Yves here. Has no one in the Beltway gotten the memo that it punishment fetish isn’t working out so well? The great shock and awe sanctions against Russia are Exhibit 1, with the US only getting as a consolation prize the strip mining of Europe. And then our efforts to try again, like the oil price cap and the embarrassing attempt at sanctions ratcheting in Europe, were proofs of weakness.
Recall OPEC members saw the oil price cap as an effort to break their cartel. The resulting anger likely played into China’s efforts to enhance its status by brokering an end to hostilities between Iran and the Saudis. Mohammed bin Salman was already hostile to Biden, but the plan to meddle in oil prices would confirm his prejudices.
The article below is cautiously skeptical. It’s also noteworthy that it doesn’t describe how the US proposed to hurt OPEC.
By James D. Durso, the Managing Director of Corsair LLC, a supply chain consultancy. Originally published at OilPrice
- U.S. consumers are showing significantly less concern about the U.S. energy situation than they did one year ago.
- The U.S. House of Representatives may once again consider a piece of legislation to pressure the OPEC oil producers’ group to stop making output cuts.
- The bill may be retaliation against the Arab OPEC countries, and a warning to others, for normalizing ties with Iran and Syria.
In early May, the U.S. House of Representatives Committee on the Judiciary was reportedly considering a bill to pressure the OPEC oil producers’ group to stop making output cuts by revoking the sovereign immunity that has protected OPEC+ members and their national oil companies from lawsuits over price collusion. (The committee previously passed the bill in 2018, 2019 and 2021.)
The OPEC Basket Price has hovered in the mid $70s, not historically high, though U.S. politicians like to talk down the price of gasoline before the summer driving season begins. (Saudi Arabia needs a price of $80.90 USD to balance its budget, and fund the diversification of its economy.)
Gasoline prices are higher than during the Trump administration, but the Gallup polling organization reported in April 2023, “Americans show significantly less concern about the U.S. energy situation now than they did a year ago.”
If American consumers aren’t up in arms over gasoline prices, and the recent OPEC production cuts have failed to stop the slump in crude oil prices, why might OPEC be a target now?
One reason may be the good news out of the Middle East: a rapprochement between Iran and Saudi Arabia (with Chinese mediation); Egypt and Iran starting to normalize ties (with mediation by Iraq); Syria rejoining the Arab league; the United Arab Emirates and Iran in talks to promote ties, and the possibility for energy cooperation between Iraq and Iran. The bill may be retaliation against the Arab OPEC countries, and a warning to others, for normalizing ties with Iran and Syria, under the color of protecting U.S. consumers. It also avoids a discussion about the Biden administration policy of limiting oil and natural gas production, though lately the administration has approved limited drilling in federal lands.
And not to be outdone, a bipartisan group of U.S. lawmakers just announced the “Assad Regime Anti-Normalization Act of 2023,” that would counter foreign governments’ outreach to Syria and allow for additional sanctions on anyone doing business with the Assad government.
The losers? Israel which probably can’t depend on the Arabs to form a bloc to back an attack on Iran’s nuclear research facilities; and the U.S., which is seeing its influence diminish as OPEC members in the Middle East start to normalize with the hated governments in Tehran and Damascus, and welcome China’s mediation of negotiations between Tehran and Riyadh, and Russia’s facilitation of talks between Saudi Arabia and Syria, and Syria and Turkey. (The worst-case scenario for Tel Aviv and Washington is Chinese participation in talks between Israel and the Palestinians.)
Normalization of relations between the Arab OPEC states and Iran and Syria would lower tensions in the region, which is not in Washington’s interest as big customers like the Saudis and Emiratis might scale back purchases of weapons intended to counter Iran. Tensions also keep the U.S. busy in the neighborhood to “ensure stability,” though U.S. actions in Iraq and Libya (and its supporting role in Yemen) guaranteed the opposite. And tension in the region makes it easy for Israel’s Shabbos goy in the U.S. to scotch any attempts to pressure Israel and the Palestinians to get peace talks going “or else,” especially if the Pals invite the Chinese into the process.
The U.S. may be failing to heed that the Middle East OPEC states, most run by kings or emirs, must pay attention to public sentiment – one secret of successfully ruling without elections. Though Iran is not popular with the publics in Arab OPEC countries, closer relations might result in less tension and more people-to-people ties and economic opportunity that will promote stability, which is more important than democracy for the Arab Spring generation according to a recent region-wide poll.
The 2022 Arab Youth Survey also found, “Nearly three-fourths (73%) want to see the US disengage from the region. China, Turkey and Russia are now seen as the region’s strongest allies” and “the default position of looking to the West in times of crisis is being eroded by new allegiances to China, Russia and Turkey.”
This sentiment may see other Arab states, i.e., Saudi Arabia, not rushing to join American projects such as the Abraham Accords, which Israel still hopes will be a detour around peace talks with the Palestinians, and instead favor homegrown initiatives to stabilize the region.
Thus, Washington’s attack on the economic engine of the Middle East, petroleum, and use of sanctions to halt attempts to end conflict and alienation between the OPEC Arabs and Iran and Syria. It is important that peace not break out as that would depress weapon sales, increase regional economic diversification and integration and reduce the need for Washington’s “solutions,” and introduce to the region new economic and political players, such as China and Turkey.
Washington has a lot of power and can force events in the short term, but it has already lost the hearts and minds of Middle Eastern youth who, since 2001, have matured with the U.S. continuously engaged in combat operations in their lands – and all for nothing. For the future, it would be wise for Washington to remember the Cold War policy that understood that civil rights and economic opportunity for all Americans was the nation’s best weapon in the war of ideas with Communism. It worked against the Reds then and it will work against the Islamists now and, if America wants to be part of the future of the region it should stop being an example of the worst kind.
“And tension in the region makes it easy for Israel’s Shabbos goy in the U.S. to scotch any attempts to pressure Israel and the Palestinians to get peace talks going”
Ouch. Guessing somebody is on a watch list now…
Isn’t gas price anxiety being suppressed because Biden is still pumping like crazy out of the SPR? So that’s his back door way of countering OPEC (strictly for his own political purposes of course) but it can’t last.
Just the headline of ‘Is The U.S. Preparing To Punish OPEC?’ caused me a double-take. A similar headline would be ‘U.S. cuts off all trade with China’ for bone-headedness. The US already tried last year to set up an oil buyers cartel with failed miserably. But it did put the OPEC countries on notice what was intended. If oil prices are too high for the Biden regime, then all they would have to do would be to back off from Venezuela and encourage investments and sooner or later the oil prices would drop as their oil would come online. But they won’t of course.
The boys at the Duran have suggested as the Ukraine is losing, that the US/west will dramatically escalate but did not say how. I could very easily see the US sanctioning the OPEC countries until they ‘get with the program.’ Certainly being outmaneuvered in the Middle east and have peace breaking out between nations would be a factor to push the US into a sanctions program to make them obey Washington’s edicts such as isolating & punishing Syria for winning that war. The only trouble is that the US is not the only game in town and that includes the poodle pack of the Collective West. Those OPEC countries could say to hell with it, let’s have another 1973-style oil crisis in the US and tell Americans that it is Biden’s fault so don’t forget that when you go to vote.
This is like an addict trying to sanction their dealer while their stash is running out.
Bonus points for using the moniker “Biden Regime”…
tony blair may have to find another country to hide out in:)
How quickly things change. From indispensable to irrelevant. No wonder nobody wanted to be president.
If they are going to do it, then they must do it now. Fracking boosted production will peter out soon enough.
“Is the US Preparing to Punish OPEC?”
Even the consideration of such a bill would advance and entrench the very thing it hopes to circumvent.
How does a country with capitalism as its national religion end up with such terrible risk management culture and pervasive inability to anticipate simple unintended consequences at the political level?
Those who repeat the mantra of capitalism uber alles have never had to endure the downside. Inherent in capitalist theory is that there will be losers, and their inability to police themselves ensures that will never happen to them.
Thus far, anyway.
I think it must somehow annoy fossil-fuel hating development activists that the strongest international organisation working for the interests of developing countries is OPEC. Sure, there are some NGOs, but they don’t have the same political leverage. And while some people do work to make the UN take a bigger role in mediating a global economy that puts poorer countries on a more equal footing with other countries, that is still years away.