Behind the "war of words" of oil production cuts: Saudi Arabia no longer only looks to the United States?

Because the OPEC organization led by Saudi Arabia and the oil production alliance ("OPEC+") formed by non-OPEC oil producers announced oil production cuts, the "war of words" between the United States and Saudi Arabia
intensified.

On October 16, local time, U.
S.
National Security Adviser Sullivan said in an interview with CNN that Saudi Arabia's support for oil production cuts has made the turbulent US-Saudi relations more tense
.
The U.
S.
will reassess relations with Saudi Arabia, and Biden has no plans to meet
with Saudi Crown Prince Salman during the G20 summit in November.
However, Sullivan also stressed that the US-Saudi relationship will not change immediately, because US President Biden will not act rashly, but will act
gradually and strategically.

Previously, Biden had warned of "consequences" for Saudi Arabia, but did not specify
them.
White House press secretary Pierre later said the Saudi move was "undoubtedly in line with Russia.
"

The Saudi government said that the oil production cut was purely economic and had nothing to do with politics, and the US threat was a deliberate gesture
by the Democratic Party before the midterm elections.
Saudi Foreign Minister Al-Jubeir said in an interview with US media: "When you're in the election season, which some people call the 'funny season,' you talk a lot and do a lot of things, and those things lose their meaning
after the election season.
" ”

Is there a political motive?

On October 5, OPEC+, a group of 23 countries, decided to cut production sharply from November this year, cutting monthly production by an average of 2 million barrels
per day from August production.
Subsequently, international oil prices hit the largest weekly increase since mid-March this year, which made European and American countries, which were already plagued by high inflation
, cry bitterly.

The United States openly accused the "quasi-ally" Saudi Arabia, on the one hand, to control global oil prices, and on the other hand, to suppress Russia
.
Whether in the face of Biden's October 11 announcement to "reassess" relations with Saudi Arabia, or the White House's statement on October 13 accusing Saudi Arabia of "no market basis" for cutting production, Saudi Arabia insisted that the decision to cut oil production was entirely out of consideration for stabilizing global oil prices, not against any country, let alone to support Russia
.

Saudi officials also issued a statement saying that the Biden administration had asked Saudi Arabia and other major oil producers to postpone a one-month plan to start sharply reducing crude oil production in November this year, in order to ease inflationary pressures in the United States so that the Democratic Party could win the midterm elections, which embarrassed
the White House.

Saudi oil analyst Ali Shihabi also denied that the cuts were politically motivated, writing in The New York Times that the Saudi move was simply "keeping prices within acceptable limits.
"

In its latest monthly report, OPEC lowered its forecast for global oil demand growth in 2022 by 460,000 b/d to 2.
64 million b/d; It will be revised down by 360,000 b/d to 2.
34 million b/d
in 2023.
This is the fourth time since April that OPEC has lowered its forecast for
world oil demand growth.
With the further development of new energy vehicles, the world's traditional oil and gas consumption may further shrink, which has also become the basis
for the recent production reduction of major oil producers such as Saudi Arabia.

Correspondingly, the US Department of Energy and the International Energy Agency also lowered their oil demand forecasts: US oil consumption will grow by only 0.
9% in 2023, down from the previous forecast of 1.
7%; Global oil consumption is expected to rise by 1.
5 percent, down from a previous forecast of 2 percent
.
The International Energy Agency forecasts full-year oil demand growth of just 1.
9 million barrels per day and 1.
7 million barrels per day for the full year of 2022 and 2023, also lower than its previous forecast
.

However, the U.
S.
government does not agree with the rhetoric of Saudi Arabia and OPEC, arguing that the production cut will cause oil prices to skyrocket to unacceptable levels
.
The current price of oil has allowed all OPEC members to enjoy huge profits every day, and there is no reason to reduce production and protect prices, and it is also a challenge
to the global financial order.

In fact, Russia has not enjoyed much of the dividend of rising oil prices, on the one hand, European and American countries have significantly reduced oil imports from Russia; On the other hand, the cost of oil extraction in Russia is too high, at $46 per barrel, compared to $22 per barrel
in Saudi Arabia, which uses American technology.

One direct reason for the United States to be more intolerant is that Kingdom Holding invested in three major Russian energy companies in the first month of the Russian-Ukrainian conflict, and doubled the import of Russian crude oil at low prices and resold it at high prices while Europe and the United States sanctioned Russia
.

Khurais oil field
, Saudi Arabia, June 28, 2021.
Photo/Visual China

NOPEC against OPEC?

At present, the US Congress has begun to explore the use of the NOPEC (Prohibition of Oil Production or Export Cartels) Act to file antitrust lawsuits
against OPEC oil producers.
The bill was approved by the U.
S.
Senate Judiciary Committee in May but has yet to be signed into law by Congress, giving the U.
S.
attorney general the right
to sue OPEC producers in federal court.
Specifically, the U.
S.
attorney general will have the power to prosecute and find illegal "joint restrictions on oil extraction and pricing oil" by other countries in federal court and take countermeasures accordingly, essentially the latest form of
U.
S.
"long-arm jurisdiction.
"

Because the bill involves the adjustment of US antitrust laws, it revokes the sovereign immunity to protect OPEC oil producers and their national oil companies from litigation, which has a huge
impact on Saudi Arabia and other countries.
In the past two decades, the bill has been proposed many times, but it has not been formally passed by Congress, which has something to do with
the fact that Saudi Arabia and other countries will lobby a lot through the US outside the court after each proposal.
The bill needs to be passed in the Senate and House of Representatives and signed by the president to become law, and many energy agencies in the United States are now optimistic that the bill will pass
in the Senate.

However, NOPEC is a double-edged sword, because the United States itself is also a major oil producer, if the law can play a role in deterring Saudi Arabia and other oil producing countries is unknown, but it is likely to hurt the oil and gas production companies
in the United States.
Several local oil and gas companies in the United States believe that NOPEC will increase the uncertainty of the oil and gas market, plunge the international oil and gas market into chaos, and ultimately hurt the status of
the United States as an oil producer.
At the same time, NOPEC could lead to overproduction in OPEC producers and excessive lowering of oil prices, making it impossible for U.
S.
oil and gas companies to survive
.
Compared with Saudi Arabia and other Middle Eastern oil producers, the cost of oil production and storage and transportation in the United States is obviously too high, and using NOPEC to suppress OPEC members may cause US companies to go bankrupt
.

Of course, if the United States really uses NOPEC to suppress, Saudi Arabia and other oil producers will naturally not sit still
.
In 2019, the United States hinted at using NOPEC, and Saudi Arabia immediately threatened to settle oil trade in currencies other than the US dollar, which will undoubtedly undermine the status of the US dollar as the world's main reserve currency and weaken the influence of the United States in global trade.

Saudi Arabia and other oil producers, as important countries investing in the United States, will also adversely affect the US capital market by selling US dollar assets (including US debt, etc.
), which will also weaken the effect
of NOPEC sanctions.

U.
S.
fight and pull combination with Saudi Arabia?

Since Biden took office, the Saudi government has hardly given
the Democratic government of the United States a good face.
After Crown Prince Salman was appointed prime minister by the old king at the end of September, his distance from Biden was further widened
.
Compared with the Biden administration, which holds high the banner of ideology at every turn, Salman undoubtedly hopes that the Republican Party can return to power
.
If November's midterm elections help Republicans regain their majorities, he would be happy to see them happen
.

The October 2018 killing of Khashoggi at the Saudi Consulate in Istanbul, Turkey, has become the main source of
grievances between the United States and Saudi Arabia in recent years.
In August 2020, Biden, then a presidential candidate, promised to make Saudi Arabia a pariah if elected because of its disgraceful record of human rights abuses (mainly the Khashoggi case) and the seven-year war in Yemen
.
In February 2021, Biden did deliver on his campaign promises, releasing an investigative report into the Khashoggi case a few weeks after taking office, indicating that Crown Prince Salman had approved the assassination of
Khashoggi.

Faced with the dual impact of the new crown pneumonia epidemic and the escalation of the Russian-Ukrainian conflict, the Biden administration is trying to ease relations
with Saudi Arabia.
In mid-July this year, Biden made his first visit to Saudi Arabia and had an "ice-breaking" meeting
with Crown Prince Salman.
But the estrangement between the two sides has not been closed, and Saudi Arabia has not heeded the US warning
.

In the United States, the opposition believes that Biden's attitude towards the Saudi government, especially Crown Prince Salman, is too soft, and although he condemns the Crown Prince's killing of Khashoggi, he does not impose even symbolic sanctions on the Crown Prince, which also gives him the courage to confront the
United States toughly.
As the hand-picked successor of the old Saudi king, Crown Prince Salman's Saudi 2030 plan, pushing for the listing of Saudi oil companies, sanctioning and isolating neighboring Qatar, etc.
, have shown a completely different style from their predecessors, and are also sought after by many foreign leaders and business giants
.

On the other hand, Crown Prince Salman, aware of the relative decline of U.
S.
power and willingness to withdraw strategically from the Middle East, must change his total dependence on the United States for oil and security, while maintaining good relations with countries such as Russia and seeking Saudi Arabia's greater economic autonomy and regional voice in a multi-party game
.

However, the United States is not completely unable to restrain Saudi Arabia
.
According to the estimates of Bruce Riddle, a senior fellow at the Brookings Institution, the Saudi military has reached 75% of the US-made weapons, including all kinds of fighters, transport aircraft, helicopters, cruise missiles, tanks, drones, etc.
, which cannot operate
without the parts, background software and maintenance support of US arms dealers.
Considering the "threat of the Houthis in Yemen and the Iranian Revolutionary Guards", Saudi Arabia is still highly dependent on
the United States militarily.

After OPEC+ announced oil production cuts, New Jersey Senator Bob Menendez, chairman of the US Senate Foreign Relations Committee, called on Congress to freeze arms sales to Saudi Arabia, and New Jersey Rep.
Tom Malinowski said
.
The United States needs to reconsider whether to continue to have troops in Saudi Arabia to protect the country's oil fields, which has disregarded U.
S.
national security interests
.
Objectively speaking, although Saudi Arabia has accelerated military cooperation with Russia, India and other countries in recent years, it is still inseparable from US-made weapons and US military assistance, especially the deterrent effect
of US troops in Saudi Arabia on regional "hostile countries" such as Yemen.

The US arms sales freeze to Saudi Arabia will have a substantial impact on the country's military and security situation, but Saudi Arabia is also well aware that the US arms industry will do everything possible to block the passage of the bill to freeze arms sales by Congress
.
Just in early August, the U.
S.
Congress approved two massive arms sales to Saudi Arabia and the United Arab Emirates, including a $3 billion Patriot missile order
for Saudi Arabia.

Historically, the United States and Saudi Arabia have never signed a mutual defense agreement or formal treaty, and their "quasi-alliance" relationship has been sustained largely by oil and arms deals
.
Saudi Arabia has used its influence within OPEC organizations to keep oil production and prices at levels satisfactory to Washington; The United States imports a lot of oil from Saudi Arabia and exports a lot of weapons
to Saudi Arabia.
But now, the United States is already the world's largest oil producer and no longer depends on Saudi Arabia for oil imports
.
In addition, on the one hand, the United States is carrying out strategic retrenchment in the Middle East, and on the other hand, it does not want to see Saudi Arabia alone or other major powers strongly intervene
.
The relationship between the United States and Saudi Arabia is doomed to change from the previous "Saudi Arabia only the United States is the leader of the horse" to "the United States to Saudi Arabia's combination of fighting"
.
Saudi Arabia's dependence on the United States is largely determined by regional security trends, not oil
.