A foreign report: The Saudi-American agreement on oil in exchange for security is threatened with collapse

[yota691]

A foreign report: The Saudi-American agreement on oil in exchange for security is threatened with collapse

 

Arab and international
   

Economy News-Baghdad
The Saudi-Russian oil alliance has the potential to cause all kinds of problems for the US economy — and even for President Joe Biden's re-election campaign. OPEC+'s decision this month to cut crude production, for the second time since Biden traveled to Saudi Arabia last summer seeking to boost production, may be just the beginning.

 

Just three years ago, when disagreements broke out between the oil giants of OPEC+, the United States found itself playing the role of peacemaker. Bloomberg points out that it now looks like their goal.

 

The April 2 announcement sent oil prices up about $5 a barrel. OPEC's forecasts show that the cuts will add to the supply shortage later this year. That means inflation will be higher, and recession risks greater than they would otherwise be—because consumers who spend more on energy will have less money for other things.

 

More important, however, is what the OPEC+ movement says about the likely course of oil prices over the coming years.

 

In a world of shifting geopolitical alliances, Saudi Arabia is moving away from Washington's orbit.

The Saudis set oil production levels in coordination with Russia.

 

When they wanted to de-escalate tensions with regional rival Iran, they turned to China to broker a deal — while cutting the United States out of the loop.

 

In other words, Western influence over the oil cartel is at its lowest point in decades.

 

And OPEC+ members have their own priorities, from the ambitious plans of Saudi Crown Prince Mohammed bin Salman to reinvent his economy, to Putin's victory in Ukraine. Any extra revenue they get from charging more for oil is good.

 

Asked about US concerns that OPEC+ has twice chosen to cut production since President Biden's visit to Saudi Arabia, a State Department spokesperson said the administration is focused on lowering domestic energy prices and ensuring US energy security.

 

Meanwhile, the threat of competition from US shale oil fields, which had been a deterrent to price hikes in the past, has receded. And while there is a global effort to reduce fossil fuel use — and higher prices will accelerate that effort — last year's drilling rush shows that a 'carbon-neutral economy' remains more of a long-term aspiration than a short-term driver.

 

For the global economy, a decrease in the supply of oil and a rise in prices is bad news. Major exporters are the big gainers, of course. For importers, like most European countries, more expensive energy is a double whammy -- it's hurting growth even as inflation rises.

 

For decades, the "oil for security agreement" between the United States and Saudi Arabia has been a pillar of the energy market. Now it is wobbly.

 

The agreement, symbolized by the 1945 meeting between President Franklin D. Roosevelt and King Abdulaziz bin Saud aboard an American ship in the Suez Canal (photo), gave the United States access to Saudi oil in exchange for ensuring the kingdom's security. But the charter is no longer what it was before.

In 2018, Washington Post columnist and Saudi dissident Jamal Khashoggi was assassinated in Istanbul.

 

In 2019, Biden - then a presidential candidate - threatened to turn Saudi Arabia into a "pariah state" and halt arms sales.

 

In 2021, early in his presidency, Biden released an intelligence report assessing that Crown Prince Mohammed, the kingdom's de facto ruler, was responsible for Khashoggi's murder.

 

In October 2022, OPEC+ cut oil production by 2 million barrels per day — less than three months after Biden traveled to Riyadh seeking the increase. The White House criticized the move as "short-sighted".

Saudi Arabia and Iran agreed last month to restore diplomatic relations in a deal brokered by China and signed in Beijing.

 

The Saudi government has also agreed to join the Shanghai Cooperation Organization - a group that includes China and Russia and is seen as a rival to Western institutions - as a "dialogue member".

In the aftermath of the April 2 move, Saudi officials said it was motivated by national priorities rather than any diplomatic agenda.

 

Muhammad al-Sabban, a former adviser to the Saudi Ministry of Oil, said, according to what was reported by Asharq Al-Awsat, that “OPEC + has succeeded now and in the past in stabilizing oil markets, and contrary to the claims of Western and industrialized countries, this has nothing to do with politics.” Newspaper.

 

In the past, OPEC+ has often been fractured: It wanted high prices, but was afraid it would attract more competition, particularly from US shale. But the dilemma hardly exists now.

 

Rising wages and inflation in the United States have made oil shale more expensive to produce, slowing production growth. Companies give priority to distributing profits to shareholders rather than investing them in expanding production.

 

Saudi oil is cheap to extract. The kingdom only needs prices between $50 and $55 a barrel to finance its imports and offset remittance outflows. But it commands a $75-$80 higher price tag to balance the budget—and even that doesn't tell the whole story.

 

Saudi Arabia has a costly social contract with its citizens, promising prosperity in return for political acquiescence. To keep its side of the bargain, the government needs to invest in its non-oil industries - which employ the most Saudis. Petrodollars pay that bill.

 

Source: moderndiplomacy.

 

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Views 161

Added 04/22/2023 - 6:57 PM

[Officiallytook]

Wen Lambo 🏎️ ... 😅

[screwball]

6 minutes ago, Officiallytook said:

Wen Lambo 🏎️ ... 😅

when bugattai 

[Officiallytook]

5 hours ago, screwball said:

when bugattai 

LoL I'm stunting I wouldn't be able to afford Lambo even at 3.26 to 1iqd lol with what I'm holding maybe used Ferrari 599 manual transmission 

Edited April 24, 2023 by Officiallytook

[rvmydinar]

3 hours ago, Officiallytook said:

LoL I'm stunting I wouldn't be able to afford Lambo even at 3.26 to 1iqd lol with what I'm holding maybe used Ferrari 599 manual transmission 

Wow. At 3.26 , some dinar holders will buy huge mansions somewhere on the island and retire there.

[Officiallytook]

5 hours ago, rvmydinar said:

Wow. At 3.26 , some dinar holders will buy huge mansions somewhere on the island and retire there.

Mine was a gift from my late father... So I've been here for him... And see a few hundred thousand as enough to get right and started on making more money with it

[rvmydinar]

13 hours ago, Officiallytook said:

Mine was a gift from my late father... So I've been here for him... And see a few hundred thousand as enough to get right and started on making more money with it

You are fortunate enough to get a gift from your late father and just wait for this baby to come to fruition.

[davis411]

22 hours ago, rvmydinar said:

Wow. At 3.26 , some dinar holders will buy huge mansions somewhere on the island and retire there.

Nope

nice pickup truck

maybe a nice small place in warm weather

biggest thing not what you can buy

but the piece of mind you can not worry as much on how to cover life and do a few extra things if you feel like 

[davis411]

22 hours ago, rvmydinar said:

Wow. At 3.26 , some dinar holders will buy huge mansions somewhere on the island and retire there.

Nope

nice pickup truck

maybe a nice small place in warm weather

biggest thing not what you can buy

but the piece of mind you can not worry as much on how to cover life and do a few extra things if you feel like 

[rvmydinar]

5 hours ago, davis411 said:

Nope

nice pickup truck

maybe a nice small place in warm weather

biggest thing not what you can buy

but the piece of mind you can not worry as much on how to cover life and do a few extra things if you feel like 

It isn't a bad idea, too. As long as we have enough money to cover for the rest of our old lives , then we have nothing to worry about. We only live once , enjoy while still can.