Find oil. It became a United States obsession after President Joe Biden’s decision Tuesday to stop importing Russian oil, which sent the market price of a barrel to $133 in Tuesday’s session. Ahead of the midterm elections, the American president fears that his fragile Democratic majority in the House of Representatives will be overthrown by American motorists grumbling about the high cost of gasoline. In California, a gallon (3.78 liters) sells for up to $5, which is rare in the world’s most oil-consuming country.
The Biden administration has already renewed contact with Venezuela, on which it has placed an embargo on oil exports since 2019. Iran is also a promising leader if an agreement is reached on the nuclear dossier, but negotiations are dragging on because of Russian demands.
2.1 million bpd capacity increase for Saudis
Other than the US, countries able to increase their production are rare and are part of OPEC+, which brings together OPEC members plus 10 non-member exporting countries, including Russia, Azerbaijan, Kazakhstan, Malaysia, or even Mexico. First of all, the United Arab Emirates (UAE), which abstained from voting at the UN on a resolution condemning the Russian invasion of Ukraine, and Saudi Arabia, which have options.
According to the latest monthly report (February) from the International Energy Agency (IEA), Saudi Arabia could immediately increase production by 1.2 million barrels per day (bpd), a capacity that could rise to 2.1 million bpd within 90 days. For the Emirates, the short-term potential is 600,000 bpd and 1.2 million bpd for 90 days. Overall, OPEC+ could theoretically produce 2.2 mb/d in the short term and 5.1 mb/d over 90 days, adding marginal increases from Iraq, Kuwait and… Russia.
However, according to information released by the Wall Street Journal (WSJ), both UAE leader Mohammed bin Zayed and Saudi leader Mohammed bin Salman refuse to meet with the owner of the White House. It is common knowledge that, unlike the Trump administration, the Biden administration does not have a very good relationship with Riyadh. However, according to an American financial newspaper, meetings with the Saudis began last month. Brett McGurk, National Security Council Middle East Coordinator, and Amos Hochstein, State Department Energy Officer, traveled to Riyadh to mend relations. Brett McGurk also met with Sheikh Mohammed in Abu Dhabi.
Three conditions
This shows that the Saudis have set their terms for increasing their oil supplies: technological support and information sharing to support their military intervention in the civil war in Yemen, where they are facing Iranian-backed Houthi rebels, technological assistance to develop their own nuclear program, and last but not least, the immunity of Crown Prince Mohamed bin Salman for travel to the United States. Several complaints have been filed against him on American soil following the 2018 murder in Turkey of Saudi journalist Jamal Khashoggi, who fled to the US. At the time, the crown prince was internationally frowned upon, with the exception of Vladimir Putin.
United Arab Emirates in the same vein. Also militarily present in Yemen, they highlighted the lack of American commitment when their country was recently targeted by missiles sent by what they say were Houthi rebels.
In addition, the two Gulf powers are concerned about the return to the international arena of their archenemy Iran in the event of a nuclear deal. And they intend to defend their interests in the new international balance of power that is emerging with the Russian invasion of Ukraine.
Compliance with the agreement within OPEC +
So far, this has not led to an increase in oil production. The Saudis and Emirates remind that they are also bound by an agreement governing the relations of member countries within the framework of OPEC +, which sets production quotas for each member. However, this policy has worked quite well so far, allowing the barrel to rise from $20 in March 2020 to over $120 today.
It is clear that this work – and this common interest – has brought Saudi Arabia closer to Moscow, with whom the connection is maintained and which today seems strong enough to keep the White House waiting.
Robert Jules
March 09, 2022, 17:13