From OPEC to OPEC+ – watts with it?

Tilak Doshi writes at Forbes:

Historians will mark the nadir of the Pax Americana in the Middle East with several rather brutal humiliations suffered by American prestige under President Joe Biden’s presidency. Examples would include Saudi Arabia and the United Arab Emirates’ refusal of phone call requests from the US President in March last year, and mainstream media images of the impersonal fist bump between Joe Biden and the de facto ruler and crown prince of Saudi Arabia, Mohammed Bin Salman (or “MBS” as it’s known to be known) in July.

The US President had come to Riyadh with a begging bowl but failed to persuade the Saudis to save the US gasoline market from high prices by opening the Arab oil tap in time for the US midterm elections. This comes after President Biden promised to make the kingdom a “pariah” during his 2020 election campaign in response to the assassination of Adnan Khashoggi.

With the waning of US dominance in Middle East security affairs, a wave of intra-regional diplomatic moves towards peace seems to have erupted. That may sound ironic to observers of American diplomacy and military power in the region. But a confident Saudi foreign policy under its crown prince and the vastly changed circumstances brought about by Western sanctions on Russia’s oil and gas exports led Riyadh to distance itself from Washington.

It is a comprehensive article on the decline in US influence in the Middle East due to Biden administration policies.

The regional order in the Middle East has undergone a dramatic realignment under President Biden’s oversight. Following last month’s landmark China-brokered deal between Saudi Arabia and Iran to resume ties, the US was again left on the sidelines a few weeks later. She could only passively observe another major diplomatic initiative, this time between Saudi Arabia and Syria, mediated by Russia. After rounds of talks in Moscow and Riyadh in recent weeks, the emerging rapprochement between Damascus and Riyadh is signaled by a series of mutual state visits by the region’s leaders.

In one fell swoop, MBS supplanted the “oil for security” agreement that had lasted for more than three-quarters of a century since Franklin D. Roosevelt’s historic meeting with King Ibn Saud in 1945 between the US and Saudi Arabia.

There is a history of the relationship between the US and the Kingdom of Saudi Arabia and the OPEC bloc

The Yom Kippur War (1973) and the resulting OPEC embargo, which sent oil prices skyrocketing in the United States, threatened the status of the fiat dollar. After the oil price shock, President Nixon authorized then-Treasury Secretary William Simon to get the Saudi monarchy to “fund America’s growing deficit with its newfound capital.” [oil] assets.” In a further elaboration of the original “oil-for-security” deal between Roosevelt and Ibn Saud, the Saudis under King Faisal pledged to denote global oil purchases only in dollars, in exchange for Washington providing the kingdom with military aid and materials to The quid pro quo came in the form of guarantees that since then the Saudis would “plunge billions of their petrodollar earnings back into the treasury and fund the spending.”

Doshi discusses the failure of Western sanctions imposed on Russia since the invasion of Ukraine began in 2022

The Russian economy is set to outperform Britain and Germany this year, according to the latest IMF economic outlook. Russia posted a record current account surplus of $227 billion in 2022, up 86% from 2021. Russia replaced lost revenue from its oil and gas exports to Europe with a focus on China, India, the United Arab Emirates, Turkey and other countries who do not participate in Western-led sanctions (i.e. the rest of the world outside of the “collective West”). Its oil exports have not fallen significantly. Last week, Reuters reported that oil shipments from Russia’s western ports rose to their highest level since 2019 in April. Although sold at discounted prices, Russian oil and gas exports to “Global South” markets have enjoyed relatively high international commodity prices, albeit including peaks immediately after the invasion of Ukraine.

Gone are the days when the OPEC cartel, with its Saudi hub, played a role as the US-allied “central banker of oil,” turning on the oil tap when oil prices got too high for the Western-dominated global economy. It is the OPEC+ group that is now in the driver’s seat, linking Saudi Arabia (and its Gulf allies) to Russia. The former is the world’s largest crude oil exporter, while the latter is the world’s second largest oil exporter and largest natural gas exporter. Absurdly, the third heavyweight competitor in the global oil and gas trade, the US itself, is being shackled by an administration that boasts a “state-of-government” commitment to anti-fossil fuel climate policies.

To read the full article at Forbes, click here.

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