United States-Saudi diplomacy is increasingly seeming to take on a transactional flavor, especially with regards to the Saudi mining industry.
The Trump administration has established that energy dominance is a national energy production priority, and it is also a foreign policy objective to extract concessions and opportunities from allies, partners and adversaries alike. For the United States and Saudi Arabia, there are a number of issues in energy diplomacy that could create opportunities for cooperation. There are also points of tension and competition, including the obvious tension in Trump’s call for lower oil prices, which is a detriment to Saudi fiscal policy, as well as to the interests of U.S. shale private industry.
For Saudi Arabia to host Ukraine-United States talks on ending the war with Russia and signing a mineral agreement, there is an opportunity to expand Saudi’s diplomatic reach, and also to create a synergy and investment opportunity for Saudi global mining and resource extraction expertise.
The proposed U.S.-Ukraine agreement to create a fund based on revenue sharing of mineral and natural resource extraction as a kind of repayment or contribution to the United States due to its prior support to Ukraine raises the question of how transactional diplomacy may affect other American bilateral relationships in energy and resource extraction on a global scale. President Trump’s proposition to Crown Prince Mohamed bin Salman to invest $1 trillion in the United States is one example.
Transactional Diplomacy and Mining
For Saudi Arabia, its mining industry is a national strategic industry, a key sector in economic diversification efforts at home and part of a nascent outward-focused investment and economic statecraft initiative abroad. Much like China’s foray and its early investment and subsidization of its mining interests abroad and refining capacity at home, Saudi Arabia is willing to invest in the potential of its domestic reserves, and also to buy stakes in mining operators with capacity to deploy at global scale. State-backed financing can enable resources for infrastructure deals, as China has used to access mining ownership stakes in the Democratic Republic of the Congo worth far more than the cost of initial infrastructure projects the Chinese built in exchange.
Saudi Arabia has the capacity to make similar investments, while also cooperating with any U.S. plans to create a model of a sovereign investment fund that would encourage strategic partnerships and investment inside the United States from foreign entities. And it would also be able to allocate investments abroad on behalf of the US government.
One of the weaknesses of the proposed U.S.-Ukraine resource deal, besides the evidence of large-scale rare earth reserves, is the lack of operational extraction and processing capabilities in Ukraine or controlled by the U.S. government. A partnership model in that case, and arguably in many other geographies, would be suitable to the goals that seem to be shaping up under Trump’s economic diplomacy strategy.
Partnership Strategies
Moreover, the diplomatic partnership strategy that Trump seems to prefer is to delegate to subordinate interlocutors, creating patronage and new points of access directly to the president. We see this in the case of encouraging Saudi Arabia to take a leadership role in the conflict in Gaza and in Ukraine, and in how President Trump might encourage Putin and Russia to take an engagement role in mediation with Iran on behalf of the United States. Tools of transactional diplomacy that cross security and energy files are pointing to Saudi Arabia and Russia for the Trump administration.
Saudi Arabia’s domestic mining capacity is set to accelerate as the kingdom diversifies away from oil by seizing investment opportunities in critical minerals. Its oil giant Saudi Aramco is broadening its investment portfolio in lithium production, aiming at forming a lithium processing venture with the state-owned mining company Ma’aden by 2027. With this partnership, Saudi Arabia aims at securing its supply chain as domestic demand for lithium is expected to grow twenty-fold by 2030, with global demand on the rise. Since lithium is a vital component of batteries powering electric cars, Aramco estimates the kingdom’s contributions at 500,000 electric vehicle batteries and 110 gigawatts of renewable energy sources by 2030.
The Ma’aden and Aramco technology partnership strategically combines the former’s mining operations with the latter’s production know-how, as oil pumping and processing techniques easily apply to minerals. The kingdom’s entry into the battery metals sector de facto challenges China’s monopoly in lithium processing, potentially reshaping the technology supply chain as Chinese proposed export controls on critical minerals threaten the EV market. International markets have already responded favorably to Saudi Arabia’s mining growth, as Ma’aden recently raised $1.25 billion to fund its expansion, half of which came from American investors cognizant of the kingdom’s untapped potential.
Beyond the Middle East
Saudi transactional diplomacy in mining is also ramping up through its joint venture Manara Minerals, established with the Public Investment Fund. After acquiring a ten percent stake in Brazil’s Vale base metal company in 2023, Manara plans to buy a stake in Pakistan’s Reko Diq project, a $9 billion copper mining complex developed by Barrick Gold. The Saudi mining fund would buy the equity stake from the government of Pakistan, which owns twenty-five percent of the mine. This project would serve Saudi Arabia’s interests in securing the minerals it needs for its energy transition, and uncoincidentally its aspirations to become an AI hub, as data centers are copper-intensive. On the other hand, it would boost the Pakistani economy, which is in dire need of investable projects. This “win-win” deal reflects Saudi Arabia’s increasingly transactional diplomacy, with petrodollars used as a bargaining ship to secure assets in the south Asian country already heavily indebted to the kingdom.
In the Biden administration, the notion of Saudi Arabia and its mining potential as an industry partner and financier, were ancillary to the former administration’s efforts at countering China in central Africa, as part of the now frozen Lobito Corridor project. Trump has opted out of the Lobito Corridor project, as well as freezing the ability of USAID and DFC to disburse loan payments. Saudi Arabia, through the Saudi Fund for Development, has been an active lender in Africa, including a $100 million project in Angola for road construction connecting Lobito to the Catumbela Industrial Center Project.
The Trump Administration may opt out of G7 multilateral efforts aimed at shared connectivity and development projects across the Middle East and Africa, but it is likely to encourage bilateral deal-making that generate returns either for a U.S. sovereign-backed fund, or those that provide services to U.S. extractive projects in Third World countries. It is an emergent trend, but one that the kingdom could use to its advantage in building out its global mining interests.
Karen E. Young is a Senior Research Scholar at Columbia University, Center on Global Energy Policy and a Senior Fellow at the Middle East Institute.
Alice Baudin is an MA Candidate at Columbia’s School of International and Public Affairs.
Image: Shutterstock/Chaudhary Umair Ahmad