[REGNUM] In the 1980s, agreements between King Fahd of Saudi Arabia and President Ronald Reagan led to a precipitous drop in oil prices and seriously undermined the economic capabilities of the USSR. Washington would like to repeat today its success of that time. However, the coordinated decline in oil production by OPEC+ countries indicates that the United States has less and less leverage over the leadership of the oil-producing Arab states.
| It’s true. The answer now is for America to increase drilling and processing domestically, going back to the situation before Joe Biden movied into the White House. But the Biden administration is adamantly opposed to actually fixing the problem. Still, all around the world nations that can find oil are working to get it out of the ground. |
Cuts by Saudi Arabia, the UAE and Kuwait totaling 772,000 bpd will take effect from May and last until the end of the year, according to statements released by official media. Iraq and Oman followed suit, while Algeria also announced voluntary cuts of 48,000 bpd over the same time period.
The decision to cut oil production by more than a million barrels was made in just a few days and in a very narrow circle. Specialists learned about it just a day or two before the announcement of this decision. Western officials said they were " completely stunned by this move ."
MULTIPOLAR WORLD IN ACTION
Back in February, Russia began to implement a voluntary reduction in oil production by 500,000 barrels per day until June 2023. But, as Russian Deputy Prime Minister Alexander Novak said, the authorities decided to extend the decline in oil production in the country until the end of the year, acting within the framework of the agreed policy of OPEC + .
"As a responsible and preventive action, Russia is implementing a voluntary cut of 500,000 barrels per day until the end of 2023 from the average February production level, determined in accordance with independent sources," Novak said in a statement, which was published on the government website.
Earlier, Russian Senator Alexei Pushkov called this OPEC+ agreement an example of a multipolar world in action.
"One of its most important features is the dispersal of global decision-making centers. It is not surprising that the US is struggling to establish such a world," he said.
The previous agreements of the OPEC+ countries to reduce oil production by 2 million barrels per day, which were reached at a ministerial meeting in Vienna on October 5 last year and entered into force in November, were called in the Kremlin a "victory of common sense" and a step that "at least somehow balances the lawlessness arranged by the Americans," trying to manipulate their oil reserves by throwing additional volumes of black gold into the market.
According to Western experts, Russia will certainly benefit from the current decline in oil production, especially since restrictions aimed at reducing Russian oil exports are not working the way the West hoped for.
Moscow's decision to cut production will not affect the volume of Russian oil on world markets. Its supplies, despite the restrictions of the West, are growing and, according to tanker tracking data compiled by Bloomberg , rose by 1 million barrels per day in the last seven days of March to a new high of 4.13 million.
Now, as Bloomberg highlights, "with OPEC members joining [to cut oil production], oil revenues that fuel the Kremlin’s war machine will be further boosted."
Naturally, Washington reacted extremely negatively. The Biden administration has already called OPEC's decision reckless.
The United States is interested in stabilizing markets at lower oil prices. This would allow the West as a whole to overcome the negative consequences of anti-Russian sanctions, preventing crises in the economies, and, of course, reduce Russia's income.
This can only be achieved by persuading the oil-producing countries to increase oil production instead of reducing it. But the United States has long and unsuccessfully sought to take account of its interests from OPEC+ members.
Now, the White House fears that the world economy is waiting for another outbreak of inflation, and gasoline prices will rise, including in the United States, as happened in 2022. World oil prices have already jumped by 6% and will continue to rise.
IT'S BIN SALMAN'S FAULT
In the United States, they tend to blame Saudi Arabia first and foremost.
During the Biden presidency, relations between the countries began to seriously stagnate due to the preaching rhetoric of the head of the White House against the kingdom and direct accusations of the de facto ruler of the KSA, Crown Prince Muhammad bin Salman, of organizing the "Khashoggi affair" (an opposition journalist who was killed in the SA consulate in Istanbul. - Note ed.).
At one time, on the eve of his trip to the Middle East in the summer of 2022, President Biden counted on receiving the main prize - the return of Saudi Arabia to its role as an independent producer in the world oil markets and its refusal to participate in OPEC +, which includes Russia.
At that time, former US Ambassador to Israel Martin Indyk said that the United States and Saudi Arabia may have reached an understanding that would allow Washington and Riyadh to pursue a coordinated policy to the detriment of Saudi cooperation within OPEC+.
Obviously, in the United States, preparing Biden's trip, they sought to persuade Saudi Arabia to some kind of separate deal and carried out appropriate work in this direction. But even before the visit of the owner of the White House to the KSA, it became clear that these hopes had collapsed and the leadership of the KSA would be true to its obligations under OPEC+.
At the same time, The Wall Street Journal reported that " Saudi officials say they are committed to making decisions on oil through [OPEC+ mechanisms] and in consultation with Russia " and will not agree to any agreements with Washington.
After another unsuccessful attempt to prevent a decline in oil production in Saudi Arabia last fall, the United States decided to toughen its line against Riyadh and switched from persuasion to threats.
In particular, then Biden said that Saudi Arabia would pay for supporting the decision of OPEC + to reduce oil production and for the fact that Riyadh "sided with Russia against the United States."
In turn, US Representative Ro Hanna and Senator Richard Blumenthal proposed to suspend the supply of weapons and the transfer of military technology to the KSA.
Several congressmen also proposed the withdrawal of all US troops from Saudi Arabia, including Patriot air defense systems and THAAD anti-missile systems. This, in fact, further convinced the Saudi leadership that it is not worth counting on the United States as its security guarantors, but that it should continue to diversify not only its ties in the field of defense and security, but also in the field of military-technical cooperation.
ATTEMPT TO DRIVE A WEDGE INTO CARTEL UNITY
When Washington's efforts to conclude separate deals with Riyadh, even under the threat of sanctions, proved futile, the United States launched an information-psychological operation to undermine the unity of OPEC.
Now the Americans have chosen the UAE as their main target. In the United States, they decided to provoke disagreements between Riyadh and Abu Dhabi, backing it up with relevant information stuffing in order to prevent a new decline in oil production by the cartel countries. So, in early March, The Wall Street Journal (WSJ) reported that the UAE was allegedly going to leave OPEC.
As the WSJ wrote, although the Emirates officially supported the current OPEC policy to reduce oil production, but in private, UAE officials allegedly told US officials that they would like to increase production in accordance with the wishes of Washington, and since then Abu Dhabi has tried in every possible way to defend itself in front of others cartel members their right to increase oil production.
American journalists also tried to portray the situation in such a way that Abu Dhabi is unhappy that OPEC - and especially Saudi Arabia - does not allow them to increase oil production, despite the available capacity.
The newspaper pointed out that Saudi Prince Mohammed bin Salman was absent from the January summit of Middle East leaders in Abu Dhabi. According to the publication, he deliberately avoids joint events with UAE President Sheikh Mohammed bin Zayed al-Nahyan .
It is significant that against the backdrop of WSJ reports, the price of oil on the stock exchanges on the evening of March 3 began to decline by more than two percent. However, an hour later the quotes won back the fall.
Of course, there has long been some competition between the UAE and the KSA on a number of issues related to both the operation in Yemen and dominance in the OPEC system. Nevertheless, the differences are not so great that one can speak of a serious split. Both countries continue to coordinate their actions both in the military-political and trade-economic fields.
The fact that it was Saudi Arabia and the United Arab Emirates that led the coordinated production cuts in the Middle East on Sunday suggests that if there were any disagreements between the UAE and the KSA, then they are already in the past.
This indicates that the United States has less and less leverage in its own interests on the leadership of the oil-producing Arab states.
Gone are the days of collusion and secret deals between Washington and Riyadh, capable of bringing down oil prices on world markets in favor of American interests. As it happened in the 80s, when the agreements between King Fahd of Saudi Arabia and President Ronald Reagan led to a precipitous drop in oil prices and seriously undermined the economic opportunities of the USSR.
April 4, 2023
Kirill Semenov