the confidence it has developed from this unwavering American support, Saudi Arabia has little incentive to change its conduct in the region.

President-elect Biden and Congress will face new opportunities to challenge our morally hazardous relationship with Saudi Arabia. It isn’t necessary to cease relations with the nation entirely. For instance, if Biden were to develop diplomatic ties with Iran as a challenge to Saudi Arabia, he could leverage his relationships with either country against the other. But, by ceasing arms sales to the
kingdom, Biden could send a clear signal that the Saudi-led coalition’s conduct in Yemen is outside the bounds of acceptable behavior. Whether Biden chooses to pursue these tactics or others, what will prove most effective in compelling Saudi Arabia to change its ways will be political and diplomatic approaches that convey that the U.S. may no longer be as securely on the kingdom’s side as it has been during the Trump years.