MBS vs Biden: US can do little in response to Opec+ cuts
Tue, Oct 11, 2022
PHOTO: AFP
LAST Wednesday’s (Oct 5) decision by Saudi Arabia and its Opec+ partners to cut oil production by 2 million barrels a day despite pleas from Washington – and in the middle of a devastating global economic crunch and a war in Europe – amounted to a major blow to the American economy as well as a diplomatic loss for the United States and its Western allies in their confrontation with Russia.
The move engineered by Saudi Crown Prince Mohammed bin Salman, otherwise known as MBS, was also a huge political setback to US President Joe Biden and his Democratic Party, whose chances of remaining in control of Congress after the November midterm elections have now been reduced to less than 50 per cent.
In fact, it seems that MBS has done his best to humiliate and show his disdain to Biden, who during a July visit to Riyadh pleaded with the crown prince and the other Arab Gulf states to increase their oil production and push down energy prices.
Increasing the global energy supply would have put pressure on Russia – whose economy relies on the country’s oil exports – and strengthened the position of the US and its European partners as they try to force President Vladimir Putin to end the war in Ukraine.
Biden’s trip to Saudi Arabia was in itself a less-than-dignified gesture by a world superpower and the “leader of the free world”, who during the 2020 presidential campaign condemned MBS’s human rights record and castigated Saudi Arabia as a “pariah”. Upon entering office, Biden ordered the release of a CIA report that placed the responsibility of the 2018 killing of Washington Post columnist Jamal Khashoggi on the Saudi crown prince.
Biden then delayed a planned arms shipment to the Saudis and pressed them to end their military intervention in the civil war in Yemen, where they were fighting guerrilla groups allied with Iran. He also continued to pursue a nuclear deal that would provide Saudi Arabia’s arch-enemy, Iran, with hundreds of billions of dollars to buy arms, fund terrorism and destabilise the Middle East.
But then, oops – here was Biden in a forgive-and-forget mission to Saudi Arabia, getting a fist bump from MBS and apparently even some pledges by the Saudis and their ally the United Arab Emirates to increase production by more than a million barrels a day – which they did for a while.
That move, together with the Biden administration’s decision to release supplies from the US Strategic Petroleum Reserve, helped to increase global oil supplies and lower gas prices for American consumers, for whom the so-called price at the pump was seen as the embodiment of the rising wave of inflation that threatened their livelihoods.
Such inflation amounts to a political curse for the Democrats, as they prepare for the midterm election where most polls suggest they will lose at least control of the House of Representatives.
When it came to making a choice between maintaining his friendship with Biden and protecting his country’s economic interests, MBS decided that, notwithstanding that memorable fist bump, what mattered was the latter.
The Saudis, like the other heads of the oil cartel, are worried that the expected global economic recession will drive oil prices down and hurt their economies. Thus on Wednesday, in what could be seen as a pre-emptive move, they announced a global daily production cut of about 2 per cent, which has already helped push up pump prices.
Moreover, by joining Russia as well as Iran in announcing production cuts, MBS and the other leaders of the oil-producing Arab Gulf states demonstrated that they would not join the US and its military allies in their effort to isolate the Russians and make them pay the price for their invasion of Ukraine.
The Western countries were hoping to find ways to cap the price paid to Russia for its oil exports. Instead, the production cut will help Russia raise revenues and finance its military operations in Ukraine. So that earlier plan, which in any case was not very convincing, will now have to be shelved.
The White House’s response to the decision by the Saudis and Opec+ was furious. Administration officials tried to lobby the Saudis and other Arab Gulf states to reverse the decision.
Treasury Secretary Janet Yellen warned Middle Eastern allies – or perhaps “allies”: “There is great political risk to your reputation and relations with the United States and the West if you move forward.” National Security Advisor Jake Sullivan called the production cuts “short-sighted”.
But that view apparently isn’t shared by MBS, who is making it clear that he doesn’t buy into the Biden administration’s narrative, under which a US-led alliance of democracies is confronting Russia, China and other authoritarian regimes.
After all, under any political definition, Saudi Arabia and its Arab-Sunni allies are not considered democracies. And in any case, while the Saudis share some common interests with Washington, they also want to do business with Russia and China, and won’t allow the Americans to dictate their policies. Their view of diplomacy, like that of former president Donald Trump, is transactional: You scratch my back, I’ll scratch yours.
Moreover, MBS and other Arab leaders don’t trust Biden and the Democratic Party as reliable allies, given their criticism of the human rights records of the military regimes and monarchies in the Middle East, and their emphasis on promoting democracy. Together with Israel, they have also been opposed to the administration’s efforts to renew the nuclear deal with Iran.
From their perspective, major losses by the Democrats in the midterm election and the possible return of a Republican to the White House after the 2024 presidential race would be welcome news. MBS is probably daydreaming about the day that his old pal Trump would be once again occupying the White House.
And at this stage, there isn’t much that the Biden administration can do to retaliate against the Saudis and the oil cartel.
Congressional Democrats have threatened to pass legislation that would charge Opec members with violating US antitrust laws, and have proposed to reduce US military ties with Saudi Arabia and the UAE.
But withdrawing US and defence systems from Saudi Arabia and the UAE – two of the world’s biggest buyers of US weapons – would only strengthen the position of the anti-American Islamic Republic of Iran and its regional allies. This would play into the hands of Russia and China, who would be delighted to replace the US as the Saudis’ weapon suppliers, and threaten the interests of Israel, America’s closest ally in the region.
The most effective way the Biden administration could respond to the rising oil prices would be by encouraging domestic oil and energy production, including by removing regulations on this.
But that kind of approach runs contrary to the views of the powerful environmentalist lobby and the progressive wing of the Democratic Party, who seek to cut American oil production – which in turn helps strengthen the Saudis’ bargaining position, and by extension, that of Putin.