How the OPEC Oil Cuts Will Probably Ignite a US–Saudi Dispute

At its meeting held in the Austrian capital Vienna, on Wednesday, October 5, 2022, the first meeting since last March, with the outbreak of the Corona pandemic, OPEC+ decided to reduce its oil production by 2 million barrels per day from next November, while Libya and Iran were excluded from this decision.

The OPEC+ decision to cut its oil production came as a shock to the United States and European countries, which have been counting on the success of production increase negotiations to minimize the repercussions of reducing Russian oil supplies due to the Ukrainian war, which has caused a violent shock in the energy market since February.

Washington saw the decision as an explicit declaration of the organization's support for Moscow in its dispute with the West, while others saw it as a clear pragmatism among oil-producing countries looking for their own interests, taking advantage of the insane rise in raw material prices that jumped to the infamous 2008 levels.

Such a move at the height of the crisis triggered by the Russian war on Ukraine and its consequences will undoubtedly have major repercussions on the course of relations between America and Europe on the one hand and Saudi Arabia and the organization's allies on the other, which the White House has begun to wave indirectly.

 

US Disappointment

The timing of the production cut comes at a particularly important moment for the United States, just two and a half months after President Joe Biden met with Saudi Crown Prince Mohammed bin Salman in Jeddah and five weeks before November's midterm elections.

Days earlier, White House envoys had traveled to Saudi Arabia to appeal to the kingdom not to reduce oil production.

Instead, Prince Mohammed's half-brother, Energy Minister Prince Abdulaziz bin Salman, decided the outcome of supply cuts at OPEC headquarters in Vienna and was next to Vladimir Putin's deputy prime minister, Alexander Novak, just days after the United States imposed sanctions on him.

Roger Diwan, a veteran OPEC observer at data provider S&P Global Communications Insight, said in a note that the cuts represented "oil armament" and that the timing and venue of the meeting were a deliberate signal from the organization, adding that the presence of Russia's deputy prime minister under US sanctions to discuss tightening oil supplies, as winter approaches and Russia effectively militarizes its gas exports to Europe, sends a clear message.

According to Diwan, "Saudi Arabia's hostile trajectory will increase the risks involved in higher oil prices."

Saudi Arabia, which has long relied on the United States for military support as part of the Energy for Security alliance during two Gulf wars and the September 11 attacks, is showing new confidence in its ability to break free from US pressure and act in its commercial and diplomatic interests.

Although the Biden administration was willing to accept the cut, it was shocked by the coalition's breach.

Against this backdrop, President Biden said he was "disappointed" and would look for "alternatives" to boost supplies, while the White House said OPEC was "allied with Russia" as Moscow escalated its offensive against Ukraine and said it would consider freeing more oil from the country's strategic reserves.

 

New Gulf?

For some commentators in the Gulf, the energy crisis has boosted the region's importance in global markets.

Emirati policy professor Abdul Khaleq Abdullah says: "At the moment, everyone needs Gulf oil, Saudi Arabia, and the United Arab Emirates. Some in Washington are still unaware of the existence of a new bay. We are also no longer receiving orders from Washington."

As the Gulf states exude new confidence, absolute monarchies have become less patient with what they see as the unreliability of the United States as a partner in the region.

Riyadh has increasingly complained about what it sees as unpredictable US policy—including toward its arch-regional rival Iran—and has expressed concerns that Washington will not provide the level of security it wants despite decades of US arms sales.

Steven Cook, a senior fellow at the Council on Foreign Relations, said: "They can cite twenty years of what they see as American weakness and that America is not a source of security and stability in the region. They really think they're the center of the universe right now, and everybody should go to them."

According to a senior administration official, the Middle East has long been a major focus of the White House, highlighting its efforts to maintain a truce in Yemen, the recent Gulf Cooperation Council summit, as well as other investments and efforts in the region.

Riyadh recently sent several messages indicating its discomfort with the Biden administration's handling of the Saudi–American relations file, which was highlighted in the announcement of negotiations with China on the sale of oil in yuan instead of dollars, Saudi Arabia's avoidance of condemning the Russian invasion of Ukraine, and the Saudi crown prince's requirement for the US president's visit to Riyadh in order to increase oil production, which happened last July.

But Biden received a weak reception, and Riyadh quickly played a pivotal role in the decision to reduce the latest oil production, which was considered an insult and humiliation for Biden ahead of the next congressional elections.

According to David Shepherd, despite the existence of a Saudi interest in the rise in the price of oil due to the huge revenues it brings, and to face the risk of a decline in the expected demand for oil in light of the indicators of the global recession, the decision to reduce production indicates that Riyadh no longer views Washington as a partner in energy and economic files.

As well as what the decision means in supporting Moscow, which benefits from high oil revenues to finance its war in Ukraine, and its role in tightening pressure on Europe, which suffers from high inflation and large increases in prices.

 

Selling MBS Out?

Security researcher Ahmed Mawlana wrote that the decision to cut oil production at the critical moment America and Europe are going through reinforces previous warnings that the policies of the Saudi crown prince are harming US interests and fostering instability in the region.

According to Mawlana, this includes a list of events like the detention of Lebanese Prime Minister Saad Hariri, the murder of journalist Jamal Khashoggi, the blockade of Qatar, and the arrest of senior princes of the royal family, which led former Assistant Secretary of State Martin Indyk and Chairman of the Council on Foreign Relations Richard Haas to say that "the United States needs a responsible Saudi partner."

They stressed that the relationship between the two countries needs to be reworked to avoid reaching the divorce stage in light of the Saudi crown prince's conviction that Washington should accept him as he is without changing his behaviors.

"Saudi Arabia is important to Washington, which is difficult to easily cede to Beijing or Moscow, as Riyadh holds 17.2% of the world's oil reserves and produces 12.5% of global production," Mawlana said.

"Washington is likely to use political, economic, and human rights tools to remind the Saudi crown prince of his need for them, while hinting at the possibility of opening the files of the Yemen war, which has killed 370,000 people, and the Khashoggi file, as well as threatening to stop maintenance operations and provide spare parts for US weapons sold to Saudi Arabia, and even encouraging parties within the royal family to take positions in support of understanding with Washington," he added.

"Overall, it seems that Saudi–American relations have reached a fundamental juncture, and that the autumn in the Saudi crown prince's relationship with Washington is beginning to turn into winter," he concluded.