When leaders of the G-20 nations pledged at their recent London summit to find $1.1 trillion in lending resources for the International Monetary Fund, they were counting on the world's wealthiest countries to boost their IMF contributions. Among the countries at the top of their list was the oil-rich kingdom of Saudi Arabia. But a month has passed, and Saudi leaders are still refusing to come up with new money for the IMF.
Their reluctance to part with their cash has less to do with stinginess than with a new determination to assert their economic and political clout on their own terms.
"The Saudis want to see exactly what's on offer from the IMF," says Eswar Prasad, a former IMF division chief and a professor of trade policy at Cornell University. "They want to see if a larger contribution will get them a larger voting share [and] more influence at the IMF."
By all measures, Saudi Arabia could afford to increase its IMF contribution. As the world's No. 1 oil exporter, it has a huge trade surplus and more than $300 billion in foreign reserves. But Saudi leaders are looking first for assurances that they will be taken more seriously as a global economic player.
At a forum on U.S.-Saudi relations last week in Washington, D.C., Saudi Finance Minister Ibrahim Al-Assaf said his government is willing to "cooperate" with the United States and other governments in multilateral development institutions like the IMF, but only under certain conditions.
"Among other things," Al-Assaf said, "such cooperation would need to recognize the systemic importance of Saudi Arabia in the world economy and the oil market in particular."
The evolving global economy is realigning the world. Energy producers, such as Saudi Arabia, have more power. Though they may continue to depend on the United States for military protection, the Saudis are now staking out a new leadership position on their own, notes Penn State professor Flynt Leverett, director of the Geopolitics of Energy Initiative at the New America Foundation.
"They want to have greater influence in the places where fundamental decisions about international economics are made," Leverett says. "They understand that their security is going to rely not just on their ability to get the U.S. to send aircraft carriers, but also on how they manage their wealth and use the kind of economic leverage that gives them."
In this sense, the IMF is a battleground. All major decisions there — who gets a loan, for how much and under what conditions — are subject to a vote. The big industrial nations have a voting majority, so emerging market nations are almost powerless. In pushing for a bigger IMF voting share, Saudi Arabia has allied with China and other countries.
On other issues, however, Saudi leaders have their own positions. While the Chinese have expressed interest in a new international currency as an alternative to the dollar, for example, the Saudis have not. At last week's U.S.-Saudi forum, the governor of the Saudi Central Bank, Mohammed Al-Jasser, defended the U.S. dollar against its rivals.
"The euro is there, the sterling is there, the Swiss franc is there, all of these currencies are there and trying their best to be the ultimate global reserve currency," Al-Jasser pointed out, "but the dollar still commands that position." Al-Jasser said central bank managers like himself, with abundant foreign reserves, choose to hold them in U.S. dollars for practical, not political, reasons.
"Those of us who are in the market are looking for liquidity, safety and return," Al-Jasser said. "As long as the dollar, or whatever currency, provides that, we are going to be using it."
A new reserve currency would be an issue for the IMF to consider. With a bigger voting share at the fund, the Saudis could actually position themselves to get more U.S. attention.
"Right now, the Saudis are still a little more sympathetic to a continuation of dollar hegemony than, say, the Chinese or certainly the Russians would be," Leverett says. "So, in a way, you make yourself more valuable to the United States as a balancer."
Saudi Arabia's fortunes, like those of other oil producers, have declined in the past year. But as the global economy recovers, so will Saudi oil revenues. The country is in stronger shape than other oil producers. It remains the key player in the OPEC oil cartel, and with their recent moves, Saudi leaders suggest that their nation will be an independent actor in the new global economic order.