Wed. Oct 5th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

March 10, 2022

Because of the two-week old Ukraine war and the US led full scale sanction against Russia, as well as potential retaliations from Russia against the west, global energy price is skyrocketing. The US is the largest energy producer in the world and a net energy exporter but rising domestic gasoline price led US inflation to 7.9%, the worst in 40 years. It is a significant political risk for Biden

Biden administration just announced banning the imports of all Russian energy to the US. Biden has to find an immediate replacement of Russian crude oil import to the US which amounts to 3~5% of US imports every day. As the following news reports indicate, Biden is reaching out to Pariahs states labeled by the US. But the responses are not encouraging. Biden is also being criticized at home for not focusing on encouraging US domestic productions.

1. Quote: President Joe Biden and past U.S. leaders have spectacularly snubbed — Venezuela, Saudi Arabia and Iran — are now targets of U.S. outreach as global fuel prices reach jarring levels during the Ukraine crisis. These three states were snubbed by the US mainly because they do not hold the same democratic and moral value as the US. Now it is clear that US moral value may not be as high as local gasoline prices.

2. Quote: Now, the Reuters sources say that American diplomats have told the Venezuelan side that Washington might relax sanctions—but only if Caracas starts delivering crude directing to the United States. It does sound like a real deal; Caracas has been under US sanctions for a long time and survived, so it is not the issue for the US to relax sanctions. Biden may have to offer high oil prices and some promises of a stable US-Venezuela relation. It is also clear that while US is sanctioning Venezuela, Russia and China stand by Maduro.

3. Ditto with Iran, but US-Iran relation has been much more fraught than US-Venezuela relation. Iran has had a glorious past and strong religious convictions. Further, US and Iran had a very twisted past, including hostages and ongoing proxy wars. US has sanctioned Iran heavily for nuclear weapon development. The JCPOA nuclear deal may be revived soon, and Iran crude oil may flow to the global market. But there would be no Iran crude to the USA anytime soon. Both the US and Iran do not have the appetite to deal with each other on businesses.

4. Saudi has a long friendly relationship with the US, they are allies in the middle East against Iraq, Syria, Libya extremists. Both the US and Saudi are also facing down Iran. The recent rupture between the US and Saudi were partisan and personal. When Trump was the President of the US, he had personal touch with the Crown Prince MBS, the de facto ruler of Saudi. After the brutal assassination of a Saudi journalist in Turkey, US reacted strongly and most accused MBS pointedly. The Democratic Party unilaterally declared that MBS is persona non grata. It is reported that Biden has not spoken with MBS since Biden took office.

5. On the other hand, Russia has joined the OPEC led by Saudi and formed the OPEC+. OPEC+ meet regularly to decide the next phase of oil output level.

6. Should anyone be surprised by the headline: Saudi Arabia, UAE Leaders Reportedly Decline Calls With Biden Amid Ukraine Crisis?

STH

Pariahs no more? US reaches out to oil states as prices rise

ELLEN KNICKMEYER and CATHY BUSSEWITZ

Wed, March 9, 2022, 12:04 PM

WASHINGTON (AP) — Three checkered oil regimes that President Joe Biden and past U.S. leaders have spectacularly snubbed — Venezuela, Saudi Arabia and Iran — are now targets of U.S. outreach as global fuel prices reach jarring levels during the Ukraine crisis.

But it’s not clear any U.S. diplomacy could get more crude oil on the market fast enough to help the current supply crunch, or tear once-shunned oil states away from what — for Saudi Arabia in particular — are profitable alliances with Russia.

For the Biden administration, the U.S. overtures to three problematic oil giants at best could lead to stabilizing rising oil and gas prices and draw those governments closer to the West and away from Russia and China. At worst, Biden risks humiliating rebuffs and condemnation for outreach to governments accused of rights abuses and violence.

“We have an interest globally in maintaining a … steady supply of energy, including through diplomatic effort,” Secretary of State Antony Blinken said Wednesday on the moves toward countries that have been out of U.S. or Biden administration favor, and in the case of Iran an armed threat. “We have a multiplicity of interests, and use diplomacy to try to advance them.”

The phrasing, as Russia’s war raises the stakes in many areas, was a change from Biden’s pointing, at the outset of his presidency, to democratic values as “America’s abiding advantage” in diplomacy.

Saudi Arabia has profited richly in recent years from teaming with fellow top petroleum producer Russia to keep global oil and natural gas supply modest and prices high.

And Biden came to office vowing to isolate the crown prince, Mohammed bin Salman, and the rest of the Saudi royal family over abuses that include the 2018 killing of U.S.-based journalist Jamal Khashoggi.

Biden and the young crown prince are not known to have ever talked.

“I don’t know whether he’s up to eating that much crow,” Saudi Arabia analyst David Ottaway said of attempts now by Biden to improve his administration’s relations with Prince Mohammed and Saudi Arabia, the country that could most easily end the global supply crunch. “He was gonna make a pariah of this guy.”

As for Iran and Venezuela, the U.S. would welcome positive diplomatic outcomes that bring back oil from those nations, but “the problem is that in that situation, their negotiation power increases dramatically,” said Claudio Galimberti, senior vice president of analysis at Rystad Energy.

“So Iran will make a lot of very steep requests in order to rejoin the deal and so would Venezuela,” the energy analyst said. Plus, it could take time to ramp up their production.

Russia’s devastating military invasion of Ukraine, and resulting market disruptions and sanctions hitting Russia’s petroleum exports, helped drive the U.S. average gasoline price to $4.25 on Wednesday.

Biden announced a ban on Russian oil and gas imports the day before, compounding high prices from the OPEC production cap engineered by Saudi Arabia and non-OPEC member Russia.

The Biden administration is making cautious overtures to all three oil giants, Venezuela, Iran and Saudi Arabia.

In the case of Iran, administration officials are not publicly linking their diplomacy to oil, although they are pursuing a deal on Iran’s nuclear program that could see international sanctions on that country lifted and Iran’s oil quickly back on the market legally.

For Biden, failure in the high-profile oil diplomacy risks humiliating treatment from unfriendly rulers abroad, potentially re-election-damaging condemnation at home.

And success? Potentially, likewise.

“Our response to (Russian President Vladimir) Putin’s war shouldn’t be to strengthen our relationship with the Saudis,” tweeted Minnesota Democratic Rep. Ilhan Omar, citing Saudi Arabia’s years-long war in neighboring Yemen.

Others in Biden’s Democratic Party have made clear their objections to any abrupt U.S. embrace of Saudi Arabia and its crown prince for the sake of oil.

The GOP is scathing in its criticism of high oil prices, and any possible thaw with Iran in particular.

Effectively, said Richard Goldberg, a former National Security Council official under the Trump administration, the Biden administration is saying, “They will still be financing terrorism, but let’s go ahead and buy their oil.”

Western nations are hoping their cuts in the use of Russia’s oil can pressure Putin to stop his attack on Ukraine, though that can create other problems since nations produce different types of oil, which need different kinds of refineries.

In Venezuela, a high-level U.S. delegation visited last weekend for the first time since relations unraveled under socialist leader Hugo Chavez in the 1990s.

The trip appeared to be met receptively by President Nicolas Maduro. It was followed Tuesday by Venezuela releasing two jailed Americans.

The apparent warming raised the possibility of a lifting of U.S. sanctions on Venezuela and eventual return of its oil to markets.

But even if that breakthrough occurs, Venezuela’s oil industry might not be ready to ramp up production in time to help the current price spike, after years of political turmoil and disinvestment cramped the industry.

Removing direct and secondary U.S. restrictions on Venezuela’s state-owned oil company, if it happens, could boost production by 400,000 barrels per day within a few months, said Paul Sheldon, chief geopolitical advisor at S&P Global Commodity Insights.

For Iran, leading countries are in the possible closing days — one way or the other — of talks with the Iranians in Vienna aimed at reimposing limits on Iran’s nuclear program in exchange for lifting sanctions, including those that keep Iranian oil off the market.

The Trump administration had taken the U.S. out of the nuclear deal.

Iran could supply oil quickly, and has the ability to put more than 1 million barrels per day on the market, according to energy analysts.

However, Iran’s oil is more likely to go to other buyers than the U.S. And if the U.S. allows Russia to freely trade with Tehran, it could create an opening for Moscow to “launder” oil sales through Iran, which could export the oil it might have refined and instead refine Russian oil in its place, according to Clearview Energy Partners.

Meanwhile, despite a decades-old strategic alliance between Saudi Arabia and the United States, including the kingdom’s dependence on the U.S. military and U.S. weapons-makers for defense, Prince Mohammed and King Salman show no eagerness to help the Biden administration out of the jam.

Biden early on vowed to make a “pariah” out of Saudi Arabia’s ruling family over the killing inside the Saudi consulate in Istanbul of Khashoggi. The U.S. intelligence community linked it to the crown prince.

But the oil tightening has led Biden officials to reach out more to the kingdom this year, including a Biden call to the aging king last month.

“We’re not going to separate our values and our interests,” Blinken told reporters Wednesday. “We’ve made that clear in everything we’ve done. But we’re working productively, constructively with those countries.”

Saudi Arabia and the United Arab Emirates together could tap an additional 2 million barrels per day if they chose. The United Arab Emirates said Wednesday it will urge OPEC to consider boosting oil output. But some OPEC nations may be reluctant to increase production to make up for Russian shortfalls, since alienating Russia could make it harder for OPEC to wield its influence over oil prices.

Personalities aside, “the oil alliance between Russia and Saudi Arabia has worked out pretty well,” said Ottaway, the Saudi Arabia analyst.

“It’s a difficult decision for MBS too, you know,” he added. “Both MBS and Biden are in a bind here.”

U.S. Wants Venezuelan Oil In Exchange For Sanction Relief

Editor OilPrice.com

Wed, March 9, 2022, 9:00 AM

The United States wants Venezuela to commit at least part of its oil exports to U.S. refineries as a condition for Washington to consider providing sanction relief to the South American nation, Reuters has reported, citing unnamed sources in the know.

The report comes days after the U.S. sent a delegation to Caracas to reportedly seek support for its sanctions against Russia in a bid to increase Russia’s isolation, including from friendly countries such as Venezuela.

The subject of the talks that the two sides held in Caracas was not disclosed, but it was reported that they did not end with an agreement of any kind. Seeing as the U.S. has been planning a ban on Russian oil imports for a while now, it would be safe to say that the topic of replacing those with Venezuelan crude may have been on the table.

Now, the Reuters sources say that American diplomats have told the Venezuelan side that Washington might relax sanctions—but only if Caracas starts delivering crude directing to the United States.

The United States broke off diplomatic relations with Venezuela in 2019 after national elections that cemented Nicolas Maduro as president. Sanctions followed, targeting specifically Venezuela’s oil industry—the lifeblood of the regime.

However, Washington could not completely stop Venezuelan oil exports despite deepening sanctions, with China and Russia coming to the rescue. Venezuela continues to export most of its oil to China.

Now that Washington is seeking a policy reversal, some believe it may be too late. The sanctions have added to years of mismanagement in the Venezuelan oil industry to reduce the country’s output severely. As the Wall Street Journal reported this week after the news of the talks, Venezuelan oil may simply be insufficient in volume to replace the crude and oil products the U.S. was importing from Russia.

By Charles Kennedy for Oilprice.com

Venezuelan vice president meets ‘good friend’ Lavrov of Russia

CARACAS (Reuters) – Venezuelan Vice President Delcy Rodriguez and Russian Foreign Minister Sergei Lavrov met on Thursday to review their countries’ strategic alliance and discuss the “complex” international situation, she said in a message on Twitter.

Venezuelan President Nicolas Maduro has expressed support for Russian President Vladimir Putin since Moscow launched an invasion of Ukraine on Feb. 24.

The meeting between Rodriguez and Lavrov took place five days after U.S. officials met Maduro and suggested Caracas deliver some of its oil exports to the United States as part of an agreement to ease sanctions against the OPEC member country.

“We held a meeting with our good friend Sergei Lavrov. We reviewed our bilateral strategic relations and the complex international scenario,” Rodriguez said.

“Venezuela reaffirmed the principle of sovereign equality of states as a way to preserve balance for the sake of peace,” she added, without giving more details.

Earlier, Sergey Melik-Bagdasarov, Russia’s ambassador to Venezuela, wrote in a Twitter message that the meeting took place in Antalya, Turkey, and published an image of Rodriguez and Lavrov walking side by side.

He gave no details of the meeting, which Venezuelan Foreign Minister Felix Plasencia also attended.

Venezuela’s Ministry of Communication and Information did not immediately respond to requests for comment.

Maduro has accused NATO and the United States of causing the crisis over Ukraine, arguing they flouted the Minsk agreements that aimed to end a conflict that began in 2014 between pro-Russian separatists in eastern Ukraine and the Kyiv government.

Plasencia will take part in a forum on diplomacy in the Turkish city from Friday through Sunday, according to a message published on the Venezuelan foreign ministry’s Twitter account.

(Reporting by Mayela Armas and Vivian Sequera; Writing by Oliver Griffin; Editing by Mark Heinrich and Paul Simao)

Saudi Arabia, UAE Leaders Reportedly Decline Calls With Biden Amid Ukraine Crisis

Josephine Harvey

Tue, March 8, 2022, 8:10 PM

The de facto leaders of Saudi Arabia and the United Arab Emirates declined to arrange calls with President Joe Biden in recent weeks as the U.S. worked to contain a spike in oil prices driven by Russia’s war on Ukraine, The Wall Street Journal reported Tuesday.

Citing U.S. and Middle Eastern officials, the Journal reported that Saudi Crown Prince Mohammed bin Salman and the UAE’s Sheikh Mohammed bin Zayed al Nahyan both declined requests to speak to Biden amid dissatisfaction in both countries over U.S. policy in the region.

“There was some expectation of a phone call, but it didn’t happen,” a U.S. official told the Journal, referring to the planned discussion between the Saudi crown prince and Biden. “It was part of turning on the spigot” of Saudi oil.

Biden did, however, speak with the crown prince’s father, King Salman, on Feb. 9, the Journal reported.

Officials said relations had grown strained between the U.S. and the two Persian Gulf nations over the Biden administration’s lack of support for the war in Yemen and its revived negotiations on the Iran nuclear deal.

Saudi officials reportedly also seek legal immunity for the Saudi crown prince, who faces multiple lawsuits in the U.S., including over the killing of journalist Jamal Khashoggi in 2018.

The White House has looked to Iran, Saudi Arabia and Venezuela for talks about increasing oil production to offset the effect of the Ukraine crisis on energy markets. Biden on Tuesday announced a ban on Russian oil imports, a major escalation of sanctions that will cause further price hikes for American consumers.

Saudi and Emirati officials had earlier this month rejected calls to pump more oil, saying they would stick to a production agreement approved by the Organization of the Petroleum Exporting Countries (OPEC+), an alliance that includes Russia.

The Saudi crown prince and the UAE’s Sheikh Mohammed both participated in calls with Russian President Vladimir Putin last week.

This article originally appeared on HuffPost and has been updated.

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