US-Saudi Oil Ties: Will Biden Rethink OPEC's Role in Global Energy Market?

While European countries may ban Russian oil imports, India will be pressured not to purchase below a certain price

5 min read

On 5 October, the Organization of the Petroleum Exporting Countries (OPEC) + which consists of 23 countries, including Russia—a major producer of oil and gas, decided to cut oil production by 2 million barrels per day (Bpd). The core of OPEC + is OPEC which consists of 13 oil producers, accounting for around 30% of global oil production. Of these, Saudi Arabia is the most important country.

Clearly, the OPEC+ decision to reduce oil production could not have been possible without Saudi's agreement. The US did not want the Saudis to reduce global oil supplies and has been deeply upset with the Kingdom.

The Biden administration had lobbied hard over the past few months with the Saudis to raise oil production to soften the market and push prices down. This would have reduced financial flows to Russia which accrue from its hydrocarbon exports.

US-Saudi Ties Strain Over Oil Output Cuts

Despite a personal appeal made by President Biden himself to the Saudis on the increase in oil production during his visit to the Kingdom in July, they did not eventually do so.

The White House readout of 15 July on Biden’s meeting with the Saudis on energy issues is revealing. It notes, “Saudi Arabia is committed to global oil market balancing for sustained economic growth. The United States has welcomed the increase in production levels 50 percent above what was planned for July and August. These steps and further steps that we anticipate over the coming weeks have and will help stabilise markets considerably."

Thus, the crucial US assessment which flowed from Biden’s conversation with the Saudi leadership which is now concentrated in the controversial Crown Prince and Prime Minister Mohammad Bin Salman (MBS) was the “anticipation” that the Saudis would not act in any way to “harden” the market.

The term “stabilise the market” points to that. Now, not only that has “anticipation” proven illusory MBS’s decision has shown his complete disdain for the US President. US National Security Advisor Jake Sullivan called the OPEC + decision “short-sighted”.

How OPEC+ Influences Global Energy Market

He went onto say that the maintenance of the global supply of energy was of "paramount" importance at this stage and that “this decision would have the most negative impact on lower and middle-income countries that are already reeling from elevated energy prices.”

The fact is though that the US is not so much concerned about the welfare of developing countries as with the consequences on the hardening of the oil market because of curtailed supplies and the financial advantage that Russia would have because of it.

The European countries will try to offset this advantage through their decision to ban the import of any Russian oil beginning with early December. There will also be pressure on India not to purchase Russian oil below a certain price. Till now, the Modi government has maintained that it will import Russian oil as it deems fit.


US's West Asia Outreach

The question is if the recalcitrance that MBS has shown will damage US-Saudi ties and hence have an impact on the situation in West Asia. In order to make an assessment of this issue, it is necessary to consider some aspects of US policies towards the region over the decades. That will indicate if it has any real space for manoeuvre.

The US became self-sufficient in hydrocarbons a little over a decade ago. It is now a net exporter of energy but throughout the second half of the last century, West Asia was of an area of critical strategic importance for the US principally because of its hydrocarbon deposits.

Beginning with the end of the Second World War and till the Islamic Revolution in Iran, Israel, Iran and Saudi Arabia were the three principal anchors of US’s West Asian policy. The Iranian Revolution made the US and Iran into great enemies thereby increasing the importance mainly of Saudi Arabia and but of other Arab Gulf states for the US.

The fact that Saudi Arabia practised the most extreme forms of puritanical Islam and was guilty of a violation of human rights was overlooked for US national security reasons. Indeed, the US went to the extent of also ignoring, in effect, that most of the perpetrators of the 9/11 terrorist attack were Saudi nationals. This also profiled the constraints of the US in dealing with Saudi Arabia.

Will There Be a Breakthrough in US-Saudi Tensions?

From Shah’s ouster, a fixed element of US policy in West Asia was demonstrated by its desire to contain Iran, Saudi, US and Israeli interests coincided with that of Iran's.

President Barack Obama decided that the way to ensure that Iran did not develop nuclear weapons was to enter into a deal with it which would ensure that its enrichment of nuclear materials was curtailed. The result was the Joint Comprehensive Plan of Action (JCPOA).

However, this freed Iranian financial assets to an extent, enabling it to play a greater regional role through consolidating Shia forces to the detriment of Israel and Saudi Arabia. Naturally, these two countries bitterly opposed the JCPOA.

President Trump walked out of the JCPOA and imposed greater sanctions against Iran. This met with approbation from Israel and Saudi Arabia. Biden was, however, committed to restoring the JCPOA. This was naturally opposed by Israel and the Saudis.

While US-Iranian negotiations have been ongoing, differences remain which are preventing the restoration of the nuclear deal. Naturally, the Israelis and the Saudis are happy at the non-fruition of the deal.

Biden had also been bitterly critical of MBS’s alleged but widely believed role in the murder of the Saudi dissident and well-known journalist Jamal Khashoggi in the Saudi consulate in Istanbul in 2018. He virtually wanted MSB to be treated like a pariah but has had to eat the humble pie because far from not having anything to do with him, Biden had to bump fists with him in Riyadh in July.

And yet MSB has not delivered on the oil front. That in effect is showing a favourable disposition to Russia for all anti-Russia votes that the Saudis may have cast against Russia in the United Nations General Assembly (UNGA) on the issue of the Russian invasion of Ukraine.

With the deadlock in US-Iran negotiations continuing and support for Israel being an article of faith with the US political and strategic classes, with Pakistan in ferment and the memories of strategic defeat in Afghanistan still fresh Biden simply has no manoeuvring ability with the Saudis. MBS knows this. Thus, the Saudi tail will continue to wag the American dog.

(The writer is a former Secretary [West], Ministry of External Affairs. He can be reached @VivekKatju. This is a personal blog, and the views expressed above are the author’s own.The Quint neither endorses nor is responsible for them.)

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