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Wednesday, November 30, 2022

White House Says Saudis ‘Coerced’ OPEC+ to Cut, Escalating Feud

White House Says Saudis ‘Coerced’ OPEC+ to Cut, Escalating Feud
&copy Bloomberg. An oil processing facility at the Shaybah oil field in the Rub’ Al-Khali desert, also known as the ‘Empty Quarter,’ in Shaybah, Saudi Arabia. Photographer: Simon Dawson/Bloomberg

 

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(Bloomberg) — The White House accused Saudi Arabia of coercing other OPEC+ countries into agreeing to a huge cut in oil production last week, escalating a dispute with Riyadh over the move, and said the administration had urged the kingdom for a delay that would effectively postpone a decision until after US midterm elections.

National Security Council spokesman John Kirby (NYSE:KEX) said in a statement Thursday that the administration had provided the Saudis with analysis showing “no market basis” for a production cut.

“Other OPEC nations communicated to us privately that they also disagreed with the Saudi decision, but felt coerced to support Saudi’s direction,” Kirby said. 

The Saudi government suggested Wednesday that the US had sought a one-month delay of the decision, which would mean no production cut until after US midterm elections in November that will decide control of the House and Senate. Kirby confirmed the US had sought a delay.

“We presented Saudi Arabia with analysis to show that there was no market basis to cut production targets, and that they could easily wait for the next OPEC meeting to see how things developed,” he said. The oil producers are expected to next meet in December. 

President Joe Biden and top US officials have expressed outrage at the OPEC+ alliance’s decision to cut oil production by 2 million barrels a day, saying it will help keep revenue flowing to Russia to support its invasion of Ukraine. Some Democrats have also questioned the timing, suggesting that Saudi Arabia seeks to raise US gasoline prices before the midterms to damage their party’s prospects.

Kirby’s statement followed a Saudi government statement Wednesday that rejected US criticism and said the production cut was based only on the kingdom’s “noble objectives” to avoid oil market volatility.

Earlier: Saudi Arabia Rejects US Criticism of OPEC+ Quota Cut Decision

Biden said this week his administration would undertake a comprehensive review of its relationship with Saudi Arabia. There is no timetable to complete the review, and lawmakers, administration officials and national security experts are split over how to impose consequences on the kingdom. 

“The Saudi Foreign Ministry can try to spin or deflect, but the facts are simple,” Kirby said. “In recent weeks, the Saudis conveyed to us — privately and publicly — their intention to reduce oil production, which they knew would increase Russian revenues and blunt the effectiveness of sanctions.”

The exchange of statements is a stark display of the animus that’s developed between the US and Saudi governments just three months after Biden traveled to the kingdom in an effort to thaw ties with Saudi Crown Prince Mohammed bin Salman, whose country he once vowed to make a “pariah” over its human rights abuses.  

The spat may influence an expected debate in Congress following the November elections over whether to strip OPEC+ nations of immunity from antitrust suits or cut weapons sales to Saudi Arabia, a long-time US defense partner. 

Democratic Representative Tom Malinowski of New Jersey said he and other supporters of legislation that would remove US troops and missile defense systems from Saudi Arabia would try to attach it to an annual, must-pass defense policy bill. 

“Saudi Arabia and the UAE would be wise to address our concerns before the defense bill comes to the floor,” Malinowski said in an interview. 

The statement from the Saudi Foreign Ministry, the government’s first formal response to US outrage over the Oct. 5 OPEC+ decision, denied its intent was to help Russia. It cited its vote for United Nations resolutions condemning the invasion. That includes a surprise “yes” vote on Wednesday in favor of a General Assembly resolution opposing Russia’s annexation of four regions in eastern Ukraine. 

It also downplayed the kingdom’s central role in the cut and portrayed the move as unanimous among cartel nations. It implied, but did not state outright, that the US had asked for a one-month delay before any production cut.

“The Government of the Kingdom clarified through its continuous consultation with the US Administration that all economic analyses indicate that postponing the OPEC+ decision for a month, according to what has been suggested, would have had negative economic consequences,” the foreign ministry statement said. 

©2022 Bloomberg L.P.

Source: Investing.com

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