US-KSA standoff: Riyadh defies Washington prior to OPEC production cut
In new damage to ties, Riyadh disregards US officials who warned that the output cut would be perceived as siding with Russia.
Prior to OPEC's cut in oil production, US officials reached out to their counterparts in Saudi Arabia and other Gulf producers with an appeal to delay the decision, according to people familiar with the conversations. However, the answer was nothing else than a resounding "no".
US officials cautioned Saudi authorities that a cut would be interpreted as Riyadh's unambiguous decision to side with Russia in the Ukraine war and that the action would erode the Kingdom's already dwindling influence in Washington, the people said.
Saudi authorities dismissed the proposals as a political maneuver by the Biden administration to prevent negative news ahead of the US November elections, in which control of Congress is at stake. High gas costs and inflation have been major campaign topics.
Instead, the country leaned on its OPEC colleagues to approve the cut, which is expected to reduce production by 2 million barrels per day.
President Biden, according to National Security Council Spokesperson John Kirby, believes that the US should examine its relationship with Saudi Arabia in light of the OPEC+ decision "and take a look to see if that relationship is where it needs to be and that it is serving our national security interests." He stated that the President was willing to meet with members of Congress to discuss the bilateral relationship.
The Saudi Foreign Minister, Prince Faisal bin Farhan, stated on Tuesday that the OPEC+ decision was solely economic and had no political implications. He stated in an interview with Saudi-owned Al Arabiya television that the coalition aims to stabilize energy markets and advance the interests of producers and consumers. He added that relations with the US are long-standing and strategic, claiming that military cooperation between the two countries has contributed to peace and stability in the region.
As the #Saudi-led aggression continues in #Yemen, we should realize how complicit the West is in the crimes committed against civilians. By selling arms & military hardware to #KSA, the US, UK, France & Canada have all participated in the killing of innocent Yemenis. pic.twitter.com/XtdrY5eBii— Al Mayadeen English (@MayadeenEnglish) January 25, 2022
Officials in the United States said the OPEC+ decision was counterproductive because high energy prices are threatening the global economy and represent an economic weapon for Russian President Vladimir Putin against the West. It threatens to raise fuel prices in the United States ahead of the November 8 midterm elections. The delay requested by Washington would have meant a production cut made in the days before the election, too late to have much effect on consumers’ wallets ahead of the vote.
Since the OPEC+ decision, the White House has vowed to challenge OPEC's dominance over the energy market. Lawmakers from all political parties have called on the United States to halt military sales to Saudi Arabia and US authorities began to consider methods to penalize Riyadh.
What does this mean? The Biden administration is considering withdrawing from Saudi Arabia's premier Future Investment Initiative investment gathering later this month as one of its first responses. According to sources familiar with the situation, the US has withdrawn from a working group meeting on regional defenses scheduled for next week at the Gulf Cooperation Council in Saudi Arabia, according to US sources.
A dollar-based relationship
Since Biden visited Saudi Arabia in July and met with Crown Prince Mohammed bin Salman, despite threatening to make the Kingdom an international "pariah" following the murder of journalist Jamal Khashoggi, the OPEC move was generally viewed as a diplomatic slap in the face. It also comes at a critical time for Biden's Democratic Party, as it prepares for midterm elections in November, with rising consumer costs a prominent Republican talking point.
Saudi Arabia has justified the proposed output cuts by arguing that the "objective of OPEC+ is to keep a sustainable oil market."
Saudi Foreign Minister Prince Faisal bin Farhan told the Saudi-owned Al Arabiya channel on Tuesday that the move "was purely economic and was taken unanimously by the (organization's) member states."
"OPEC+ members acted responsibly and took the appropriate decision," he said.
Kirby added that Biden was "willing to work with Congress to think through what that relationship (with Saudi Arabia) ought to look like going forward," although he clarified that no formal discussions had yet begun.
Biden threatens KSA with 'consequences'
US President Joe Biden threatened Saudi Arabia with "consequences" after a coalition led by Riyadh agreed with Russia to cut output.
Last week, the 13-nation OPEC+ and its 10 allies infuriated the White House by resolving to cut output by two million barrels per day beginning in November, fueling fears that oil prices may spike. "I'm not going to get into what I'd consider and what I have in mind. But there will be -- there will be consequences," he told CNN.
Biden would not specify which choices were being evaluated, although the White House had previously stated that Biden was reassessing connections between allies. "I think the president's been very clear that this is a relationship that we need to continue to re-evaluate, that we need to be willing to revisit," National Security Council spokesman John Kirby told CNN. "Certainly in light of the OPEC decision, I think that's where he is."
This comes after US President Joe Biden expressed disappointment on October 5 in the OPEC+ alliance's "shortsighted decision" to cut oil production against the background of supply issues, according to Jake Sullivan, National Security Advisor, and Brian Deese, National Economic Council Director.
"The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine. At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices," the two officials said in a joint statement.