WASHINGTON (AP) — Three motley oil regimes that President Joe Biden and former US leaders have spectacularly flouted — Venezuela, Saudi Arabia and Iran — are now the targets of US efforts as global fuel prices soared during the Ukraine crisis.
But it’s not clear if any U.S. diplomacy can get more crude on the market fast enough to help the current supply crisis or rip oil states once shunned from what – for Saudi Arabia in particular – is a lucrative alliance. with Russia.
For the Biden administration, the US initiative on the three troubled oil giants could at best stabilize rising oil and gas prices and bring those governments closer to the West and further away from Russia and China. At worst, Biden risks humiliating rebuff and condemnation for addressing governments accused of rights violations and violence.
“We have a global interest in maintaining … a stable supply of energy, including through diplomatic efforts,” Secretary of State Anthony Blinken said on Wednesday of moves towards countries that were not favored by the US or the Biden administration, and in the case of Iran, an armed threat . “We have a lot of interests and we use diplomacy to try to advance them.”
The wording that the Russian war raises the stakes in many areas was a change from Biden’s early presidency pointing to democratic values as “America’s enduring advantage” in diplomacy.
In recent years, Saudi Arabia has made rich profits by teaming up with another major oil producer, Russia, to keep global oil and natural gas supplies modest and prices high.
And Biden came to power vowing to isolate Crown Prince Mohammed bin Salman and the rest of the Saudi royal family over abuses, including the 2018 murder of US journalist Jamal Khashoggi.
It is known that Biden and the young crown prince never spoke.
“I don’t know if he’s ready to eat that much crow meat,” Saudi Arabia analyst David Ottaway said of Biden’s efforts to improve his administration’s relationship with Prince Mohammed and Saudi Arabia, the country that could most easily end the global supply crisis. . “He was going to make this guy an outcast.”
As for Iran and Venezuela, the US will welcome positive diplomatic results that bring oil back from those countries, but “the problem is that in this situation their negotiating power increases dramatically,” said Claudio Galimberti, senior vice president of analysis at Rystad. energy. .
“So Iran will make a lot of very cool requests to rejoin the deal, and Venezuela too,” the energy analyst said. In addition, it may take time to ramp up their production.
Russia’s devastating military invasion of Ukraine and the ensuing market disruptions and sanctions hitting Russia’s oil exports helped lift the average U.S. gas price to $4.25 on Wednesday.
The day before, Biden announced a ban on imports of Russian oil and gas, exacerbating high prices due to OPEC production cuts imposed by Saudi Arabia and non-OPEC Russia.
The Biden administration is making cautious moves towards all three oil giants, Venezuela, Iran and Saudi Arabia.
In the case of Iran, administration officials do not publicly link their diplomacy to oil, although they are pursuing a deal on Iran’s nuclear program that could lift international sanctions on the country and promptly return Iranian oil to the market legally.
For Biden, failure in high-profile oil diplomacy is fraught with humiliating treatment from unfriendly rulers abroad, potentially dangerous re-election and condemnation at home.
What about success? Potentially the same.
“Our response to[Russian President Vladimir]Putin’s war should not be to strengthen our relationship with the Saudis,” Minnesota Democratic Rep. Ilhan Omar tweeted, citing Saudi Arabia’s years-long war in neighboring Yemen.
Other members of Biden’s Democratic Party have made clear their objections to any harsh US embrace of Saudi Arabia and its crown prince for the sake of oil.
The Republican Party has been sharply critical of high oil prices and, in particular, any possible thaw in relations with Iran.
In fact, as Richard Goldberg, a former National Security Council official during the Trump administration, said, the Biden administration is saying, “They will still fund terrorism, but let’s buy their oil.”
Western countries are hoping that their cuts to Russian oil use could put pressure on Putin to stop attacking Ukraine, though that could create other problems as countries produce different types of oil, which require different types of refineries.
A high-level US delegation visited Venezuela last weekend, the first time since the rupture of relations under socialist leader Hugo Chávez in the 1990s.
The trip appears to have been favorably received by President Nicolás Maduro. This was followed on Tuesday by Venezuela’s release of two imprisoned Americans.
The apparent warming has raised the possibility of lifting US sanctions on Venezuela and eventually bringing its oil back to the market.
But even if that breakthrough happens, the Venezuelan oil industry may not be ready to ramp up production in time to help the current price spike, after years of political turmoil and investment cuts that have shackled the industry.
The lifting of U.S. direct and secondary restrictions on Venezuela’s state oil company, if it happens, could increase production by 400,000 barrels a day in a matter of months, said Paul Sheldon, chief geopolitical adviser at S&P Global Commodity Insights.
For Iran, the leading countries are one way or another closer to completing negotiations with the Iranians in Vienna aimed at restoring restrictions on Iran’s nuclear program in exchange for the lifting of sanctions, including those that keep Iranian oil off the market.
The Trump administration pulled the US out of the nuclear deal.
According to energy analysts, Iran can supply oil quickly and can deliver more than 1 million barrels a day to the market.
However, Iranian oil is likely to go to buyers other than the US. And if the US allows Russia to trade freely with Tehran, it could create an opportunity for Moscow to launder oil sales through Iran, which can export the oil it could export. according to Clearview Energy Partners, they have processed and are processing Russian oil instead.
Meanwhile, despite years of strategic alliance between Saudi Arabia and the United States, including the kingdom’s reliance on the US military and US weapons manufacturers for defense, Prince Mohammed and King Salman show no desire to help the Biden administration out of its predicament. .
Biden vowed from the outset to ‘rogue’ the Saudi ruling family over the Khashoggi murder at the Saudi Arabian consulate in Istanbul. The US intelligence community connected him to the Crown Prince.
But tightening oil prices have prompted Biden officials to engage more with the kingdom this year, including Biden’s call to the aging king last month.
“We are not going to share our values and our interests,” Blinken told reporters on Wednesday. “We made it clear in everything we did. But we are working productively and constructively with these countries.”
Saudi Arabia and the United Arab Emirates together could produce an additional 2 million barrels a day if they wanted to. The United Arab Emirates said on Wednesday it was urging OPEC to consider boosting oil production. But some OPEC countries may be reluctant to increase production to make up for Russia’s deficit, as Russia’s alienation could make it harder for OPEC to influence oil prices.
Personalities aside, “the oil alliance between Russia and Saudi Arabia has worked out pretty well,” said Ottaway, a Saudi Arabia analyst.
“You know, this is a difficult decision for MBS as well,” he added. “Both MBS and Biden are in a quandary here.”