No Dead-Ends: How Will the United States Reassess Its Relationship With Saudi Arabia?

On October 13, The White House said that Saudi Arabia "could try to manipulate or divert attention, but the facts are clear," accusing the kingdom of "behaving in the wrong direction" by deciding to cut oil production.

John Kirby, a spokesman for the National Security Council, said in response to a Saudi statement rejecting US criticism of the OPEC Plus coalition's decision that Washington would "continue to monitor any reference to Riyadh's position in response to Russian aggression against Ukraine."

The Organization of the Petroleum Exporting Countries (OPEC) and its allies last week cut target output by two million barrels per day (BPD), despite a shortage of global supplies.

"The Saudi Foreign Ministry can try to maneuver or distract attention, but the facts are simple," Kirby said in a statement, adding that the production cut would "increase Russia's revenues and limit the effectiveness of sanctions" imposed on Moscow after it invaded Ukraine in February.

Kirby added in a statement that the other countries in the rally had secretly told the United States that they "felt compelled to support the direction of Saudi Arabia."

Kirby added that the United States had provided Saudi Arabia with an analysis indicating that "key market elements" did not support targeted production cuts and that the bloc could have waited for the next OPEC meeting.

Saudi officials rejected the idea that the cut was politically motivated and said delaying the cut would have had negative economic consequences.

 

Consequences

US Secretary of State Antony Blinken said on Thursday that the United States was currently reviewing the fallout from OPEC+'s decision last week to cut its oil production target despite Washington's objections to its relations with Saudi Arabia.

"Not only have we been deeply disappointed with that, we think it's short-sighted. As the president has made clear, this decision has to have consequences, and that's something we're reviewing as we speak," Blinken said.

Senator Chris Murphy, chairman of the Senate Middle East Foreign Relations Subcommittee, told CNBC: "I think it's time for a comprehensive reassessment of the US alliance with Saudi Arabia."

In the House of Representatives, Tom Malinowski, Sean Casten, and Susan Wild introduced legislation seeking to withdraw US troops from Saudi Arabia and the United Arab Emirates.

Rep. Rubin Gallego suggested that the United States restore the Patriot missile defense systems deployed in Saudi Arabia.

Gallego said on Twitter: "If they prefer the Russians to that extent, they can use their 'very reliable' military technology."

In a joint statement, the legislators said, "Saudi Arabia and the UAE have long relied on the US military presence in the Gulf to protect their security and their oil fields."

The statement continued by saying that, following their (Riyadh and Abu Dhabi) support for the OPEC+ decision, they "see no reason why American troops and contractors should continue to provide this service to countries that are actively working against us."

"If Saudi Arabia and the UAE want to help Russian President Vladimir Putin, they should look to him to defend them," he said, according to the statement, which stressed that "this decision is a turning point in our relationship with our Gulf partners."

"If Saudi Arabia and the UAE hope to maintain a good relationship with the United States that has long been beneficial to them, they must show a greater willingness to work with us, not against us, in advancing what is now our most urgent national security goal, which is to defeat Russian aggression in Ukraine," the statement said.

Saudi Arabia is the largest customer of U.S.-made military equipment, with the State and Defense Departments approving multibillion-dollar requests each year. In August, the Biden administration announced the sale of Patriot interceptor missiles and equipment worth up to $3.05 billion to Saudi Arabia.

Members of Congress have the right to review and stop major arms sales under the Arms Export Control Act 1976. But Congress has never been able to muster enough votes to halt the sale, including three failed attempts to bypass former President Donald Trump's 2019 veto of resolutions that would halt sales to the Saudis.

 

NOPEC Law

After OPEC+ announced a significant reduction in oil production despite pressure from President Joe Biden's administration to keep the taps running, US senators from both parties provided momentum to a bill pressing the law.

Interest in the so-called No Oil Producing and Exporting Cartels (NOPEC) bill increased. OPEC+ took action despite limited oil supplies worldwide that were made worse by Russia's conflict in Ukraine.

"What Saudi Arabia did to help (Russian President Vladimir) Putin continue to wage his despicable, vicious war against Ukraine will long be remembered by Americans," said Senate Majority Leader Chuck Schumer, a Democrat.

"We are looking at all the legislative tools to best deal with this appalling and deeply cynical action, including the NOPEC bill," Schumer said in a statement.

The Republican senator who sponsored NOPEC, Chuck Grassley, said he intended to attach the bill as an amendment to the upcoming National Defense Authorization Act.

"OPEC and its partners have ignored President Biden's pleas for increased output, and now they are colluding to reduce production and further raise global oil prices," Grassley said in a statement. "We should at least be able to hold them accountable for their unfair price fixing," he said.

NOPEC would alter US antitrust law to abolish the sovereign immunity that has shielded OPEC+ members and their national oil firms from lawsuits if it were approved by both chambers of Congress and signed by President Joe Biden.

It would give the US attorney general the option to file a federal court lawsuit against the oil cartel or any of its participants, including Saudi Arabia or Russia.

 

Iranian File

The United States might come under fire for its attempts to manipulate markets, such as when it released record volumes of oil from emergency reserves between May and November if Washington were to sue other nations for cooperation.

In an apparent reference to potential support for NOPEC, the White House stated that it will discuss with Congress "new tools and powers" to lessen OPEC+'s grip over oil prices. Concerns about the bill have already been expressed by the White House.

One of the politically riskier actions may also have the greatest chance of lowering crude prices. According to experts, removing economic restrictions that prevent Iran and Venezuela from exporting oil would increase supply on the market and relieve strain on supplies.

In particular, when domestic fuel costs increase, the administration starts to engage in negotiations with those regimes. But it will take time to come to any kind of deal that would be acceptable from a political and policy sense.

"I think there is now a clear incentive to ease sanctions on several oil producers such as Venezuela," Christophe Barraud, chief economist at the global investment research firm Market Securities, said via email.

"The question of an Iran nuclear deal will be once again on the table. So new tentative negotiations will probably be a focus in the coming weeks," he added.