Oil deal or no deal? A Saudi slap in the US face: NYT

By Al Mayadeen English
Source: The New York Times
26 Oct 2022 22:30
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The United States has fallen out of the Saudi grace, and the Kingdom has chosen to move on its own terms.

President Joe Biden arrives at King Abdulaziz International Airport in Saudi Arabia, on Friday, July 15, 2022. (The New York Times)

President Biden's top advisors believed they had reached a secret agreement to increase oil production through the end of the year as he planned a politically critical trip to Saudi Arabia this summer, The New York Times (NYT) reported. This arrangement could have helped justify breaking a campaign promise to avoid the country and its crown prince, the newspaper added.

Earlier this month, Saudi Arabia and Russia helped a group of oil-producing nations decide to cut oil production by two million barrels per day, the opposite of the result the administration believed it had secured as the Democratic Party struggles to combat inflation and high gas prices ahead of the November elections.

A flurry of accusatory statements was exchanged between the two governments as a result of the action, which enraged Biden administration officials and caused them to reevaluate America's relationship with the Kingdom. The White House even went as far as accusing Saudi Arabia of assisting Russia in the Ukraine war.

According to the NYT, the oil deal, which has not been previously disclosed and was intended to increase production between September and December, was disclosed to lawmakers in classified briefings and other conversations. These lawmakers, who were informed of the benefits of the trip, are now enraged that "Bin Salman deceived the administration."

After the death of journalist Jamal Khashoggi, President Biden promised to treat Saudi Arabia's ruler as a "pariah," but the result has been yet another low point in the United States' troubled relationship with Saudi Arabia.

The newspaper reported that the incident also reveals how Saudi Arabia, led by its ambitious and frequently brutal crown prince, looks ready to reduce its reliance on the United States. Bin Salman, according to the paper, is attempting to establish Saudi Arabia as a regional force on its own.

“We have a disagreement with Saudi Arabia over the most recent production cut, but our energy policy has always focused on prices, not the number of barrels — and that policy is succeeding with crude oil prices down over 30 percent this year alone,” Adrienne Watson, a National Security Council spokeswoman, said in a statement on Tuesday night.

Officials in the United States are also preparing for a potential price increase in December if a European oil embargo on Russian oil takes effect and the Saudis do not raise oil output to offset the predicted decline in supplies. According to the officials, that would be a sure indicator that the Saudis were assisting the Russians by undercutting the plan put forth by the United States and Europe.

“While we clearly disagreed with the OPEC Plus decision in early October, we recognize the importance of continuing to work and communicate with Saudi Arabia and other producers to ensure a stable and fair global energy market,” said Amos Hochstein, Biden’s energy envoy.

Analysts have concluded that senior US and Saudi officials miscommunicated on the oil market dynamics and Russia's geopolitics, adding that the Biden administration will have a hard time figuring out how things went downhill.

“Deconstructing Saudi decision-making right now is like Kremlinology on steroids,” said Hussein Ibish, a scholar at the Gulf States Institute in Washington. “It’s become a matter of a relative handful of people around the king and the crown prince.”

The private oil deal

According to the NYT, officials in the Biden administration started making plans in the spring for the President to visit "Israel" in the summer and stop in Saudi Arabia for a conference. They were aware that such a visit would draw criticism because, up until that point in his presidency, Biden had refused to meet one-on-one with the Crown Prince and had criticized Bin Salman during the presidential campaign. He also ordered the declassification of an intelligence report that suggested the Prince had probably ordered the murder of Jamal Khashoggi.

However, a few of the President's advisors regarded the trip's advantages as having both immediate and long-term value and had secretly worked to mend the relationship. More immediately, they thought the trip could support a Saudi promise to persuade OPEC to raise oil output in light of the fact that the Western sanctions on Russia caused a sharp increase in world fuel costs.

What was the deal?

The NYT reported that the leading proponents of the trip met with Bin Salman and his advisors in spring, including Hochstein and Brett McGurk, the top National Security Council representative for Middle East affairs. They struck a two-part secret oil agreement with the Saudis in May, according to American officials.

The first part included Saudi plans to accelerate OPEC+ production to 400,000 barrels per day by moving the plans from September to July and August.

The second part of the deal included the Saudis producing 200,000 barrels per day for each month from September to December of this year.

That said, the first element of the covert agreement was carried out when OPEC+ declared on June 2 that the production rise anticipated for September would be accelerated. The White House revealed that day that Biden would soon travel to Saudi Arabia.

Democratic lawmakers remained skeptical of the efforts at rapprochement.

By the time Biden arrived in Jeddah, Saudi Arabia, on July 15 for his meeting with Bin Salman and other Arab officials, the price of oil had begun to gradually decline. Although the trip's most iconic image is of the American President shaking hands with the Saudi crown prince he once demonized, White House officials thought they had at least strengthened Saudi promises on a number of fronts.

Saudi officials showed members of Biden's group a chart during the summit showing that oil prices had dropped to $101 per barrel from more than $120 per barrel when the war in Ukraine started, showing that they had kept their promises to the Americans. Soon, the Kingdom would produce more than 11 million barrels per day, a volume it had only occasionally in the previous few years.

US falls out of Saudi "grace"

The summit left the Americans with the impression that Bin Salman was content and the agreement was on track. However, in Riyadh, senior Saudi officials quietly informed others that no more significant increases in oil production were planned.

In fact, on August 3, OPEC+ issued the first public notice of this, announcing a meager increase in production for September of 100,000 barrels per day, which is only half of what US officials felt the Saudis had promised them.

American officials first learned of Saudi Arabia's potential to persuade OPEC+ to declare a significant reduction in oil output at a meeting slated for October 5 in late September. American officials worked feverishly to persuade Bin Salman to change his mind.

According to the NYT, on September 24, American representatives had a face-to-face meeting with Bin Salman and Prince Abdulaziz bin Salman, the Saudi Energy Minister, in the Kingdom. According to American officials with firsthand knowledge of the conversation, Bin Salman assured the Americans that there would be no production reduction.

But four days after that, the White House learned the Crown Prince had done the opposite: Saudi officials notified the Americans that Saudi Arabia would back production cuts at the OPEC+ meeting, which took place in Vienna, wrote the newspaper.

At a yearly investment summit on Tuesday in Riyadh, Prince Abdulaziz made the improbable claim that it was unlikely. He said that Saudi Arabia was keeping a reserve of capacity to be ready for such shocks and that it felt a great duty to be a "dependable supplier of oil."

While Europe and the US try to pressure Russia, Prince Abdulaziz made the improbable claim, during the investment summit in Riyadh on Tuesday, that increasing production is unlikely. Prince Abdulaziz said the Kingdom would do what was in its best interests.

“I keep listening to, ‘Are you with us or against us?’ Is there any room for, ‘We are for Saudi Arabia and the people of Saudi Arabia’?” he said.

“We will have to deliver our ambitions.”