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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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What Biden’s Victory Means For Middle East Oil

Whilst new U.S. President-elect, Joe Biden, will almost certainly focus on dealing with the tail of the COVID-19 pandemic and repairing the economic damage to the U.S. that it has wrought, when he turns his attention to fully to shaping Washington’s policy in the Middle East it is likely to be significantly different to his predecessor’s in key policy areas. Top of the list of his considerations are likely to be what to do about Iran, in particular the Joint Comprehensive Plan of Action (JCPOA) from which the U.S. unilaterally withdrew in May 2018, and Saudi Arabia, especially its Crown Prince Mohammed bin Salman (MbS).  For Iran, although Biden is widely expected to bring the U.S. back into the JCPOA, OilPrice.com understands from sources close to the new Administration that a number of the key members of the team that negotiated the original JCPOA deal with Iran – which included virtually all of the tougher clauses that were then dropped by former President Barack Obama in his rush to sign the deal in 2015 - will be returning to the Biden negotiating team. It is vital to note that these clauses that were dropped by Obama were the very same clauses that were later laid out by then-Secretary of State Mike Pompeo after the U.S. withdrew from the deal in 2018 as being essential for any deal being made under Trump. These original, tougher clauses are going to form the basis of the Biden Administration’s renegotiation of the JCPOA with Iran and, unlike last time, both France and Germany are now behind the key clause of these that is designed to check Iran’s ballistic missile program, along with the E.U. formally as a whole.

The core concepts that will form the basis of the renegotiation of the JCPOA by the Biden team are, OilPrice.com exclusively reveals, as follows: 1. The safety and security of U.S. troops from Iran or Iran-sponsored attacks in Iraq and elsewhere; 2. The safety and security of Israel; and, 3. The inextricable link between Iran’s nuclear enrichment program and its ballistic missile program. In this last regard, Biden’s team is to make it absolutely clear – and there is no room for alteration on this point – that Iran is not to build, import, maintain, hold, or test any ballistic missiles with a range of more than 2,000 kilometres. This effectively precludes all ‘intermediate range’ ballistic missiles – that is, those with a range of between 3,000 and 5,500 km – including, crucially, the Hwasong-12 missiles that Iran is planning to get in from North Korea as part of the expanded military element of its 25-year deal with China, as exclusively revealed by OilPrice.com.  Related: Oil Majors Aren’t Worried About A Biden Presidency


These core concepts will run through each of the specific clauses with which the Biden JCPOA team will begin negotiations and these will include the following, OilPrice.com understands from people close to proceedings: 1. Declare to the International Atomic Energy Agency (IAEA) a full account of the prior military dimensions of its nuclear programme and permanently and verifiably abandon such work in perpetuity; 2. Stop enrichment and never pursue plutonium reprocessing, including closing its heavy water reactor; 3. Provide the IAEA with unqualified access to all sites throughout the entire country; 4. End its proliferation of ballistic missiles and halt further launching or development of nuclear-capable missile systems; 5. Release all U.S. citizens as well as citizens of U.S. partners and allies; 6. End support to Middle East terrorist groups, including – but not limited to – Hezbollah, Hamas, and Islamic Jihad; 7. Respect the sovereignty of the Iraqi government and permit the disarming, demobilisation and reintegration of Shia militias; 8. End its military support for the Houthi rebels and work towards a final peaceful, political settlement in Yemen; 10. Withdraw all forces under Iran's command throughout the entirety of Syria; 11. End support for the Taliban and other terrorist groups in Afghanistan and the region; 11. End the Islamic Revolutionary Guard Corps-linked Quds Force’s support for terrorists and militant partners around the world; and, 12. End its threatening behaviour against its neighbours, including its threats to destroy Israel and its firing of missiles at Saudi Arabia and the UAE, and threats to international shipping and destructive cyberattacks. For its part, according to senior Iranian sources close to the Petroleum Ministry spoken to exclusively by OilPrice.com last week, Tehran’s negotiators will start with the following conditions: 1. Compensation by the U.S. for the damage done by sanctions to its economy; 2. Immediate access to all of Iran’s frozen deposits in Europe, the Far East and everywhere else; 3. Guarantees that Israel does not continue to increase its intelligence and military presence in the region to threaten the security of Iran; and 4. Recognition of the national security interests of Iran including not discussing anything to do with the 25-year China deal. 

Clearly, Mehrdad Emadi, head of the international risk analysis company, Betamatrix, in London, exclusively told OilPrice.com last week, the U.S. is unlikely to agree to any of these four conditions but will likely be willing to allow Iran not to lose face entirely in the negotiations, so will allow it the following: 1. Access – from non-U.S.-sanctioned suppliers – to equipment relating to civilian aircraft; 2. Access – from non-U.S.-sanctioned suppliers – to medicines and medical equipment; 3. Access – from non-U.S.-sanctioned suppliers – to technology needed to upgrade its oil and gas and petrochemicals sectors; and 4. Allow U.S.-monitored access to some of its frozen deposits but subject to Iran’s full agreement on Financial Action Task Force conditions on transparency. 

Related: Oil & Gas Discoveries Resilient In 2020 Despite Pandemic

For Saudi Arabia, Biden’s starting point was made clear in broad terms on 2 October when he said that he would seek to: “…reassess our relationship with the Kingdom [of Saudi Arabia], end U..S support for Saudi Arabia’s war in Yemen, and make sure America does not check its values at the door to sell arms or buy oil.” With regard to MbS, during the same speech – which marked the second anniversary of the murder of expatriate Saudi journalist, Jamal Khashoggi, which according even to the CIA was carried out on the personal orders of the Crown Prince – Biden appeared to endorse the CIA’s findings. He said: “Two years ago, Saudi operatives, reportedly acting at the direction of Saudi Crown Prince Mohammed bin Salman, murdered and dismembered Saudi dissident, journalist, and U.S. resident Jamal Khashoggi,…His offense - for which he paid with his life - was criticising the policies of his government.” He added, in an extremely worrying twist for MbS personally: “Today, I join many brave Saudi women and men, activists, journalists, and the international community in mourning Khashoggi’s death and echoing his call for people everywhere to exercise their universal rights in freedom…America’s commitment to democratic values and human rights will be a priority, even with our closest security partners.” 

For MbS, these comments come at a time when his second failed oil price war in less than five years has left the ruling Saud dynasty facing the greatest existential threat to its continued rule over the country since Ibn Saud first consolidated his Arabian conquests into the Kingdom of Saudi Arabia in 1932. Not only is the Kingdom economically crippled but also its core relationship with the U.S. is at its lowest ebb since it was established in 1945 between then-U.S. President, Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz. Such anger was felt in Washington that the Saudis had yet again attempted to destroy, or at least disable, the U.S. shale oil industry in March this year, that even the pro-MbS former President Donald Trump felt compelled to personally call the Crown Prince on 2 April and tell him that if he did not end the oil price war them the U.S. would withdraw its military support for Saudi Arabia.

Given these factors, MbS’s hold on power has never been more tenuous, particularly with other senior Saudis jostling for position in light of King Salman’s extremely poor health. Those looking to re-assert their claim to the throne – most notably Prince Mohammed bin Nayef, King Salman’s nephew and the former crown prince – are supported by those 500 or so highly-placed Saudis who were rounded up from 4 November 2017 and held captive in the Ritz-Carlton in Riyadh as part of MbS’s supposed crackdown on corruption. In reality it appeared to be more of a standard criminal shakedown in which those being held were told to hand over around US$800 billion of their assets to MbS’s grouping or else their lives would become a lot worse very quickly. The same tactic was used in 2020, with the same sort of people rounded up, including again Prince Mohammed bin Nayef, plus most notably as well Prince Ahmed bin Abdulaziz, one of three members of the Allegiance Council (the senior royal organisation that endorses the line of succession), who opposed MBS’s appointment as crown prince in place of his cousin bin Nayef in 2017.

By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on November 17 2020 said:
    During the first few months of his administration, President-elect Biden’s attention will be totally and exclusively focused on controlling the COVID-19 pandemic and reverse the destructive damage it has inflicted on the US economy which shrank by 32.9 in the second quarter of 2020 and continues to contract.

    The second priority for his to-do list is to repair strained relationships, especially in NATO, with Angela Merkel’s Germany whom President Trump had the temerity of threatening with sanctions for supporting the Russian-led Nord Stream gas pipeline and re-join global alliances.

    When Biden eventually gets time to look at the Middle East, Iran and Saudi Arabia will figure very prominently simply because these two countries form the core of the United States' foreign policy in the Middle East. The United States plays Iran and Saudi Arabia against each other to maintain its influence in the Gulf region and also to blackmail the Saudis and the Gulf States in a Mafia-like fashion for protection money against an illusory threat from Iran.

    When it comes to dealing with Iran, the author of this article and members of the Biden administration who would be re-negotiating the Iran nuclear deal will be deluding themselves if they believe that Iran will ever accept to re-negotiate on the basis of the core concepts outlined in the article.

    Iran’s position will be: (1) It will never relinquish its nuclear programme and its Ballistic development programme; (2) It will never guarantee the safety and security of US troops while deployed in Iraq and Syria; (3) It will never end its support of Lebanese Hezbollah, Palestinian Hamas and the Houthi rebels in Yemen; (4) It will never withdraw its forces from Syria; and (5) it will never negotiate while sanctions continue. And with its success in evading US sanctions, Iran isn’t in a hurry.

    As for Saudi Arabia, there’s a chance US support could cool, and it could focus on the Saudi human rights record, including the disappearance of Saudi journalist Jamal Khashoggi. President-elect Biden may also end US support for the Saudi-led war in Yemen.

    Still, like his predecessor, Biden might be lured by Saudi money and lucrative arms deals to maintain the close relations Trump has had with Saudi Arabia. This will be underpinned by the Biden administration’s possible failure to reach a deal with Iran.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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