The April 2 announcement of plans by the OPEC Plus cartel for a 1 million barrel-a-day cut in crude oil output is the latest setback to the U.S. economy from the emerging Saudi-Russia strategic alliance. The production cut, which is likely to boost inflation, is the latest fallout from the Biden-induced strains in the U.S.-Saudi relationship which has undermined the longtime pillar of American foreign policy in the Middle and dashed Israel’s diplomatic hopes to formally bring the Saudis into the Abraham Accords.
The deliberate alienation of the Saudis and their de facto leader, Crown Prince Mohammed bin Salman, has been one of Joe Biden’ most serious foreign policy blunders. It has also driven the Saudis and their Persian Gulf oil state allies into the arms of Israel’s arch-enemy, the Iranians. Biden’s hostility also prompted the Saudis to seek help in re-establishing diplomatic ties with their former arch-enemy, the radical Shiite Islamic regime in Tehran, in an agreement that was negotiated by China and signed in Beijing.
SAUDIS MENDING THEIR FENCES HAMAS
More important, from Israel’s point of view, after a seven-year hiatus, the Saudis have re-established cordial relations with the Iranian-sponsored terrorist groups in the region, such as Hamas and Hezbollah, that are dedicated to Israel’s destruction. A delegation of senior Hamas officials, including its politburo chief, Ismail Haniyeh, and his deputy, Saleh al-Arouri, from Gaza, and the international head of Hamas abroad, Khaled Mashaal, was welcomed by Saudi officials to their capital city of Riyadh last week. The visit marks the end of years of Saudi hostility towards the Hamas terrorists who have repeatedly launched missile attacks on Israel since seizing control of Gaza from the Palestinian Authority in 2007 in a bloody coup.
As recently as 2019, Saudi authorities arrested dozens of Hamas terrorists operating in that country because they were seen as a threat to the kingdom’s rulers. But as the Saudis recently began to re-establish cordial relations with Iran, they also released the Hamas terrorists that they had jailed, including senior Hamas leader, Mohammad Al-Khodary. He was freed in October, paving the way for last week’s visit by Hamas leaders to Riyadh.
The recent Saudi diplomatic outreach to Iran has interrupted the substantial diplomatic progress that Israel had made during Donald Trump’s presidency in formulating a new, regionwide peace initiative with Israel’s Sunni Muslim neighbors by creating a de facto alliance to counter Iran’s subversive influence in the region, and its rapidly growing nuclear weapons capability. With the encouragement of the Trump administration, two of Saudi Arabia’s closest allies, the United Arab Emirates (UAE) and Bahrain signed the Abraham Accords in 2020, establishing full diplomatic ties with Israel.
PROGRESS OF THE ABRAHAM ACCORDS INTERRUPTED
The next diplomatic step toward the establishment of peaceful relations between the Saudis and Israel was a 2022 agreement by the Saudis to permit Israeli airlines to pass through their airspace, but the growing hostility between the Crown Prince and the Biden administration halted further progress in that direction.
A large part of the problem has been the Biden administration’s counterproductive efforts to restore U.S. aid to the Palestinian Authority and revive the hopelessly stalled negotiations for a so-called two-state solution which neither side really wants at this point.
The renewed U.S. support for the Palestinians has indirectly encouraged the sharp recent uptick in deadly terrorist attacks on Israeli civilians and foreign tourists, including the April 7 murder in Efrat of two Israeli-British sisters, Maia Dee, 20, and Rina Dee, 15, and their mother, Leah Dee, and the February 26 murder by a Hamas terrorist of Israeli brothers Hallel Yaniv, 21, and Yagel Yaniv, 19, as they drove through the West Bank village of Huwara.
SAUDIS PULLING BACK FROM TIES WITH ISRAEL
The increase in violent confrontations between Israeli terrorist forces and Palestinian terrorists in the West Bank and on the Har Habayis in Yerushalayim during the Muslim holy month of Ramadan, as well as strong Saudi objections to public comments by Israeli Finance Minister Bezalel Smotrich promising a major expansion of Israeli settlement activity in the West Bank by the Netanyahu-led right-wing Israeli government, has led to a halt in further progress in developing Israeli-Saudi relations. More specifically, according to a Wall Street Journal report, a U.S.-supported plan to start scheduled direct passenger flights from Tel Aviv for the benefit of Israel’s Muslim citizens who want to make the Hajj pilgrimage to Mecca has been put on hold due to the increase in Israeli-Palestinian tensions.
Shortly before he was sworn in as the current prime minister, Binyamin Netanyahu had spoken optimistically about finalizing the long-sought diplomatic normalization deal with the Saudis, which could serve as a “quantum leap” forward in the long search for a region-wide peace. But in the current climate of violence and political turmoil in Israel and the ongoing Saudi strategic realignment, any further progress along those lines is highly unlikely.
At the same time, the Saudi Crown Prince has ignored the pathetic public pleas by a visibly weakened President Biden to increase rather than cut Saudi crude oil output in order to boost Biden’s re-election hopes next year by keeping the price of gas relatively low at the pump for U.S. consumers.
The joint decision by the Saudis and the Russians to cut global crude oil output has already driven up the market price by $5 to $85 a barrel, and renewed fears that the price could reach $100 a barrel or more by the end of the year as China ramps up its energy usage by reducing the Covid restrictions on its economic output. It also marks the second time that the Saudi leader has defied Biden since the U.S. president flew to Saudi Arabia last summer and humiliated himself by his actions in front of the Crown Prince, whom he had previously accused of ordering the murder of Jamal Khashoggi, a dissident Saudi journalist who wrote for the Washington Post.
IS THIS THE END OF THE LONG U.S.-SAUDI ALLIANCE?
The de facto U.S.-Saudi oil-for-security alliance has served as the backbone of U.S. foreign policy in the Middle East since the latter days of World War II. It began with the 1945 meeting between President Franklin D. Roosevelt and King Abdul Aziz Ibn Saud, aboard a U.S. cruiser in the Suez Canal, which gave the U.S. preferred access to Saudi oil in exchange for a U.S. guarantee for the security of the kingdom’s Saudi royal family rulers.
That durable alliance between the U.S. and the Saudis, including the other small Persian Gulf oil states, stabilized the region throughout the Cold War. That alliance withstood its greatest test when Iraq’s Saddam Hussein invaded Saudi Arabia’s neighbor, Kuwait, and seized its oil fields in August of 1990. Saddam Hussein’s army was then in a position to invade across the lightly guarded Saudi Arabian border, disrupting the vital flow of crude oil to the rest of the world. This prompted then-British Prime Minister Margaret Thatcher to convince U.S. President George H.W. Bush to form the broad international coalition that launched the First Persian Gulf War which evicted the Iraqi army from Kuwait and ended the immediate threat to the Saudi regime, and further solidified the alliance.
In return for the continued protection from U.S. military units stationed inside Saudi Arabia, as well as a constant flow of advanced U.S.-made arms sold to the Saudi military, the U.S. could count on receiving full Saudi cooperation in stabilizing global crude oil prices. As the world’s largest swing producer of crude oil, the Saudis helped to maintain a market equilibrium between the forces of supply and demand, until that arrangement was destabilized a decade ago by the rapid rise of U.S. domestic shale oil production using the new fracking drilling technology.
U.S. HAS GONE FROM A SAUDI ALLY TO A COMPETITOR
The U.S. was no longer just another Saudi oil customer. It had become Saudi Arabia’s prime competitor for control of pricing and supply in the international oil market.
The Saudis formed an informal alliance with the Russians, which has also been one of the world’s leading exporters of crude oil, to deliberately create a glut of supply on world oil markets. Their goal was to drive down the market price of oil below the cost of production for American shale oil producers, in a deliberate effort to bankrupt their competitors, but the effort did not succeed. While the global price of oil fluctuated wildly over the course of the last decade, U.S. producers continued to borrow money to drill new wells, confident that they would ultimately become profitable. They reversed the long decline in domestic oil and natural gas production, making the U.S. energy self-sufficient for the first time in decades by reaching record highs just before market demand for oil collapsed in early 2020 due to the Covid pandemic.
The political and economic climate also turned hostile to domestic U.S. fossil fuel producers due to the outcome of the 2020 presidential election. The Biden administration reversed President Trump’s policies encouraging maximum domestic energy production and declared war on the fossil fuel industry in the name of preventing climate change. The administration’s federal agencies also used their regulatory powers to halt new drilling and exploration for fossil fuels, and pressured lenders and corporate boards to dry up the industry’s financing.
BIDEN’S VENDETTA AGAINST THE SAUDI CROWN PRINCE
Meanwhile, President Biden, once in office, continued his vendetta against the Saudi government which began in 2019, when Biden was a presidential candidate. He threatened to turn Saudi Arabia into a “pariah state.”
Biden threatened to halt U.S. arms sales to the Saudi military on the basis of the Saudi regime’s poor human rights record, and the fact that many of the arms that America had sold the Saudis were being used in the ongoing civil war in Yemen against the Iranian-backed Houthi rebels who have been fighting the Saudi-backed pro-Western Yemeni government.
Biden and other administration officials also renewed their accusations that Crown Prince Mohammed was behind the murder of journalist Khashoggi in Istanbul by Saudi agents. In 2021, shortly after he became president, Biden released a U.S. government intelligence report accusing the Crown Prince of direct responsibility for the Khashoggi assassination.
When crude oil and gasoline prices spiked in the summer of 2022, due to an unexpected rise in demand due to the rapid recovery of the U.S. economy, Biden was faced with a firestorm of criticism over the record-high prices of gas and diesel fuel at the pump. Nevertheless, the president refused to lift the restrictions he had imposed on the U.S. fossil fuel industry, and called instead for foreign oil producers, including hostile states such as Russia, Venezuela, and even Iran, to increase their oil production instead.
BIDEN TURNS TO U.S. ENEMIES FOR HELP WITH ENERGY
Biden angered many Americans by revealing his preference to enrich this country’s enemies rather than enable American fossil fuel companies to meet the need by tapping the domestic energy reserves they had already found. Biden also embarrassed himself and the United States when, upon visiting Saudi Arabia to beg for more oil production, he gave a “high-five” greeting to the same Crown Prince whom he had condemned for plotting the murder of a journalist.
In October 2022, the Crown Prince took his revenge. In a deal including Russia, which was already under U.S. and European Union sanctions for its invasion of Ukraine, The OPEC Plus cartel lowered oil production by 2 million barrels a day, defying Biden’s pleas for a Saudi production increase and assuring that gas prices would remain high. The Biden White House blasted the move as “shortsighted,” but the Saudi crown prince obviously no longer cared.
He had decided that the longstanding U.S-Saudi alliance based upon a pragmatic exchange of cheap Saudi oil for U.S. military protection and security guarantees was no longer viable.
U.S. SECURITY GUARANTEES HAVE LOST THEIR VALUE
The value of U.S. security guarantees has also come under question, first due to the Trump administration’s failure to protect the Saudi oil fields from a devastating September 2019 attack using Iranian-supplied cruise missiles and drones.
The Saudis and other U.S. allies were justifiably alarmed by the poor example that Biden set by his disastrous withdrawal of the remainder of U.S. troops in Afghanistan during the summer of 2021, without giving adequate advance notice to the U.S. coalition partners whose troops, still stationed in Afghanistan, were left vulnerable and exposed,
The Biden administration has also made it clear that it intends to draw down the U.S. military presence in the Middle East, removing its most capable ships and warplanes and sending them to the Asian-Pacific region to match China’s rapid military expansion.
As a result, there is good reason for the Saudis to doubt whether the Biden administration has the necessary will or military ability to make good on America’s longstanding security promises to its allies in the Middle East.
The Biden administration has also made it clear that it remains determined to continue trying to revive the deeply flawed 2015 Iran nuclear deal, even though it is clear that Iran now has enough highly enriched uranium and the technical knowhow to build a nuclear weapon within a matter of weeks, any time it wants to.
IRAN’S NUCLEAR THREAT IS NOW A REALITY
Because the Iranian nuclear threat is now a reality, the Saudis changed their strategy and decided that it would be safer to appease the Iranians than continue trying to stop them. As a result, in March, they turned to China to broker an agreement to restore diplomatic ties with Iran, without seeking help or approval from the Biden White House.
The Saudi government also agreed to join as a “dialogue member” of the Shanghai Cooperation Organization, a group headed by China and Russia designed to counter the international influence of the U.S. and its allies.
U.S.-Saudi relations have deteriorated to the point that one might reasonably question whether that historical alliance still exists. Saudi Arabia has broken away from its traditional reliance on the United States, and is now setting its oil production levels in coordination with Russia. When the Saudis decided to mend their fences with their chief regional rival, Iran, they turned to China to broker the deal and left their former closest ally, the U.S., with little or no influence over its key strategic and economic decisions going forward.
U.S. IS NO LONGER A RELIABLE ALLY
From the Saudi point of view, in recent years, U.S. energy and strategic policies have changed sharply in the transitions from President Obama to President Trump and back again to President Biden. America has become an unpredictable ally, prompting Saudi leaders to hedge their bets by reaching out to the members of the opposing alliance consisting of Russia, China, and even Iran.
By continuing to pursue policies designed to cripple the domestic U.S. fossil fuel industry, while continuing to falsely accuse those companies of price gouging, Biden has restored the OPEC Plus cartel’s monopoly control over the international oil market, enabling the Saudis and Russia to drive up the price of gas and oil to serve their own purposes, at the expense of U.S. energy consumers.
WHY THE SAUDIS AND RUSSIANS ARE PUSHING HIGH OIL PRICES
While Saudi oil is relatively cheap to produce, the Saudi government has ambitious and expensive plans to invest its petrodollars in building up and diversifying its economy, while fulfilling its promises of generous entitlement benefits for its citizens. Saudi Arabia’s sovereign wealth fund has long-term plans to spend $40 billion a year on the domestic economy, including the construction of Neom, a futuristic city in the desert at an estimated total cost of $500 billion.
Taken all together, Bloomberg financial experts estimate that the Saudis would need the price of oil to rise to about $100 a barrel to meet all of those expected expenses.
Bloomberg experts calculate that Russian President Vladimir Putin also needs the return of $100 dollar-a-barrel oil to continue financing his war of conquest in Ukraine.
Over the past 18 months, the market price of oil has vacillated sharply from a high of around $120 a barrel last June to a low of about $65 a barrel a few months ago. Meanwhile, the cumulative effects of Biden’s war on domestic fossil fuel sources have severely reduced the ability of the industry to quickly ramp up its shale oil and gas production as it did during the years just prior to the Covid pandemic.
THE U.S. FOSSIL FUEL INDUSTRY HAS BEEN CRIPPLED
The post-Covid domestic fossil fuel industry is facing the same challenges as many other recovering U.S. businesses. These include supply chain issues, including shortages of critical raw materials such as drilling pipe and fracking sand, and a shortage of skilled labor leading to sharply rising wages that have driven up the cost of shale oil production, and slowed output growth.
Due to Biden’s federal government regulatory pressure and a reluctance by lenders, under pressure from clean energy advocates, to finance new drilling projects, oil producers are distributing more of their profits to shareholders and cutting back on their investments in the exploration and development of new domestic energy sources.
Biden is winning his war on domestic fossil fuels and has begun the process of extricating the U.S. from its historic commitments in the Middle East. But the American people are already paying a very high price for those clean energy “victories.” Meanwhile, America’s longtime allies in the region are being left more vulnerable as other nations, including traditional enemies, rush in to fill the dangerous power vacuum that Biden has created.