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Washington’s Oil Supply Spat With Saudi Arabia Could Backfire

  • Three weeks ago, President Joe Biden threatened Saudi Arabia with “consequences” after OPEC+ decided to cut production.
  • Turkey’s Foreign Minister Mevlut Cavusoglu, for instance, called Biden’s behavior towards Riyadh “bullying”.
  • Saudi Foreign Minister Al-Jubeir has signaled that Riyadh is ready to continue working with the U.S. where the two have common interests.

Three weeks ago, President Joe Biden threatened Saudi Arabia with “consequences” after the kingdom that is the de facto leader of OPEC supported a decision to reduce oil production by about 1 million barrels daily.

The U.S. president was so agitated because U.S. midterms were approaching, and his and his government’s rating was falling and gasoline prices were rising.

He never specified what the consequences would be, but other voices have joined in criticizing Saudi Arabia for not taking the U.S. side but rather its own: the Saudis have repeatedly explained that the decision to reduce production is an anticipatory move in view of inflation trends.

While media commentators pour out thousands of words on musing whether the U.S.-Saudi relationship is beyond repair, more are siding with the Saudis and criticizing the U.S. at a time when the U.S. is trying to build support for its and the EU’s isolation strategy against Russia outside the West.

Turkey’s Foreign Minister Mevlut Cavusoglu, for instance, called Biden’s behavior towards Riyadh “bullying”, as quoted in a Bloomberg article that detailed the shift in geopolitical alignment.

Formerly one of the staunchest allies of the U.S. and NATO, Turkey is now balancing between its NATO membership and increasingly closer ties with Russia, and Russian happens to be the co-leader of the OPEC+ grouping alongside Saudi Arabia.

There are already warnings from the more foresighted commentators that if Saudi Arabia joins BRICS, it will change the balance of powers in the world. But Saudi Arabia is not the only one that wants to join BRICS. Turkey happens to be another likely candidate, and so does the UAE, OPEC’s third-largest producer of oil, along with more than a dozen other countries. Related: Exxon Mobil Makes First Oil Discovery In Angola In 20 Years

Turkey is not the only one objecting to U.S. policy towards the Saudis. China has openly praised Riyadh for its stance towards Washington, but that is hardly surprising given China’s own disputes with the U.S. What is interesting, however, is that China is praising a move that aims to make oil more expensive—something that is generally not a cause for joy in an oil importer as large as China.

The same is true for Turkey. Turkey is a big energy importer, and it recently sealed a deal with Russia to become a new regional gas hub. Like China, it shouldn’t be happy with higher oil prices, and yet it is supporting Saudi Arabia’s move to keep prices higher. Apparently, there are some things that are more important than the immediate oil bill. And these things are collectively known as geopolitics.

Earlier this month, U.S. Treasury Secretary Janet Yellen told the media that a price cap on Russian oil would benefit India and China by making oil more affordable for them. Indeed, per plans, this should be the case. Neither China nor India, however, have budged on their decision to continue importing oil from Russia directly and without price caps.

A couple of days ago, Yellen said that India is free to continue importing Russian crude outside the price cap scheme as long as it steers clear of Western insurance and tankers. Some noted this as a display of political arrogance, but it could as well be seen as a white flag waved by a party that can do nothing to persuade another party to do what the first party wants.

Meanwhile, in seemingly unrelated news, Bank Indonesia has called on importers and exporters to use more national currencies in their deals instead of U.S. dollars. The reason: as much as 90 percent of transactions are conducted in dollars while “the share of Indonesian direct exports to the US is estimated at only 10%, and US imports account for 5%,” a bank official told media.

Indonesia is the largest economy in Southeast Asia and is currently negotiating a $15-billion energy transition deal with the U.S. and Japan. Yet it appears willing to pursue an independent foreign policy, working with everyone instead of siding with one superpower against another.

This seems to be a trend, and nowhere is this clearer than in Saudi official rhetoric. “Ultimately, we are going to pursue a path that is predicated solely on our interests and the values that we bring to our work around the world,” Crown Prince Mohammed said earlier this month, as quoted by Bloomberg. It really doesn’t get much more straightforward than this.

Even more straightforward is the signal that Riyadh is ready to continue working with the U.S. where the two have common interests. The latest to confirm this was Saudi foreign minister Adel Al-Jubeir.

This week, he said, as quoted by Bloomberg, We have had a disagreement with regards to the oil. We have our position and we believe our position is correct. Some in the US take a different approach, but we’ll be able to overcome this.”

There is a realignment going on in parts of the world, then, but the realignment does not seem to be of the “You’re either with me or against me” variety. It looks more like a realization that a state’s own national interests don’t need to be sacrificed for geopolitical alignments. They could complement them. The faster the Biden administration accepts this, the smaller the risk for its own position on a shifting geopolitical scene.

By Irina Slav for Oilprice.com

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