Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 20, 2022
The following report is NOT news, but it is a challenge for Biden Administration. It is also not a new challenge; but the Ukraine war has suddenly and completely destabilized the global energy market. Biden has already been blamed for high gasoline prices and inflation caused by the COVID-19 Pandemic. Biden’s severe sanctions against Russia after the war broke out effectively took about 3 million barrels per day of Russian crude oil off the market. There is no way for the supply side to immediately make up all the loss. As such, the Biden Administration had counted on Iranian oil when the JCPOA nuclear deal was in reach. Unfortunately, Biden has taken a hardline against Iran and the US does not engage JCPOA directly. The almost agreed deal has been derailed because of Russia’s new demands. Biden administration has reached out to Maduro of Venezuela for freeing some crudes previously sanctioned by the US. The deal would only benefit the US refineries.
The US and Saudi had been very friendly till 2018. Biden now even faces domestic opposition from reaching out to Saudi for increasing crude output. Quote: “I hate the fact that we have to ask the Saudis to produce more oil,” Rep. Tom Malinowski (D-N.J.), who was a top human rights official during the Obama administration, told reporters this week.” But it is also the reality, quote: “I hate that the Biden administration has to figure out how to leverage our relationship with Saudi Arabia to get them to do that so that my constituents aren’t being squeezed at the pump,” he added.
There is just no way that the US can have the cake and eat it too. One has to realize the following:
- It takes constant nourishments to maintain a good friendship. Friendship, once broken, can not be restored by just phone calls.
- National leader has personal pride, nation has honor. It is up to the national leader, in this case, President Biden to call MBS in person. Quote “State Department spokesman Ned Price said this week that “we are in touch with our Saudi partners on a daily basis.” For the State Department to state that “we are in touch with our Saudi partners on a daily basis,” is just nonsense. Saudi is a Monarch and MBS is the Crown Prince, he makes all the decisions. No amount of “our Saudi partners” has much influence over MBS alone because MBS has been targeted by US elites. It is also clear that unless Biden can manage to talk with MBS in person, nothing will happen. Of course, Biden could face domestic criticism if he is perceived as being soft on MBS.
- Biden’s challenge is how to unify the US by offering realistic policy choices and has the courage to implement. Unless Biden has the majority support in the US, his global agenda has no “teeth.” Another Biden challenge is the clock for mid-term election is ticking, it is not clear that Democratic has a unified winning strategy yet.
U.S.-Saudi tensions complicate push for more oil
Strained relations between Saudi Arabia and the United States are complicating efforts by the Biden administration to convince Riyadh to step up its oil production — which could provide some relief to consumers amid high prices exacerbated by the Russian war in Ukraine.
The U.S. government has been increasingly critical of the Saudis since the 2018 killing of Washington Post journalist Jamal Khashoggi, who was lured to and killed in the Saudi Consulate in Istanbul.
Saudi Arabia’s human rights record and tensions over Yemen’s civil war, which have led to bipartisan criticism from Congress, have added to the strife.
It puts the administration in a difficult spot as it seeks to get Saudi Arabia and the United Arab Emirates to increase production.
“I hate the fact that we have to ask the Saudis to produce more oil,” Rep. Tom Malinowski (D-N.J.), who was a top human rights official during the Obama administration, told reporters this week.
Saudi Arabia’s control over strategic oil reserves may force the Biden administration, which is under pressure ahead of the midterms to provide some relief to consumers amid inflation and high gas prices, to reassess its strategy towards Riyadh.
The president has sought to recenter the relationship as pragmatic, focused on shared security interests and energy needs, while raising concerns over Riyadh’s human rights record.
This marked a sharp reversal from the Trump administration’s overly friendly, personal dealings with Riyadh and carte blanche support for the Saudi-led offensive in Yemen’s devastating civil war.
But Biden’s strategy now appears to have put the administration at a disadvantage in a global time of need.
Saudi Crown Prince Mohammed bin Salman, the day-to-day ruler of the kingdom and heir apparent, reportedly refused a call from Biden as part of outreach in the early days of Russia’s invasion of Ukraine.
The White House refuted the report by The Wall Street Journal, with press secretary Jen Psaki calling it “inaccurate.”
“The president’s focus is really on our relationship moving forward — where we can work together, how we can work together on economic and national security here at home. And he looks forward to that continuing,” she told reporters during a briefing last week.
High gasoline prices exacerbated by the invasion have put Saudi Arabia and the United Arab Emirates (UAE) in strategic positions of power as members of OPEC+, the primary grouping of oil-producing nations.
Saudi Arabia and the UAE can add more oil into play because they have “spare capacity,” barrels that can be quickly moved onto the market and sustained for a period of time.
But Riyadh and Abu Dhabi have resisted calls to increase supply, part of agreements reached with Russia to strengthen their own economies, according to Hussein Ibish, senior resident scholar for the Arab Gulf States Institute in Washington.
“Saudi Arabia and, to a lesser extent, the UAE are relying on a hard-fought OPEC+ oil production agreement with Russia as the basis for their national development and economic transition planning,” he wrote in a recent article.
The Saudis and Emiratis have also resisted issuing blunt statements condemning Russia’s invasion. Instead, their top officials have criticized the U.S.
Prince Mohammed, who U.S. intelligence said approved a plot to “capture or kill” Khashoggi, said in a wide-ranging interview published this month in The Atlantic that he “simply” did not care what Biden thought of him and suggested that the U.S. alienating the Saudi monarchy would hurt the president.
“It’s up to him to think about the interests of America,” the magazine quoted him as saying and then shrugging. “Go for it.”
Senior U.S. officials last visited Riyadh on Feb. 17 in a bid to get Saudi Arabia to increase its oil output ahead of the Russian invasion. State Department spokesman Ned Price said this week that “we are in touch with our Saudi partners on a daily basis.”
But the Saudis and the UAE seem intent on nursing their grievances with the U.S.
UAE Ambassador to the U.S. Yousef Al Otaiba reportedly said this month that Washington and Abu Dhabi are going through a “stress test.”
“But I am confident that we will get out of it and get to a better place,” he reportedly said during a defense conference in Abu Dhabi.
The UAE is waiting for the administration to approve a delivery of F-35 fighter jets to the country and has also pressed Biden to redesignate Yemen’s Houthi separatists as a foreign terrorist organization, which the president revoked.
Biden has said he is considering reimposing the terrorist designation, but human rights groups and Democratic lawmakers have warned it would block the delivery of humanitarian assistance.
Katherine Bauer, a fellow at The Washington Institute for Near East Policy and former senior Treasury official who served in Israel and the Gulf, said specific tensions between the U.S. and Gulf nations are part of a broader feeling of American retreat from the region.
“The sense that the U.S. isn’t paying enough attention … I think it adds to this sense, from the perspective out there, that the U.S. has not been the most reliable partner in the recent past,” she said.
But for some, warming relations with the Gulf in exchange for increased oil output is akin to accepting Russian energy exports since both are responsible for major human rights abuses.
Biden in his first month in office ended U.S. military support for offensive Saudi operations in Yemen, where human rights groups have documented thousands of civilian casualties caused by Saudi-led airstrikes, a layer of indiscriminate violence on top of the war-torn country being classified as the worst humanitarian crisis in the world.
“I think what the Saudis have done in Yemen is actually worse, but it’s just gotten less attention,” said William Hartung, a senior research fellow at the Quincy Institute for Responsible Statecraft.
“I think if even a fraction of the pressure that Russia’s feeling were put on Saudi Arabia, there’d be a good chance of stopping the killing in Yemen,” he added.
Republicans have made blaming Biden for the high gas prices a key attack strategy, though.
International factors, rather than Biden policies, are the main driver of high prices.
Both Republicans and some administration officials have also pushed for more U.S. drilling.
“We are on war footing, we are in an emergency, and we have to responsibly increase short-term supply,” Energy Secretary Jennifer Granholm said at an industry conference this month.
It’s a line of argument that has support from some U.S. allies in Europe, including Greece.
“I don’t think that we should rely on Russia or on the Gulf countries for our oil imports, we should definitely see the U.S, as an option,” Greek Deputy Foreign Minister Varvitsiotis Miltiadis told The Hill in an interview in Washington this week.
“We have to develop the energy resources that are tangible and near to us in order to make the system more stable,” he added.
It would take time for U.S. companies to bring more oil online, however, so the administration is looking for the most immediate solution.
Kurt Volker, former U.S. ambassador to NATO, said the administration is pursuing the right strategy by looking to Gulf countries to offset energy shortfalls due to the Russian invasion. He argued that the European Union and United Kingdom should follow Biden’s lead and ban Russian oil and gas.
“I think it’s the right thing to do. We should be talking to everybody about the oil and gas markets,” Volker said.
Morgan Chalfant contributed to this report.