- Surprise production cuts fly in the face of US interests
- Saudi move follows its agreement with Iran mediated by China
According to Bloomberg article published on April 3, 2023, if ever there was any doubt over Saudi Arabia’s growing international assertiveness, Sunday’s decision to slash OPEC+ oil production put it to rest.
Mere months after rebuffing President Joe Biden’s pleas to pump more crude, an increasingly confident Riyadh is using its regional clout to carve out its own path. Whether in the fields of energy or diplomacy, through forging ties with former foe Iran and moving toward embracing Syria’s pariah leader, it’s evidence of a determination to pursue Saudi priorities even if they run against Washington’s interests.
Saudi newspapers were brimming with self-assurance on Monday, asserting that Riyadh’s course had been the right one all along. The commentary suggested that addressing a sinking oil price was more important than extending any favors to allies because it would reap longer-term benefits.
“OPEC+ has succeeded now and in the past in stabilizing oil markets, and contrary to claims by Western and industrial states this has nothing to do with politics,” former Saudi oil ministry adviser Mohammad Al Sabban said, according to Asharq Al-Awsat newspaper. The decision was “preemptive and precautionary” due to uncertainty in oil markets and increased risk of recession, he added.
Faisal Faeq, a former manager at state-owned Saudi Aramco, wrote in periodical Al-Majalla that OPEC+ had to act because tightening monetary policy in the West put “artificial” downward pressure on prices.
Crown Prince Mohammed bin Salman’s willingness to act to secure stability, while coordinating energy policy with Russia and even sidelining the US in favor of its No. 1 rival China, underscores Riyadh’s growing geopolitical influence as a fossil fuel superpower. His latest move also reflects an element of economic expediency, with the crude price slumping to a 15-month low in late March.
“The Saudis and OPEC feel that they have some bragging rights,” Bob McNally, president of Rapidan Energy Group and a former White House energy official, told Bloomberg Television. “They’re proud of their cut in October, they had a lot of naysayers.”
MBS, as the Saudi crown prince is known, also calculates that the US won’t risk a full rupture in relations with Riyadh, so will temper its response to any diversions in policy. The Saudis, who rely on the US for security, are still unwilling to pursue a complete breach with Washington.
“American tolerance for this Saudi-first mentality is certainly more tested in a geopolitical environment where higher prices play into the hands of the Russians and the Saudi political posture aligns more with US strategic competitors,” said Kristin Smith Diwan, senior resident scholar at the Arab Gulf States Institute in Washington.
Saudi Arabia led the OPEC+ cartel by pledging a 500,000 barrel-a-day supply reduction. Fellow members including Kuwait, the United Arab Emirates and Algeria followed suit, while Russia said the production cut it was implementing from March to June would continue until the end of 2023.
After last year’s snub, the White House reaction was more restrained this time round. While the 1 million barrel-a-day reduction was ill-advised under current market conditions, the US will work with producers and consumers with a focus on gasoline prices for Americans, it said.
Karen Young, a senior researcher at Columbia University’s Center on Global Energy Policy, said it was “too bad” the US was criticizing Saudi Arabia for the OPEC+ decision when they both share the same concerns over Chinese economic growth. “Moreover, we need to pay close attention to how Gulf-Russia relationships evolve,” she said. “There will not always be a rationale to help Russia.”
‘New reality’
Crown Prince Mohammed’s foremost priority is ensuring his multi-trillion-dollar vision to transform Saudi Arabia stays on track. That’s driving his efforts to shield his country from any possible escalation as a result of US and Israeli tensions with Iran. While the US remains Saudi Arabia’s main defense and security partner and the No. 1 provider of military technology, the Saudis have grown less confident of Washington’s support in the event they come under attack.
“The US and other leading consumers have to get used to this new reality” of a “Saudi-first” policy, said Kuwait University history professor Bader Al-Saif. “Why would you expect a state to put other countries’ interests ahead of it?” It’s tempting to consider it politically instigated, but the economics backs up the production-cut decision, he added.
Oil prices rose and US gasoline jumped on Monday, in a blow to Biden’s efforts to tame the cost of transportation fuels. Riyadh said the reductions were a “precautionary measure aimed at supporting the stability of the oil market.”
Interpreting every Saudi production change as a political statement is a mistake, David Rundell, a former U.S. diplomat with decades of experience in the kingdom, said. “The Saudis have an interest in maximizing oil prices over the long term, not the short term,” he said. “This requires a degree of price stability.” In any case, he added, “the days of you being with us 100% or against us are over.”
Biden vowed after last year’s production cut that there would be “consequences” for Saudi Arabia, but the administration has yet to follow through. Riyadh has not only cast itself as an emerging power that stands up to Washington, but has become an even greater force in global energy markets since Russia’s invasion of Ukraine in February 2022.
Sunday’s decision isn’t great for the US or China, so differs from the Iran deal mediated by China, according to Gregory Gause, a professor of international affairs at Texas A&M University. Rather, it’s “a reflection of a Saudi foreign policy that sees the world as multipolar, giving Riyadh greater room for maneuver among the great powers, and that is very focused on maximizing short-term economic benefits,” he said.
For Fawaz Gerges, a professor of Middle Eastern politics at the London School of Economics, the Saudi move is part of “a recalibration moment” in the region. Middle Eastern rulers, no longer confident that the US has their back, are working to “lower the tempo of geostrategic rivalries and tensions,” and Saudi Arabia is no different, Gerges said. “MBS and his regional cohorts look at the world and see China and India as the future, not the USA.”
