Behind the "war of words" for oil production cuts: Saudi Arabia is no longer the only leader of the United States?

Disputes over oil production cuts: Saudi Arabia no longer depends on the US?

　　Author: Zhu Zhaoyi

　　Published in the 1065th issue of "China News Weekly" magazine on 2022.10.24

　　The "war of words" between the United States and Saudi Arabia has intensified as the Organization of Petroleum Exporting Countries (OPEC) led by Saudi Arabia and the oil-producing alliance ("OPEC+") formed by non-OPEC oil-producing countries announced oil production cuts.

　　On October 16, local time, Sullivan, the National Security Adviser to the US President, said in an interview with CNN that Saudi Arabia’s support for oil production cuts has made the turbulent US-Saudi relationship even more tense.

The U.S. will reassess its relationship with Saudi Arabia, and Biden has no plans to meet with Saudi Crown Prince Salman on the sidelines of the G20 summit in November.

But Sullivan also emphasized that the US-Saudi relationship will not change immediately, because US President Biden will not act rashly, but will act gradually and strategically.

　　Biden had previously warned of "consequences" for Saudi Arabia, but did not specify.

White House press secretary Pierre then said that Saudi Arabia's move was "unquestionably aligned with Russia."

　　The Saudi government said that the oil production cuts were purely due to economic factors and had nothing to do with politics, while the threat from the United States was a deliberate gesture by the Democratic Party before the mid-term elections.

Saudi Foreign Minister al-Jubeir said in an interview with US media: "When you are in the election season, which is what some people call the 'funny season' (funny season), you talk a lot and do a lot of things, and these things It will be meaningless after the election season."

Are there political motives?

　　On October 5, the "OPEC+" group of 23 countries decided to significantly reduce production from November this year. On the basis of August production, the monthly production will be reduced by an average of 2 million barrels per day.

Subsequently, international oil prices recorded the largest weekly increase since mid-March this year, making European and American countries, already suffering from high inflation, complain.

　　The United States has publicly accused the "quasi-ally" Saudi Arabia, on the one hand, to control global oil prices, and on the other hand, to suppress Russia.

Whether in the face of Biden's October 11 claim to "re-evaluate" its relationship with Saudi Arabia, or the White House's October 13 statement accusing Saudi Arabia of "no market basis" for production cuts, Saudi Arabia insists that the decision to cut oil production is entirely For the purpose of stabilizing global oil prices, not against any country, let alone to support Russia.

　　The Saudi official also issued a statement saying that the Biden administration had asked Saudi Arabia and other major oil-producing countries to postpone the plan to sharply cut crude oil production starting in November this year by one month. The White House was embarrassed.

　　Saudi oil analyst Ali Shihabi also denied there was any political motivation for the cuts, writing in The New York Times that the Saudi move was simply "to keep prices within acceptable levels."

　　In its latest monthly report, OPEC lowered its forecast for global oil demand growth in 2022 by 460,000 barrels per day to 2.64 million barrels per day, and by 360,000 barrels per day in 2023 to 2.34 million barrels per day.

This is the fourth time OPEC has lowered its forecast for world oil demand growth since April this year.

With the further development of new energy vehicles, the global traditional oil and gas consumption may further shrink, which has also become the basis for the recent production cuts by major oil-producing countries such as Saudi Arabia.

　　Correspondingly, the US Department of Energy and the International Energy Agency have also lowered their oil demand forecasts: in 2023, US oil consumption will increase by only 0.9%, lower than the previous forecast of 1.7%; global oil consumption is expected to rise by 1.5%, lower than the previous forecast. 2%.

The International Energy Agency forecast full-year oil demand growth in 2022 and 2023 to be only 1.9 million barrels per day and 1.7 million barrels per day, also lower than previous forecasts.

　　However, the U.S. government does not agree with the rhetoric of Saudi Arabia and OPEC, arguing that this production cut will cause oil prices to skyrocket to unacceptable levels.

The current oil price has already made all OPEC members enjoy huge profits every day. There is no reason to reduce production and protect the price, and it is also a challenge to the global financial order.

　　In fact, Russia has not enjoyed much of the dividend of rising oil prices. On the one hand, European and American countries have greatly reduced oil imports from Russia; The technical Saudi is only $22/barrel.

　　A direct reason that makes the United States even more intolerable is that Saudi Arabia's Kingdom Holding invested in three major Russian energy companies in the first month of the Russian-Ukrainian conflict, and turned it over at low prices while Europe and the United States sanctioned Russia. Double imported Russian crude oil and resold it in the European and American markets at a high price.

Fighting OPEC with NOPEC?

　　At present, the US Congress has begun to explore the use of the NOPEC (No Oil Production or Export Cartel) Act to file antitrust lawsuits against OPEC oil-producing countries.

The bill, approved by the U.S. Senate Judiciary Committee in May, has yet to be signed into law by Congress, which would give the U.S. attorney general the right to sue OPEC producers in federal court.

Specifically, the U.S. Attorney General will have the power to sue in the federal court and determine that other countries’ “joint restrictions on oil extraction and oil pricing” are illegal, and take corresponding countermeasures, which is essentially the “long-arm jurisdiction of the United States”. " in its latest form.

　　Because the bill involves adjustments to U.S. antitrust laws and revoked the sovereign immunity that protects OPEC oil producers and their national oil companies from lawsuits, it has a huge impact on countries such as Saudi Arabia.

In the past two decades, the bill has been proposed many times, but it has never been formally passed by Congress. This has a certain relationship with Saudi Arabia and other countries after each proposal. After each proposal, a lot of lobbying was carried out by forces outside the U.S. House of Representatives.

The bill needs to be passed in the Senate and House of Representatives and signed by the president to become law, and now many US energy agencies are optimistic that the bill will pass in the Senate.

　　However, NOPEC is a double-edged sword, because the United States itself is also a big oil-producing country. It is not known whether the implementation of the Act can deter oil-producing countries such as Saudi Arabia, but it is likely to hurt domestic oil and gas production enterprises in the United States.

Several local oil and gas companies in the United States believe that NOPEC will increase the uncertainty of the oil and gas market, throw the international oil and gas market into chaos, and ultimately hurt the status of the United States as an oil-producing country.

At the same time, NOPEC could lead to excess production in OPEC producers and lower oil prices too much, making it impossible for U.S. oil and gas companies to survive.

Compared with Saudi Arabia and other Middle East oil-producing countries, the cost of oil production and storage and transportation in the United States is obviously too high. Using NOPEC to suppress OPEC members may actually make American companies go bankrupt.

　　Of course, if the United States really uses NOPEC to suppress it, Saudi Arabia and other oil-producing countries will naturally not sit still.

In 2019, the U.S. hinted at using NOPEC, and Saudi Arabia immediately threatened to settle oil trade in currencies other than the U.S. dollar, which would undoubtedly undermine the U.S. dollar’s ​​status as the world’s main reserve currency, weaken the U.S.’s influence in global trade, and have a negative impact on the U.S. Naturally, it doesn't pay off.

As important countries investing in the United States, Saudi Arabia and other oil-producing countries will also have an adverse impact on the US capital market by selling US dollar assets (including US bonds, etc.), which will also weaken the effect of NOPEC's sanctions.

U.S. ties to Saudi Arabia?

　　Since Biden came to power, the Saudi government has hardly given the Democratic government of the United States a good face.

After Crown Prince Salman was appointed prime minister by the old king at the end of September, he was further distanced from Biden.

Compared with the Biden administration, which has always held high the banner of ideology, Salman undoubtedly hopes that the Republican Party will return to power.

If the midterm elections in November can help the Republicans regain their majority in the two sessions, he will naturally be happy.

　　The killing of Khashoggi in the Saudi consulate in Istanbul, Turkey in October 2018 has become the main reason for the feud between the United States and Saudi Arabia in recent years.

In August 2020, Biden, who was then a presidential candidate, promised to make Saudi Arabia a "untouchable" after being elected because of its disgraceful record of human rights violations (mainly referring to the Khashoggi case) and the seven-year war against Yemen.

In February 2021, Biden did fulfill his campaign promise and released an investigation report on the Khashoggi case a few weeks after taking office, specifying that Crown Prince Salman approved the assassination of Khashoggi.

　　Facing the double shock of the new crown pneumonia epidemic and the escalation of the conflict between Russia and Ukraine, the Biden administration has tried to ease relations with Saudi Arabia.

In mid-July this year, Biden made his first visit to Saudi Arabia and had an "ice-breaking" meeting with Crown Prince Salman.

But the gap between the two sides has not yet disappeared, and Saudi Arabia has not heeded the warnings of the United States.

　　In the United States, the opposition believes that Biden’s attitude towards the Saudi government, especially Crown Prince Salman, is too weak. Although he condemned the crown prince’s killing of Khashoggi, he did not impose even symbolic sanctions on the crown prince, which also gave him toughness. Courage against America.

As the carefully selected successor of the old king of Saudi Arabia, Crown Prince Salman launched the Saudi 2030 plan, promoted the listing of Saudi oil companies, sanctioned and isolated neighboring Qatar, etc., showing a completely different style of behavior from his predecessors, and was also affected by Many foreign leaders and business giants sought after.

　　On the other hand, Crown Prince Salman has realized the relative decline of U.S. power and willingness to withdraw strategically in the Middle East. He must change his complete dependence on the U.S. for oil and security, while maintaining good relations with Russia and other countries. In the game, Saudi Arabia seeks higher economic autonomy and regional voice.

　　However, the United States is not completely incapable of containing Saudi Arabia.

According to estimates by Bruce Riedel, a senior researcher at the Brookings Institution, the proportion of US-made weapons in the Saudi military has reached 75%, including various fighter jets, transport aircraft, helicopters, cruise missiles, tanks, drones, etc. Parts, back-office software and repair support for American arms dealers simply don't work.

Considering the threat it faces from the Houthis in Yemen and the Iranian Revolutionary Guard, Saudi Arabia is still highly dependent on the United States militarily.

　　After OPEC+ announced oil production cuts, Senator Bob Menendez of New Jersey, chairman of the U.S. Senate Foreign Relations Committee, called on Congress to freeze arms sales to Saudi Arabia, while Rep. Tom Malinowski of New Jersey believed.

The United States is reconsidering whether to continue to station troops in Saudi Arabia to protect the country's oil fields, because Saudi Arabia has disregarded the national security interests of the United States.

Objectively speaking, although Saudi Arabia has accelerated its military cooperation with Russia, India and other countries in recent years, it is still inseparable from the US-made weapons and US military assistance, especially the deterrent effect of the US military in Saudi Arabia on regional "hostile countries" such as Yemen.

　　The U.S. freeze on arms sales to Saudi Arabia will have a substantial impact on the country’s military and security situation, but Saudi Arabia also knows that American arms companies will do everything possible to obstruct Congress from passing a bill to freeze arms sales.

Just in early August, the U.S. Congress just approved two large-scale arms sales plans to Saudi Arabia and the United Arab Emirates, including a $3 billion Patriot missile order for Saudi Arabia.

　　Historically, the U.S. and Saudi Arabia have never signed a mutual defense agreement or formal treaty, and their "quasi-alliance" relationship has been largely sustained by oil and arms deals.

Saudi Arabia uses its influence within OPEC to keep oil production and prices at levels that Washington is comfortable with; the United States imports a lot of oil from Saudi Arabia and exports a lot of weapons to Saudi Arabia.

But now, the United States is the world's largest oil producer and no longer depends on Saudi oil imports.

In addition, on the one hand, the United States is strategically shrinking in the Middle East, and on the other hand, it is unwilling to see the dominance of Saudi Arabia or the strong intervention of other powers.

The relationship between the United States and Saudi Arabia is also destined to change from the previous "Saudi Arabia only follows the lead of the United States" to "the combination of the United States and Saudi Arabia."

The extent of Saudi Arabia's dependence on the United States is largely determined by regional security trends, not oil.

　　"China News Weekly" 2022 Issue 39

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