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Joe Biden’s choice after OPEC cuts: Woo Saudi Arabia, or retaliate?

The announcement by the Saudi-led OPEC+ energy cartel that it would pump 2 million fewer barrels a day was widely seen in Washington as a stab in the back of Biden, who just three months ago jettisoned his vow to make Saudi Arabia a “pariah".

President Joe Biden of the U.S. is escorted by Crown Prince Mohammed bin Salman as he arrives at the al-Salam palace in Jeddah, Saudi Arabia, July 15, 2022. (Doug Mills/The New York Times)

President Joe Biden faces a dicey choice following the decision by the world’s oil giants to slash production just weeks before critical midterm elections that could turn on the price of gasoline: Should he stick with his policy of wooing Saudi Arabia or take measures to retaliate?

The announcement by the Saudi-led OPEC+ energy cartel that it would pump 2 million fewer barrels a day was widely seen in Washington as a stab in the back of Biden, who just three months ago jettisoned his vow to make Saudi Arabia a “pariah” and traveled there to court the kingdom’s autocratic crown prince.

The question now confronting Biden is what to do about this seeming betrayal. In intentionally bland comments, he told reporters Thursday only that he was “disappointed” and considering unspecified “alternatives.” But fellow Democrats, frustrated by what they see as the president’s excessive deference to the Saudis and eager to demonstrate toughness before their constituents head to the polls, increased pressure on Biden to punish Riyadh.

“He should just start withdrawing stuff,” Rep. Tom Malinowski, D-N.J., said in an interview, referring to the U.S. military presence in Saudi Arabia. “That would get their attention. Action for action. Call their bluff. Do they really think they can trade their American security partner for a Russian security partner or a Chinese security partner? They know they can’t do that.”

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Sen. Chuck Schumer, D-N.Y., the majority leader, said Saudi Arabia’s decision to ally with President Vladimir Putin’s Russia to shore up oil prices was a grave mistake.

A photographer takes pictures of the Khurais oil field during a tour for journalists, 150 km east-northeast of Riyadh, Saudi Arabia, June 28, 2021. (AP/File)

“What Saudi Arabia did to help Putin continue to wage his despicable, vicious war against Ukraine will long be remembered by Americans,” he said. “We are looking at all the legislative tools to best deal with this appalling and deeply cynical action.”

Biden gave little indication of how far he would go.

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Asked about the production cut Thursday, Biden said that “we are looking at alternatives” to oil from OPEC+ countries. “We haven’t made up our minds yet,” he said.

His administration counseled caution, holding out hope that at the end of the day, the cut in daily production would in reality amount to maybe half of the 2 million barrel goal because some oil producers were already not meeting their targets. Rather than penalizing Saudi Arabia, Biden aides appeared focused more on countering its move by releasing more oil from the Strategic Petroleum Reserve and possibly seeking rapprochement with oil-pumping Venezuela.

The administration also appeared to be considering moves to pressure domestic energy companies to reduce retail prices, possibly including limits on the export of petroleum products. “We’re not announcing any steps on that front, but there are measures that we will continue to assess,” Brian Deese, the president’s national economic adviser, told reporters.

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President Joe Biden before departing the White House for a trip to New Jersey and New York, Oct. 6, 2022. (Doug Mills/The New York Times)

The OPEC+ decision could hardly have come at a worse time politically for Biden, who had staked his argument for the midterm campaign in part on falling gas prices. Ron Klain, the White House chief of staff, has methodically tracked the price at the pump for months as it has declined, and Democrats felt renewed momentum as a result.

But gas prices had already begun inching back up even before the Saudi-led move, in part because of refinery issues on the West Coast and in the Midwest. The national average rose by 7 cents to $3.86 since Monday as demand increased and stocks fell, although it remained far below the peak topping $5 a gallon in June.

The Saudis maintain that the production cut was not meant as a shot at Biden and have sent papers and charts to administration officials justifying it. With the price of oil falling just below $80 a barrel in recent days, the Saudis told U.S. officials that they worried it would slide further into the $70s and possibly the $60s, making their own energy-dependent budget unsustainable.

Biden administration officials fear the real crisis might come in December when a price cap organized by the United States to restrict Russian oil profits goes into effect and a European Union ban on the purchase of Russian crude is set to begin.

People and media gather at the entrance of the building of the Organization Of The Petroleum Exporting Countries, OPEC, in Vienna, Austria, Wednesday, Oct. 5, 2022. (AP)

Biden’s options to counter the production cut are limited and carry trade-offs. He has already ordered more oil to be released from the Strategic Petroleum Reserve, but since the reserve is now at its lowest level in four decades, that risks shortages in case of war or a natural disaster like another hurricane.

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He could push to limit exports of processed fuels like gasoline and diesel, which would expand supplies and lower prices domestically. But that would harm trading partners, particularly the European allies attempting to wean themselves off Russian energy and amplify global inflationary pressures.

The administration could open more federal lands and waters to drilling and soften regulations on drilling, exploration and pipeline laying to increase domestic production, although that could incite a backlash among environmentalists.

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“They need to loosen regulations, they need to release all those permits sitting on someone’s desk for drilling on federal lands, and they need to allow the Keystone XL pipeline to come down to deliver the Canadian oil sands to American consumers,” said Darlene Wallace, a board member of the Oklahoma Energy Producers Alliance. “And the president needs to encourage investors to invest in the oil business.”

Easing sanctions on Iran and Venezuela could free up more than 1 million barrels of oil a day, which would help lower prices and potentially replace some of the Russian barrels now sold to Chinese and Indian refineries. But nuclear talks with Iran have stalled with scant hope of a breakthrough, and the prospects of a deal with Venezuela are murky.

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The Wall Street Journal has reported that the Biden administration was preparing to scale down sanctions to allow Chevron to resume pumping in exchange for a move toward elections in 2024. But in a statement, the White House emphasized that “there are no plans to change our sanctions policy without constructive steps from the Maduro regime.”

In brief comments to reporters Thursday, Biden did not deny a possible change toward Venezuela. “There’s a lot of alternatives,” he said. “We haven’t made up our mind yet.” Asked what Venezuela would have to do to persuade the United States to ease sanctions, Biden said, “a lot.”

A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. (Reuters/File)

The president defended his decision to travel in July to Saudi Arabia, where he exchanged a fist bump with its de facto ruler, Crown Prince Mohammed bin Salman, despite a campaign pledge to isolate the kingdom for the killing of Jamal Khashoggi, a Saudi journalist and U.S. resident killed on what the CIA said were Crown Prince Mohammed’s orders.

While not formally announced, U.S. officials said privately at the time that they had an understanding that Saudi Arabia and other energy powers would ramp up production by fall.

But Biden insisted again Thursday that he had other goals in going to Saudi Arabia, such as encouraging diplomatic relations with Israel.

“The trip was not essentially for oil,” the president said. “The trip was about the Middle East and about Israel and rationalization of positions.”

“But it is a disappointment,” he added about the production cut, “and it says that there are problems.”

Malinowski and other Democrats said the president should go further than just expressing disappointment. He introduced a bill with Reps. Sean Casten, D-Ill., and Susan Wild, D-Pa., requiring the removal of U.S. troops and defensive systems from Saudi Arabia and the United Arab Emirates.

The bill was more a statement than anything else since Congress is out of session until the election, but Malinowski said he patterned it after a similar measure introduced by Republicans in 2020 and used by President Donald Trump to pressure Saudi Arabia to decrease production at a time when low oil prices were a concern.

Malinowski said Biden should similarly use the legislation to push the Saudis. “The point of our bill is to give him the ammunition he needs. I hope he uses it,” Malinowski said. “He took a risk. He put himself out there for this relationship, and this is not how a friend should respond. So maybe they should find some new friends.”

Written by Peter Baker. This article originally appeared in The New York Times.

First published on: 07-10-2022 at 10:30 IST
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