America and Saudi Arabia are locked in a bitter battle over oil. The stakes are massive

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CNN Business

The relationship between the United States and Saudi Arabia is one of the most important on the planet. And lately, it has been one of the most awkward things in the world.

Angry officials in Washington have vowed “consequences” after Saudi-led OPEC slashed oil production earlier this month, pushing up oil prices in the weeks leading up to the midterm elections.

US lawmakers are threatening unexpected steps soon, including a ban on arms sales to Saudi Arabia and the release of the Justice Department. File a complaint against Other OPEC countries and members for conspiracy.

Riyadh was captured by the hunger for revenge from American politicians. And Saudi officials are talking about repayments, including the release of US debt, which could have a huge impact on financial markets and the real economy.

Neither side tries to hide the tension. After Saudi Arabia’s top official proposed that the Kingdom decide to have a more mature party, a top White House official responded, “It’s not like high school love here.”

What happens next is important.

If this decades-old relationship develops into a complete breakdown, it could have far-reaching consequences for the global economy, regardless of international security.

“This is a new low. “We have seen a decline in relations between the United States and Saudi Arabia over the years, but this is the worst thing that has ever happened,” said Clayton Allen, CEO of Eurasia Group.

Spitting has been linked to the biggest pain points among voters in the Biden era: inflation and high gas prices.

After trying and failing to persuade OPEC to increase oil production, President Joe Biden changed his 2020 campaign promise to make Saudi Arabia a “paradise” on its human rights record. Biden visited Saudi Arabia in the summer and even punched Prince Mohammed bin Salman.

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The New York Times reported this week that U.S. officials thought they had reached a secret agreement with Saudi Arabia to boost oil supplies by the end of the year.

They are wrong.

OPEC and its allies, known as OPEC +, responded by increasing oil production by at least 100,000 barrels a day, the smallest increase in its history. The move is widely seen as a “slap in the face” by the Biden administration.

What came next was even worse.

In early October, OPEC + announced plans to cut oil production by 2 million barrels a day, an action that would push oil and gasoline prices short-lived when inflation was high and angered US politicians.

“Both sides do not seem to understand each other,” Allen said. “Riyadh has underestimated the seriousness of the US response. “And the United States has assumed that we have an undisclosed agreement.”

Fatih Birol, chief executive of the International Energy Agency, described the move as “unprecedented” and “unfortunate” in an interview with CNN International on Thursday.

“When the global economy was on the brink of global economic crisis, they decided to push up prices,” Birol said.

Tensions have not eased and officials on both sides have been sharply critical of each other for days. The latter. In a narrative session, Saudi Arabia’s top minister went From defending Biden’s energy strategy to attacking it.

During an OPEC + press conference in early October, Saudi Energy Minister Prince Abdulaziz bin Salman appeared to commend Biden’s decision to release an unprecedented amount of emergency oil reserves from the strategic oil reserves.

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“I will not call it a distortion. In fact, it was done at the right time. Prince Abdulaziz told reporters. “If it did not happen, I’m sure things would be different today.

Moving forward for three weeks, the same Saudi minister sang a very different song.

Prince Abdulaziz said during a conference in Saudi Arabia this week: “People are depleting their emergency stocks and taking them away and using them as a mechanism to organize the market while aiming deeper. “Its to alleviate supply shortages.” “However, it is my deepest duty to make it clear to the world that the loss of emergency stock could become painful in the coming months.”

This criticism is particularly noteworthy because OPEC is open to the market. In Many ways by cutting supply to support prices.

The risk is that stress falls into the tit-for-tat cycle of destructive revenge. Global Any economic stability or economic stability that exists now.

Lawmakers from both sides of the aisle have stepped up their call for the passage of the NOPEC (No Oil Producing and Exporting Cartels) law, which would give the Justice Department the power to follow OPEC countries on the basis of opposition. And trust. Although NOPEC is not new, it seems to be possible more than at any time in recent memory. Eurasia Group sets a 30% chance of NOPEC approval and a 45% chance of a declining billing version.

“You can not overstate how disappointed a large number of lawmakers are,” Allen said.

MPs are not only unhappy, they understand that OPEC does not care about the electorate.

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“This is popular. American sentiment is against Saudi Arabia. It is now politically beneficial for American politicians. That’s where we are now, ”said Karen Young, a senior researcher at Columbia University’s Center for Global Energy Policy. “NOPEC will be harder to veto than ever before.”

Saudi Arabia could respond to a fine from Washington with its own drastic steps. Encourage further conflict.

Saudi officials have warned that the Kingdom could sell US Treasury bonds if Congress approves NOPEC, the Wall Street Journal reported this week, citing people aware of the issue.

At the very least, the US debt relief will create uncertainty in the market at a time when there is already danger. The sale of electricity will boost the treasury rate, destabilize the market and increase the cost of loans for households and businesses.

And, of course, Saudi Arabia’s own occupation would be damaged by the sale of such lights.

Saudi Arabia is sitting on US debt of about $ 119 billion, according to Treasury data, making it The world ‘White 16th largest holder of the treasury.

Another risk is that Saudi Arabia, the real leader of OPEC +, may withdraw more supplies from the global oil market, or at least refuse to respond to future price increases as the West continues to crack down. Russia.

Further restrictions on OPEC supplies will push up gasoline prices and worsen inflation, increasing the risk of an already high recession.

All of this explains why a complete breakdown in US-Saudi relations could be the last thing the fragile economy needs right now.


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