OPEC’s decision to sharply cut output has put more pressure on the already strained ties between the once-close allies. Will this be the end of the strategic partnership in the Middle East?
The OPEC+ countries control the valve to global oil output, and their collective decision directly impacts energy prices since they are the pricing cartel in the energy market.
On October 5, the OPEC+ – 13 member countries plus 10 allies under Moscow’s de facto leadership – announced in Vienna a sharp cut of output by two million barrels per day, roughly equal to two percent of global supply, despite the Biden administration’s push to pump more.
The announcement – the largest supply cut by OPEC+ since 2020 – sent global shockwaves as it came in the midst of an energy crisis triggered by the Russian incursion on Ukraine.
The cut will go into implementation at the beginning of November. However, the action was taken before the European Union’s fresh embargoes on Russian energy over the conflict in Ukraine. The decision will clearly help Moscow’s revenue rise despite the western sanctions. Russia will undoubtedly exploit the rising energy costs as retaliation for the curbs against Moscow.
It is entirely foreseeable that the OPEC decision will result in tensions between the United States and some of its Gulf allies– it would not only exacerbate the issues that already exist but will also have political repercussions between the US and Saudi Arabia, the de facto leader of OPEC.
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said “We are here to stay as a moderating force, to bring about stability”. Though he stressed that the “decision is not an act of belligerence”, it will definitely destabilise the market and sour relations with oil-importing Western countries.
Suhail al Mazroui, the Energy Minister for the United Arab Emirates, too maintained that "the decision is technical, not political”. Haitham al Ghais, the secretary-general of OPEC, supported the group's decision to impose a major supply reduction, asserting that OPEC+ is working to provide "security [and] stability to the energy markets”.
The US response
In response, the US intends to release an additional 10 million barrels of oil from its Strategic Petroleum Reserve in November to counterbalance OPEC's output drop, and officials suggested they may consider releasing more. The White House also argued that the OPEC decision will offer a lifeline to the Russian military campaign in Ukraine. Karine Jean-Pierre, a spokesperson for the White House, said, “It’s clear that OPEC+ is aligning with Russia with today’s announcement.”
The chain of events was a clear indication that President Biden’s visit to Saudi Arabia, a staunch American ally, in July and his encouragement to crown prince Mohammed bin Salman to increase oil output did not yield any result.
The US government called OPEC’s deep output cut “shortsighted” and as weaponising energy. Biden told reporters, "We're looking at what alternatives we may have.” He deliberately insight NOPEC (No Oil Producing and Exporting Cartels Act), a new oil supplier group, to control prices and output in the global energy market.
"Pariahs" standing shoulder to shoulder
Saudi Arabia and UAE are the most significant allies of the US next to Israel in the Middle East but the Biden administration has failed to push them to increase oil output to calm the global economic crisis and gum up the Russian energy advantage. Particularly, Saudi Arabia is foot-dragging on the US concern about Russia’s extent of influence in global politics, especially in Europe.
For years now, Russia and Saudi Arabia have had a special place in US international politics as “pariahs". Moscow has been challenging Washington at the international level and Riyadh is hedging the US with China and Russia at the sub-regional level, especially since Biden came to power.
Moreover, though OPEC is claiming that the output cut is aimed at maintaining a healthy balance between supply and demand, in reality it is a direct message to the US administration. Significantly decreased oil supply will most probably cause US gasoline prices to rise sharply. It is a timely and important attempt to indirectly influence the US congressional and state elections in November. Soaring prices will potentially help drive up inflation and Biden’s position will be more brittle.
Last nail in the coffin
Numerous friction points have existed between the US and Saudi Arabia, including intervention in Yemen, foreign policy orientation, pricing of oil in the Chinese yuan, and energy prices. But the steep cut in oil production could be the last nail in the coffin.
White House immediately released a statement to “re-evaluate relations with Saudis”, that is, to put Riyadh directly in the firing line over OPEC’s output curbs. Legislation to remove US soldiers from Saudi Arabia and the United Arab Emirates was presented by Democratic congressman Tom Malinowski of New Jersey.
In addition, the Chairman of the Senate Foreign Relations Committee, Bob Menendez, issued a statement that “the United States must immediately freeze all aspects of our cooperation with Saudi Arabia, including any arms sales and security cooperation beyond what is absolutely necessary to defend US personnel and interests”.
These official statements indicate that the US and Saudi Arabia’s relationship is spinning out of control. Washington is clearly angry and political “retaliation” against Riyadh is very much on the table.
OPEC’s decision has already affected oil prices and it will increase the cost of living not only in the US but also in other parts of the world. Hence, the US may ease sanctions on Venezuela and seek closer rapprochement with Iran to punish Riyadh.
The House Democrats are mounting pressure on the Biden administration, asking it to call American troops back from Saudi military bases and pause the supply of strategic conventional weapons to Saudi Arabia.
This scenario will be catastrophic for Riyadh’s regional security. The US stance may impact the Saudi position on the war in Yemen, crippling the Saudis’ ability to bomb and blockade the country, finally ending US complicity in that devastating conflict, one of President Biden’s earliest foreign policy commitments.
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