A Secret, Failed Oil Deal: How the U.S.-Saudi Relationship Ruptured
[ad_1]
WASHINGTON — As President Biden was planning a politically risky trip to Saudi Arabia this summer, his top aides thought they had struck a secret deal to boost oil production through the end of the year — an arrangement that could have helped justify breaking a campaign pledge to shun the kingdom and its crown prince.
It didn’t work out that way.
Mr. Biden went through with the trip. But earlier this month, Saudi Arabia and Russia steered a group of oil-producing countries in voting to slash oil production by two million barrels per day, the opposite of the outcome the administration thought it had secured as the Democratic Party struggles to deal with inflation and high gas prices heading into the November elections.
The move led angry Biden administration officials to reassess America’s relationship with the kingdom and produced a flurry of accusatory statements between the two governments — including a charge by the White House that Saudi Arabia was helping Russia in its war in Ukraine.
Lawmakers who had been told about the trip’s benefits in classified briefings and other conversations that included details of the oil deal — which has not been previously disclosed and was supposed to lead to a surge in production between September and December — have been left fuming that Crown Prince Mohammed bin Salman duped the administration.
This account is based on interviews with American officials and officials from Gulf Arab nations, as well as Middle East experts with knowledge of discussions between the two nations.
What happened over the last half-year is a story of handshake agreements, wishful thinking, missed signals and finger-pointing over broken promises. Far from rebuilding a relationship with a leader Mr. Biden had once pledged to treat as a “pariah” after the murder of journalist Jamal Khashoggi, the outcome has been another low point in America’s tumultuous ties with Saudi Arabia.
The episode is also a revealing example of how Saudi Arabia, under the leadership of its ambitious and often ruthless crown prince, appears eager to shed some of its longtime reliance on the United States, with Prince Mohammed trying to position Saudi Arabia as a powerhouse of its own.
American officials said that, even days before the OPEC Plus decision, they had received assurances from the crown prince there would be no production cuts — and when they learned of the Saudi reversal they made a futile last-ditch push to change minds in the royal court.
The Saudi Energy Ministry said in a statement that “the kingdom rejects these allegations and stresses that such mischaracterizations made by anonymous sources are entirely false.”
The ministry added, “The decisions of OPEC Plus are reached by the consensus of all members and determined solely by market fundamentals, not politics.”
The Biden Presidency
With midterm elections approaching, here’s where President Biden stands.
White House officials admit they were angered and surprised by what they said was a Saudi about-face, but insist their overall strategy to lower energy costs is working.
At the same time, U.S. officials are bracing for another potential price surge in December, if a European embargo on Russian oil goes into effect and the Saudis refuse to increase oil production to make up for the anticipated reduction in supply. The officials say that would be a sure sign that the Saudis were helping the Russians by undermining the American and European-led plan.
“While we clearly disagreed with the OPEC Plus decision in early October, we recognize the importance of continuing to work and communicate with Saudi Arabia and other producers to ensure a stable and fair global energy market,” said Amos Hochstein, Mr. Biden’s energy envoy.
Some analysts say that senior American and Saudi officials have misread each other on both the dynamics of the oil market and the geopolitics around Russia, and that the Biden administration will have a hard time figuring out how things went awry.
“Deconstructing Saudi decision-making right now is like Kremlinology on steroids,” said Hussein Ibish, a scholar at the Arab Gulf States Institute in Washington. “It’s become a matter of a relative handful of people around the king and the crown prince.”
“Even the most well-informed people in the United States often don’t know,” he added.
The White House has indicated it might seek retribution for the Saudi decision, and some Democrats in Congress are making a push to scale back some military and economic ties to the kingdom. Even some of the president’s staunchest supporters have called the episode an example of the administration sacrificing principles for political expediency — and having little to show for it.
“There’s now a level of embarrassment as the Saudis merrily go on their way,” said Representative Gerald E. Connolly, Democrat of Virginia and a member of the House Foreign Affairs Committee.
Fist Bump in Jeddah
Biden administration officials began planning in the spring for the president to make a summit stop in Saudi Arabia while also visiting Israel over the summer. They knew such a trip would bring criticism: Mr. Biden had denounced Prince Mohammed during the presidential campaign, had ordered the declassification of an intelligence assessment that the prince likely ordered the killing of Mr. Khashoggi and had thus far in his presidency refused to have a one-on-one meeting with the crown prince.
How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.
But some of the president’s aides saw both short- and long-term benefits for the trip and had quietly tried to repair the relationship. They said it was important to work with the kingdom on the Yemen war and Iran, and to expand Israel’s acceptance in the region. More immediately, they believed, the trip could shore up a Saudi commitment to convince OPEC to increase oil production as Russia’s war in Ukraine had led to surging global fuel prices.
Leading proponents of the visit, including Mr. Hochstein and Brett McGurk, the top National Security Council official for Middle East policy, met during the spring with Prince Mohammed and his advisers. American officials said that in May, they reached a private oil deal with the Saudis that had two parts.
First, the Saudis would accelerate an OPEC Plus production increase of 400,000 barrels per day already planned for September, moving it to July and August. Then the Saudis would get the cartel to announce a further production increase of 200,000 barrels per day for each month from September to December of this year.
On June 2, OPEC Plus announced they would move up the production increase scheduled for September — fulfilling the first part of the secret deal.
That same day, the White House announced Mr. Biden would soon make a trip to Saudi Arabia.
Democratic lawmakers remained skeptical of the efforts at rapprochement. Representative Adam Schiff, Democrat of California and chairman of the House intelligence committee, said publicly that Mr. Biden should not travel to the kingdom. He and five other senior Democratic House members sent a letter on June 7 to Mr. Biden urging him to take a more guarded approach to Saudi Arabia — the most immediate issue, they said, was that “Saudi Arabia’s refusal to stabilize global energy markets is helping bankroll Vladimir Putin’s war crimes in Ukraine.”
The White House agreed to give the lawmakers classified briefings about their diplomatic efforts on a range of issues, including the Yemen war, Iran and Saudi Arabia’s relations with Israel. In briefings and talks with members of the congressional intelligence and foreign affairs committees, Mr. McGurk and Mr. Hochstein laid out the elements of a variety of agreements they had brokered with the Saudis, including the oil production boost aimed at bringing down prices.
For Democratic lawmakers who attended the briefings, this apparent pledge from the Saudis promised relief both for American consumers being pummeled by inflation, and for Mr. Biden and his embattled party as they headed into the November elections.
The price of oil was slowly dropping by the time Mr. Biden arrived in Jeddah, Saudi Arabia, on July 15 for his meeting with Prince Mohammed and other Arab leaders. The image of the American president bumping fists with the Saudi crown prince he once vilified endures from the trip, but behind the scenes, White House officials believed they had at least shored up Saudi commitments on a number of fronts.
Saudis officials seemed eager to demonstrate to the Americans that they had delivered on their commitments — during the summit, they gave members of Mr. Biden’s delegation a chart showing oil prices had fallen to $101 per barrel, down from more than $120 per barrel after the war in Ukraine began.
October Surprise
The Americans came away from the summit with the belief that the agreement was on track and that Prince Mohammed was satisfied. But in Riyadh, top Saudi officials were privately telling others that they had no plans for further meaningful oil production increases.
Indeed, the first public warning of this came on Aug. 3, when OPEC Plus announced a paltry bump in production for September of 100,000 barrels a day — half of what U.S. officials believed the Saudis had promised them.
American officials said they did not understand why that decision was made. Then OPEC Plus announced on Sept. 5 it would cut production by 100,000 barrels per day — retracting the increase it had announced a month earlier. After that, U.S. officials were increasingly confused and concerned about the kingdom’s direction.
In late September, American officials began hearing that Saudi Arabia could get OPEC Plus to announce a deep cut to oil production at a meeting scheduled for Oct. 5. U.S. officials scrambled to get Prince Mohammed to back away from any such move.
On Sept. 24, American officials met in person in the kingdom with Prince Mohammed and his brother Prince Abdulaziz bin Salman, the Saudi energy minister. During the meeting, Prince Mohammed assured the Americans that there would be no production cuts, according to U.S. officials with direct knowledge of what transpired.
But four days after that, the White House learned the crown prince had done the opposite: Saudi officials notified the Americans that Saudi Arabia would back production cuts at the OPEC Plus meeting, which took place in Vienna.
The White House dispatched Treasury Secretary Janet Yellen to speak by phone to Mohammed al-Jadaan, the Saudi finance minister, to argue against the production cut, but that failed to sway the Saudis.
American officials say they believe that Prince Mohammed was particularly influenced by a high-level Sept. 27 meeting in which Prince Abdulaziz, the energy minister, argued that oil production cuts were needed to keep prices from plummeting to as low as $50 per barrel. The U.S. officials said they learned Prince Abdulaziz asserted that, under such as scenario, the Saudi government would lack the resources to fund economic diversification projects at the heart of Prince Mohammed’s domestic agenda.
Some U.S. officials believe that the Russians influenced the Saudi about-face, pointing to Prince Abdulaziz’s strong working ties with top Russian officials close to Mr. Putin, particularly Alexander Novak, the deputy prime minister who oversees energy policy.
Saudi officials vehemently denied marching in lock step with Russia and said they have viewed themselves as a neutral mediator in Russia’s war with Ukraine. Some American officials said that an answer to whether Riyadh has truly cast its lot with Moscow will come on Dec. 4, when OPEC Plus is scheduled to meet again.
The White House is working with European allies to implement a partial embargo and price cap on Russian oil sales beginning in December. Their goal is to deprive Moscow of resources and to increase pressure on Mr. Putin to end the war in Ukraine, while keeping global oil supplies stable.
But much hinges on what the Saudis choose to do. If they refuse to announce a production increase at that December meeting — around the time when Russian oil could come off the market — oil prices might surge, undermining Mr. Biden’s efforts against Russia and stoking global inflation.
On Tuesday, speaking on stage at the annual investment forum in Riyadh, Prince Abdulaziz said that the kingdom would do what was in its best interests.
“I keep listening to, ‘Are you with us or against us?’ Is there any room for, ‘We are for Saudi Arabia and the people of Saudi Arabia’?” he said. “We will have to deliver our ambitions.”
Vivian Nereim contributed reporting from Riyadh.
[ad_2]
Source link