What might those repercussions be? Foreign policy heavyweights like Senator Chris Murphy are musing about the wisdom of selling arms to the Saudis. Three members of the House of Representatives have introduced legislation calling for the withdrawal of American troops and missile defense systems from the kingdom — and, for good measure, from the United Arab Emirates.
Others threaten to revive the so-called “NOPEC” bill, which would target the entire cartel for antitrust action.
But the hawks and doves should settle their feathers. First, the cut was not unexpected, so feigning surprise won’t do. The Saudis have been signaling for years that they would like to maintain oil prices close to $100 a barrel. More recently, they’ve dropped the target by $10.
With demand slipping in tandem with the global economy’s slowdown, and prices sinking below $85 last month, a production cut was inevitable. Nigerian Minister of State for Petroleum Resources Timipre Sylva says the cartel’s hope with the cut is to keep prices “around $90.”
Second, as my colleague Javier Blas has pointed out, the big number announced on Wednesday — 2 million barrels — is misleading. Because many OPEC members aren’t meeting their output targets, the real cut would be in the region of 950,000 barrels per day.
The White House knew a big cut was coming: Deploying everyone from Treasury Secretary Janet Yellen to Tim Lenderking, Biden’s special envoy to Yemen, it tried to dissuade OPEC members from going along with Russia.
At the same time, the administration maintained that no additional releases from the Strategic Petroleum Reserve would be forthcoming beyond the previously announced release of 10 million barrels in November. On Monday, White House press secretary Karine Jean-Pierre told reporters the administration is “not going to be considering new releases at this time.”
Either this was a bluff, or the White House was overconfident that Yellen and posse would head the Saudis off at the pass. It didn’t work. Now the administration is hinting at a larger release.
But with the production cut being interpreted as a snub to Biden, the president will feel compelled to do more than that. His options are limited. The NOPEC bill is likely a non-starter. Proposed repeatedly for the best part of two decades, co-sponsored in one incarnation by then-Senator Biden in 2007 and passed by both houses of Congress, it was dropped after then-President George W. Bush threatened a veto.
Since becoming president, Biden has had a change of heart, warning of NOPEC’s unintended consequences — a spike in prices, for instance. He can hardly afford one in the lead-up to the midterm elections next month.
NOPEC is also opposed by the American Petroleum Institute and the U.S. Chamber of Commerce, which have warned that U.S. companies abroad may face retaliatory action if it becomes law.
Blocking military sales to the Saudis and withdrawing the American security umbrella from the kingdom would hurt US arms makers and empower Iran, which represents a far greater threat to the world economy than $90 oil.
The smarter course for Biden would be to portray the production cuts, not as a personal slight or even a poke in the eye of America, but as a hindrance to a global economic recovery. OPEC+ is hurting everybody — and especially developing countries that don’t have the cushion of a Strategic Petroleum Reserve. Biden should point out that the poor will suffer disproportionately.
As for Saudi Arabia, he should indicate that he has grokked Prince Mohamed’s message that Washington should expect no special consideration or favors from Riyadh — and signal, in turn, that the kingdom should expect no more cringeworthy fist-bumps. If the Saudis want a strictly transactional economic relationship, let it be just that. No more pretense of any kind of symbiotic relationship, no more feigned grace notes or awkward evasions about Saudi Arabia’s deplorable record on human rights. Instead, treat Saudi Arabia like many another country with which the US routinely does business, and reduce its diplomatic relationship accordingly — to the level of, say, Malaysia.
That is more likely to sting the prideful prince than any empty bluster about “repercussions.”
More From Bloomberg Opinion:
The Oil Market’s Big Russian Sanctions Problem: Elements by Julian Lee
Peak Oil Has Finally Arrived. No, Really: David Fickling
Is Putin Fully Weaponizing the Nord Stream Pipelines?: Javier Blas
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Bobby Ghosh is a Bloomberg Opinion columnist covering foreign affairs. Previously, he was editor in chief at Hindustan Times, managing editor at Quartz and international editor at Time.
More stories like this are available on bloomberg.com/opinion
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