Biden’s options to counter OPEC+ are limited


This week, OPEC+ made a decision unprecedented in its history and in the history of OPEC. The extended cartel approved production cuts of 2 million bpd at a time of steady demand, tight supply and trail inflation in the world’s biggest economies. More importantly, perhaps, OPEC+ made this decision despite repeated attempts by Washington to change the minds of cartel leaders, including Saudi Arabia and the United Arab Emirates.

Just a day before the OPEC+ meeting, CNN reported that all available human resources in the administration had been mobilized, with the White House “going into spasm and panicking,” according to an unnamed official.

Top officials such as Amos Hochstein and Janet Yellen had been tasked with dissuading the Saudis and Emiratis from cutting production. Talking points included a not-too-veiled threat of damage to reputation and foreign relations: “There is a great political risk to your reputation and your relations with the United States and the West if you move forward. Yet the Saudis and Emiratis did just that. They went ahead.

Commentators were quick to note that the move was a slap in the face to the United States and the collective West. It’s the West that needs cheaper oil the most right now, as the European Union has embargoed Russian crude and fuels and the US Democratic administration needs cheap gasoline ahead of the mi -mandates to have a chance to keep his party’s majority in Congress, however slim.

In a symbolic affirmation of a major shift in geopolitical alignment, Saudi Energy Minister Prince Abdulaziz bin Salman accused Reuters bad reporting and refused to answer questions from the agency at a press conference after the OPEC+ meeting and all but dismissed suggestions from CNBC’s Hadley Gamble that OPEC+ was siding with side of Russia and weaponized oil at a time when the world economy needed it.

Related: Is This the Next Big Threat to Oil Demand?

In short, OPEC+ has clearly demonstrated that it can do whatever it deems necessary to protect its own interests, even if that means going against the interests of its traditional allies, including its largest.

As Bloomberg’s Javier Blas said in a comment room after the meeting, “The United States and its Western allies must be careful. For the first time in recent energy history, Washington, London, Paris and Berlin do not have a single ally within the OPEC+ group.

One could argue that this tectonic shift in geopolitics is more important to the future of the world than the war in Ukraine, although they are certainly not isolated from each other.

Saudi Arabia has already declared its desire to join the BRICS alliance in what can hardly be interpreted as anything other than a declaration of support for the Russia/China bloc. Its closest ally at home, the United Arab Emirates, tends to follow Riyadh’s foreign policy, so it is fine with this estrangement from the West and forging close relations with a symbolic East and a very literal group. which accounts for a substantial share of global GDP.

So the world’s largest oil producers after the United States are turning their backs on their former geopolitical friends and siding with the enemy, to put it bluntly and simply. This talking point for Biden’s top team quoted above may sound like a threat, but what specific form would that threat take?

So far, the response has been fairly general. In an official statementPresident Biden said Wednesday he was “disappointed with OPEC+’s short-sighted decision to cut production quotas” and threatened to consider steps to “reduce OPEC’s control over oil prices.” energy”.

The only way to reduce OPEC’s control over energy prices would be to boost domestic production, but that’s something Biden has sworn not to do and even pledged to prevent. However, that would leave even fewer options on the response table, such as ending arms deliveries to Riyadh.

Indeed, some Democrats in Congress have already called for a sharp reduction in arms deliveries to the Kingdom in response to the OPEC+ production cut decision. Still, such a move would make the military-industrial complex quite unhappy with the White House, which would make such a move a tough sell.

Besides the suspension of arms deliveries to Saudi Arabia, there is the approach of the political pressure campaign, with some on social media already joking that it is only a matter of time before Washington is only beginning to notice the human rights abuses and lack of democracy in the desert kingdom.

Other than that, there’s little Washington can do to “punish” Riyadh – the leader of OPEC and co-leader of OPEC+ with Moscow – for the slap in the face. Sanctions would hardly be a smart move given Saudi Arabia’s clout as an oil producer at a time of insufficient oil supply in the West. Cajoling hasn’t worked and seems unlikely to work in the future, at least for now.

It seems increasingly wise to drop this one to avoid risking even greater alienation from former allies who can do a lot of damage to the US economy – and it won’t be reputational damage. After all, Saudi Arabia is the United States third largest foreign crude supplier.

Irina Slav for

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