[TMGM Financial Breakfast] US and Saudi Arabia Sign Civil Nuclear Cooperation Agreement, Raising Widespread Concerns!

The agreement is named after Section 123 of the U.S. Atomic Energy Act of 1954, which provides the legal framework for civilian nuclear cooperation between the United States and foreign countries. U.S. Energy Secretary Chris Wright and Saudi Energy Minister Prince Abdulaziz bin Salman officially signed the agreement, along with a complementary Bilateral Safeguards Agreement, on July 22 local time. This 30-year strategic agreement, worth hundreds of billions of dollars, is expected not only to reshape the foundation of U.S.-Saudi relations but also to have far-reaching implications for the geopolitical landscape of the Middle East and the global energy market.

Commercial Logic

From a commercial perspective, the core value of the agreement lies in giving U.S. companies a leading role in Saudi Arabia's nuclear energy development while effectively excluding other foreign competitors. According to The New York Times, citing U.S. officials, the government expects the agreement to generate billions of dollars in revenue for the U.S. nuclear industry.

Saudi Arabia's motivation is equally clear. As part of its Vision 2030 economic diversification strategy, the kingdom aims to use nuclear power to reduce domestic consumption of oil and natural gas for electricity generation, thereby freeing up more crude oil for export. For a country heavily dependent on oil exports, replacing oil and gas with nuclear energy for power generation is essentially a strategy to maximize export profits.

A key provision in the agreement states that, as reactor projects progress, if joint U.S.-Saudi research determines it is necessary, U.S. companies will build a uranium enrichment facility in Saudi Arabia. This means the U.S. nuclear industry will not only participate in construction but could also remain involved in long-term operation and maintenance, creating a commercial value chain that may last for decades.

Geopolitics: A Diplomatic Victory for Saudi Arabia and a Strategic Calculation for the United States

Many media outlets have described the agreement as a "major victory" for Saudi Arabia. The kingdom has long sought access to civilian nuclear technology while insisting on retaining the right to enrich uranium. The new agreement fulfills Saudi Arabia's key objective, particularly at a time when U.S.-Iran relations remain tense.

For the United States, the agreement also serves multiple strategic objectives. Officials from the Trump administration believe that deep U.S. involvement will provide Washington with practical influence over Saudi Arabia's nuclear program, helping prevent it from being used for military purposes. In other words, rather than allowing Saudi Arabia to obtain nuclear technology from other sources, the United States prefers to remain directly involved, benefiting economically while maintaining strategic influence.

Notably, the agreement is reportedly part of a broader geopolitical package. According to reports, during Crown Prince Mohammed bin Salman's visit to the White House, the two countries signed not only the civilian nuclear cooperation agreement but also an agreement covering the sale of advanced F-35 fighter jets. Bundling nuclear cooperation with defense sales demonstrates the United States' broader strategy of strengthening ties with Saudi Arabia through a combination of security and technology cooperation.

Growing Opposition

The most controversial aspect of the agreement is how it addresses nuclear proliferation risks. Unlike previous U.S. nuclear agreements with countries such as the United Arab Emirates, the U.S.-Saudi agreement does not include the so-called "gold standard," which requires partner countries to permanently renounce uranium enrichment and spent fuel reprocessing capabilities. These technologies can be used not only to produce fuel for civilian nuclear reactors but also to manufacture nuclear weapons. The agreement also omits the Additional Protocol of the International Atomic Energy Agency (IAEA), an international safeguard measure that grants the agency broader authority to conduct surprise inspections.

Former senior U.S. State Department official Robert Einhorn warned that unless the agreement includes sufficient safeguards, it could increase the risk of nuclear proliferation across the Middle East and beyond. Henry Sokolski, Executive Director of the Nonproliferation Policy Education Center, was even more direct, stating, "Whatever Saudi Arabia does, the UAE, Turkey, and Egypt will follow. Expecting this to end well for everyone is pure fantasy."

Critics have also pointed to what they see as a double standard in U.S. nuclear policy. On one hand, Washington continues to pressure Iran to scale back its nuclear program and surrender its stockpile of highly enriched uranium. On the other hand, it is helping Saudi Arabia develop a civilian nuclear program that could potentially provide a pathway to nuclear weapons capability. Israeli officials have also expressed concern that the agreement could trigger a regional nuclear arms race in the Middle East.

Under U.S. law, the 123 Agreement will be submitted to Congress for approximately 90 days of review. Although many lawmakers oppose the spread of nuclear technology in the Middle East, blocking the agreement would require a two-thirds majority vote through a joint resolution. Given the current political landscape, that threshold is considered extremely difficult to reach. Senator Ed Markey of Massachusetts has publicly criticized the agreement as "irresponsible and dangerous," but such opposition is widely expected to fall short of creating an effective legislative obstacle.

Short-Term Impact on Oil Prices

The agreement comes at a time when international oil prices remain elevated. Ongoing tensions in the Middle East continue to threaten global energy supply routes. Saudi Arabia's decision to advance its nuclear energy program is commercially rational from the perspective of energy diversification. By reducing domestic oil and gas consumption, the kingdom can increase crude oil exports, making the strategy particularly attractive during periods of high oil prices. However, the market is focused not only on Saudi Arabia's energy transition but also on the geopolitical risk premium implied by the agreement. If investors interpret the deal as a signal of rising nuclear proliferation risks in the Middle East, expectations of greater regional instability could provide further upward pressure on oil prices.