Biden Says Saudi Arabia Will Face Consequences For OPEC+ Decision

President Biden risks further complicating his own position by continuing to threaten Saudi Arabia with consequences for OPEC+ decision to cut production by 2.0 million barrel a day (mbd). So what action can he take against Saudi Arabia.

1- He can stop shipments of weapons but this is no big deal since many Western powers will be only happy to oblige not mention China and Russia. The real loser will be Saudi Arabia who will lose an estimated $200 bn worth of American weapons annually.

2- The CIA can try to topple the Saudi Crown Prince Mohammed bin Salman but there is no guarantee that it will succeed nor that his replacement could be more amenable to America's needs. On the contrary, it will distance Saudi Arabia further from the United State

3- He can re-evaluate his relations with Saudi Arabia but this is something Saudi Arabia itself is doing. The Saudis seem to realize that the World Order is already transiting from a unipolar system led by the US to a multipolar one ushered by both Russia and China and therefore it has to adapt its policies to the new emerging order.

4- He can invoke the NOPEC Bill if necessary to sue Saudi Arabia and OPEC+ for a so-called cartel-like manipulation of oil prices. But this is an empty threat. President Biden has first to prove that Saudi Arabia and OPEC+ are a cartel. This is virtually impossible because OPEC+ isn’t. If the US tries to sue OPEC+ or any of its members, the organization could stop all its oil exports to the US. NOPEC only has jurisdiction in the United States but no extraterritorial jurisdiction under international law. If the US, however, persists with mounting law suits against Saudi Arabia and OPEC+, they could retaliate by withdrawing their investments and funds in the US and even replace the petrodollar with the petro-yuan. This would be the most serious retaliation against the US. Once Saudi Arabia and UAE have made the switch, the overwhelming majority of OPEC+ members will most probably follow suit exactly as they did in 1975 when they adopted the petrodollar. This will literally pull the rug from under the petrodollar and the US financial system it underpins.

Moreover, President Biden is demeaning himself by reiterating that he didn’t visit Saudi Arabia this summer to beg for more oil. Having said during his presidential campaign that his administration will treat Saudi Arabia as a pariah state and that he will never shake hands with the Saudi Crown Prince, he did visit the country for no reason other than to beg for oil.

President Biden should consider his threats against Saudi Arabia very carefully because the Saudis are capable of harming both the US financial system and the US economy far more that the US can harm Saudi Arabia. They can also complicate the US position in the Gulf by reaching a rapprochement with Iran.

Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert