The two main targets of this effort, Saudi Arabia and the United Arab Emirates, have had a cold relationship with the US since Biden took office. Both countries are members of OPEC, a powerful bloc of 13 countries that together control 40% of the world’s oil production. And both were on friendly terms with the Trump administration.
But US officials say progress has been made over the past month, and there is evidence that diplomacy is beginning to bear fruit.
Inside the White House, the comments ricocheted throughout the West Wing and created a sense that everything was moving in the right direction, officials said.
This month, Biden officials held diplomatic talks in oil-rich Venezuela, although the administration has since downplayed any increase in production in the heavily sanctioned country. The potential for a looming nuclear deal with Iran could eventually release a wave of sanctioned Iranian oil back into the market, but this is not seen as a short-term solution in the White House.
The reality is that most of the spare oil capacity that the US energy industry is looking at comes from the Middle East. In particular, officials and market participants are of the opinion that the fastest way to bring as much oil to the market as possible is to increase production in Saudi Arabia.
For that to happen, US officials are realizing they need to resolve the highly strained relationship between President Joe Biden and Saudi Crown Prince Mohammed bin Salman, the kingdom’s de facto leader, colloquially referred to as MBS. Since the early days of the Biden administration, the Saudis have felt personally disadvantaged by what they say was the president’s decision to level all ties around the 2018 killing of Washington Post journalist Jamal Khashoggi.
“It’s hard to do anything better without dealing with MBS,” explained one US official familiar with the matter. “There is no other way to do it.”
Critical phone call
When US officials finally raised the possibility of a call between Biden and MBS in late January, Saudi Arabian officials instead suggested putting Biden on the phone with his 86-year-old father, King Salman, the kingdom’s official leader, and an individual. Biden identified himself as a direct colleague early in his freshman year.
This will be their first conversation in 12 months.
Yet officials involved in the matter point to what has happened since as a window into a relationship that, while still difficult, is showing signs of stabilizing at a critical juncture.
MBS, who was scheduled to travel to Beijing for the opening ceremony of the Winter Olympics at the time of the call, canceled his trip for “scheduling reasons”, according to the Chinese Ministry of Foreign Affairs. The real reason, two regional sources briefed on the matter told CNN, was at least in part that MBS might have been present on the phone call between his father and Biden.
While it’s unclear if he was in the room, MBS listened to the call but did not speak, the sources said.
The Saudi Embassy in Washington did not immediately respond to a request for comment.
The Feb. 9 phone call included a discussion of securing global oil supplies and prompted a trip to Saudi Arabia by two senior Biden officials, one US official said.
Three days later, Brett McGurk and Amos Hochstein, Biden’s top national security and energy envoys to the region, arrived in the Saudi capital Riyadh for hours of face-to-face meetings with MBS and accompanying senior Saudi officials. including MBS’s brother, Prince Abdulaziz bin Salman, the kingdom’s energy minister.
“It was established by call,” a senior administration official said of the trip to Riyadh. “It wasn’t decided beforehand.”
There was no explicit request for more supplies at that meeting, officials said. But with Russia just weeks away from what the Biden administration thought would be a large-scale invasion of Ukraine, the market’s erratic dynamics amid the crisis have been at the center of the discussion.
In the days that followed, White House officials publicly declined to provide any specific details of the meetings and were careful not to characterize progress, if any.
But behind the scenes, the groundwork was laid for a process that went on for several weeks.
Since the meeting in Riyadh, the administration and the Saudis have had “a really productive set of commitments following this discussion on an affirmative, positive agenda that reflects the critical range of issues that we’re dealing with,” the official said. According to the official, this includes issues of energy, regional security and international development.
Saudi Arabia appeared to draw attention to the U.S.-Saudi working relationship Thursday, publicly saying a joint Saudi-U.S. operation earlier this year was able to get two American girls out of Yemen safely, according to a source familiar with the cause.
However, other U.S. officials acknowledge that the relationship is no longer as strong as it used to be and that it will require more high-level scrutiny from the Biden administration.
Market turmoil
When Russia launched its invasion on February 24, the US and a coalition of more than 30 countries responded with sweeping sanctions targeting the country’s economy.
While energy sanctions were deliberately not discussed to protect Western allies, especially those in the European Union, from destabilizing price shocks, punitive sanctions have rocked a market where Russia is the world’s second largest exporter.
Post-sanctions Russian producers have struggled to close new oil orders as market participants retreat fearing the full scope and reach of sanctions targeting the country’s central bank and its major financial institutions.
However, the effect goes beyond the Russian economy. Russia is a member of OPEC+, which is the most important player in the supply market. Russian President Vladimir Putin had a telephone conversation with MBS and UAE Sheikh Mohammed bin Zayed Al Nahyan.
Russia has made it clear that it will not support the increase in production, which will largely come at its expense.
The OPEC+ members decided to stick to the agreed delivery schedule when they met on March 2, a decision that came as no surprise to US officials at the time.
However, the economic downturn since then has led to palpable supply disruptions. As global energy companies shun Russia despite its stagnant oil production, most of those Russian barrels don’t make it to the market. This is an important, if subtle, distinction that OPEC members could point to in any future decision to raise production targets.
Earlier this week, the US independently banned imports of Russian oil into the US, which is a small share of total Russian exports, but another move that has chilled the market and fueled prices.
It’s a painful reality that has drawn attention to months of quiet but urgent efforts by US officials to secure increased energy production in industry and countries around the world.
Led by Hochstein, the State Department Energy Envoy, and McGurk, it included outreach to the Middle East, Asia, and North Africa, as well as intensive discussions with US manufacturers.
As price increases continued to bite, the quiet nature of these efforts gave way to a direct public statement.
“We want the world to have more oil supplies,” Duleep Singh, Biden’s deputy national security adviser for international economics and one of the officials in charge of the US response, told CNN’s New Day on March 9. capacity.” Singh explicitly pointed out that Saudi Arabia is one such producer.
UAE stress test
The UAE is another one of those producers that have spare oil capacity. But it’s also a traditional Gulf ally whose relationship with the US has become increasingly strained since Biden took office.
The country felt especially resentful from the US when there was no overwhelming support from it after the deadly drone attack in the UAE in January by the Iranian-backed Houthis, the US official explained.
They are also concerned that a possible renewal of the Iran nuclear deal would be too weak and thus enable the IRGC.
When Biden dispatched his top aides to Saudi Arabia, McGurk contemplated a stop in the UAE, with a focus on Yemen, which included an attempt to highlight U.S. support for the country’s territorial defense against Iranian missiles and UAV attacks, officials said. .
As with the Saudis, McGurk discussed “the need to combine pressure on the Houthis in Yemen with a concerted UN-led effort to end the war there,” according to a White House report on the trip.
Signs of tension were evident after the Russian invasion.
The UAE has refrained from passing a US-led resolution condemning Russia’s invasion of Ukraine in the UN Security Council, officials said, largely out of frustration with Yemen.
Otaiba then laid out the unsettled dynamics in public appearances, noting that the relationship “has strong days when the relationship is very healthy and days when the relationship is in question.”
“Today we are going through a stress test, but I am sure that we will come out of it and become better,” he added.
Yet it was Otaiba’s comments on Wednesday that first caused markets to plummet and provided some possible evidence that the Biden administration’s diplomatic efforts are beginning to bear fruit.
But even though the UAE has signaled that it will support an increase in production, the country has also signaled that it will have to comply with OPEC rules that require all countries to support any move to increase production.
The UAE Energy Minister, just hours after Otaiba’s comments, appeared to have declined to answer, but he never directly contradicted what Otaiba had said.
Instead, he made it clear that the UAE supports work within OPEC guidelines.
“The UAE is committed to the OPEC+ agreement and its existing monthly production adjustment mechanism,” Suheil Al Mazrui said on Twitter in what appeared to be an attempt to appease other members.
The next OPEC+ meeting is scheduled for March 31.
Natasha Bertrand of CNN contributed to this report.