OPEC’s Body Blow to Biden

M.K. Bhadrakumar says the OPEC+ decision could change the security picture in West Asia more than anything since the 1979 Iranian Revolution.

President Joe Biden and Saudi Crown Prince Mohammed bin Salman bin Abdulaziz bump fists at Al-Salam Palace in Jeddah, on July 15. (Saudi Press Agency, Wikimedia Commons, CC BY 4.0)

By M.K. Bhadrakumar
Peoples Dispatch

The Biden administration is swiftly establishing a narrative that the recent OPEC decision to cut oil production by 2 million tonnes is a geopolitical “aligning” by Saudi Arabia and Russia.

It taps into the Russophobia in the Beltway and deflects attention from the humiliating defeat of President Joe Biden’s personal diplomacy with Saudi Arabia. But it is not without basis, either.

Foreign policy was reputed to be Biden’s forte but is turning out to be his nemesis. An ignominious end is not unlikely; as with former U.S. President Jimmy Carter, West Asia may become the burial ground of his carefully cultivated reputation.

The magnitude of what is unfolding is simply staggering. Biden realizes belatedly that territorial conquests in Ukraine is not the real story but embedded in it is the economic war and within that is the energy war that has been incubating through the past eight-month period following the Western sanctions on Russia.

The paradox is, even if Ukraine President Volodymyr Zelensky wins the war, Biden would still have lost the war unless he wins the energy war and goes on to win the economic war as well.

Russian President Vladimir Putin visualized such an outcome as far back as in 2016 when on the sidelines of the G20 Hangzhou summit, the tantalizing idea of OPEC+ crystallized between him and then Saudi Deputy Crown Prince Mohammed bin Salman.

I wrote at that time that an “understanding between Russia and OPEC holds the potential to completely transform the geopolitical alignments in the Middle East… This shift cannot but impact petrodollar recycling, which has been historically a robust pillar of the western financial system. In strategic terms, too, Washington’s attempt to ‘isolate’ Russia is rendered ineffective.” That was six years ago.

The debris that surrounds Biden today is a large messy pile. He didn’t realize that the lackadaisical way the Russian offensive in Ukraine rolled on was because Putin was concentrating on the economic war and the energy war, the outcome of which will determine the future of U.S.’ global hegemony, which has been riveted on the dollar being the reserve currency.

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Back in the early 1970s, Saudi Arabia agreed that the price of oil should be determined in dollars and that oil, the world’s most widely traded commodity, be internationally traded in dollars, which virtually mandated that every country on the planet ought to hold dollar reserves in order to buy oil.

The U.S., of course, reciprocally pledged on its part that free access to dollar was guaranteed for all countries.

Weaponizing the Dollar

However, it turned out to be a phony assurance in the wake of the rampant weaponization of the dollar and the preposterous moves by the U.S. to grab other countries’ dollar reserves.

Unsurprisingly, Putin has been harping on the need for setting up a reserve currency alternative to the dollar, and that finds resonance in world opinion.

OPEC headquarters in Vienna. (Bwag, CC BY-SA 4.0, Wikimedia Commons)

All indications are that the White House, instead of introspection, is considering new forms of punishment for Saudi Arabia and Russia.

While “punishing” Russia is difficult since the U.S. has exhausted all options, Biden probably thinks the U.S. holds Saudi Arabia by its jugular veins: it being the supplier of weaponry and custodian of massive Saudi reserves and investments and the mentor of Saudi elites.

Brian Deese, the director of the National Economic Council, told reporters on Thursday, “I want to be clear on this (OPEC production cut), the president has directed that we have all options on the table and that will continue to be the case.” Earlier on Thursday, Biden himself told reporters that the White House is “looking at alternatives.”

Neither Biden nor Deese explicitly named what those “alternatives” might be, other than to reiterate their ability to pull from strategic petroleum reserves, lean on energy companies to reduce consumer prices and work with Congress to consider legislative options.

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This is a foreign policy black eye for Biden who is facing ridicule over his trip to Saudi Arabia in July, which was excoriated by Democrats and Republicans alike.

The U.S. political elites feel that the OPEC decision looks like a targeted Saudi move to weaken Biden and Democrats in advance of the November elections.

This could have an impact beyond the U.S.-Saudi relationship and could change the security picture in West Asia more than anything since the 1979 Iranian Revolution.

Already, the Shanghai Cooperation Organization is slouching toward West Asia with Iran joining it and Saudi Arabia, the U.A.E., Qatar, Bahrain, Kuwait and Egypt being granted status as dialogue partners and Turkey intending to seek full membership.

In the broader terms of de-dollarization, the SCO summit in Samarkand drew up a roadmap for the gradual increase in the share of national currencies in mutual settlements, flagging the seriousness of its intention.

Shanghai Cooperation Organization in Samarkand, Uzbekistan 2022. (President.az, CC BY 4.0, Wikimedia Commons)

Now, the American defense industry will stiffly resist any attempts to unwind its business in Saudi Arabia, and it has extremely close ties to the Biden administration.

But Washington may work for some sort of regime change in Riyadh. Prince Salman has said he “does not care” if Biden misunderstands him. There is little affection between them. The point is, this is not a mere hiccup.

A color revolution is unrealistic but a palace coup to block MBS from succession is a possibility.

But it is risky as a coup attempt will probably fail. Even if it succeeds, will a successor regime have legitimacy regionally and be able to establish control?

A chaotic situation like in post-Saddam Hussein Iraq might ensue. The consequences could be disastrous for the stability of the oil market and rocky for the world economy. It could lead to an upsurge of Islamist groups.

What rankles Biden is that his trump card to reduce Russia’s high oil revenues without depressing supply through a “price cap” has become a lot more difficult now.

Hence, Biden’s rage that the Saudis have “sided” with Russia, which will now not only benefit from higher oil prices ahead of a price cap, but if Russia indeed is ever called upon to sell oil at a discount, at least the reduction will start at a higher price level!

As The Financial Times put it, “The kingdom and its allies in the Gulf are unlikely to turn their back on Russia. The Gulf states have not spoken out against the Ukraine invasion, and bringing Russia closer to the OPEC fold has been a long-term aim.”

The heart of the matter is that what Biden has done to Russia by grabbing that country’s reserves cannot but unnerve the Saudis and other Gulf regimes. They see the latest “price cap” project against Russia as setting a dangerous precedent that one day can lead to U.S. attempts to control oil prices and even a direct attack on the oil industry.

Suffice it to say, Russia cannot be cornered through the next three-to-four year period when there is such a tight-rope walk ahead.

The OPEC+ decision is poised to benefit Russia in multiple ways. It will buoy Russia’s oil revenue heading into winter, when demand for Russian energy from Europe typically rises — in essence, help Russia maintain market share even if its production in absolute terms drops off.

Ironically, Moscow won’t have to reduce a single barrel of output, as it is already producing well below the agreed OPEC target, while benefiting from a higher oil price, which will be achieved through cuts mainly by OPEC Gulf producers — shouldered by Saudi Arabia (-520,000 bpd), Iraq (-220,000 bpd), the U.A.E. (-150,000 bpd) and Kuwait (-135,000 bpd).

Isn’t it amazing that Russian oil companies will benefit from higher prices while at the same time keeping output steady? And this is when the central bank in Moscow is likely to have more than recovered the $300 billion dollars of reserves already that were frozen by the Western central banks at the beginning of the Ukraine war.

In reality, Saudi Arabia and other Gulf states involved with OPEC+ have effectively sided with the Kremlin, which enables Russia to refill its coffers and to limit the impact of Western sanctions.

The implications are far-reaching, from the Ukraine war to the future relationship between the U.S. and Saudi Arabia, and the emergent multipolar world order.

M.K. Bhadrakumar served for more than 29 years as an Indian Foreign Service officer with postings including India’s ambassador to Turkey and Uzbekistan.

This article is from Peoples Dispatch.

The views expressed are solely those of the author and may or may not reflect those of Consortium News.

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24 comments for “OPEC’s Body Blow to Biden

  1. bardamu
    October 12, 2022 at 21:02

    Interesting piece, and good to see the topic on the table.

    I would be careful about assuming that “Biden,” a term that I assume mostly refers to staffers who are not cerebrovascular patients, does not know crushingly obvious things. There are surely such things that he and his staff do not know, since that appears to be pretty universal. But it may be difficult to discern which by extrapolating from his motives, let alone his announced motives.

    Since about 1980, the US has been run like a business that is going under or facing bankruptcy: the leading particulars call this “privatization.” When it happens in a failing corporation, it is just graft, and the particulars eat out the organization from the inside.

    So, for whom does Mr. Biden work? I do not know, but the answer is clearly not “for the United States, of course.”

    Cui bono? Who wanted Nordstream cut a decade ago?

  2. Piotr Berman
    October 12, 2022 at 10:48

    “The heart of the matter is that what Biden has done to Russia by grabbing that country’s reserves cannot but unnerve the Saudis and other Gulf regimes. They see the latest “price cap” project against Russia as setting a dangerous precedent that one day can lead to U.S. attempts to control oil prices and even a direct attack on the oil industry.”

    In short, as huge investors with assets that can be grabbed, “Gulf regimes” have no intention of making the grab of Russian asset an experience so successful that it would be repeated in the future.

    In the meantime, US policy is full of contradictions. First, as a big energy producers, does it want low prices or high prices? Low prices in the early stage of COVID-19 imposed huge financial stress. Excessively high prices enjoyed by American LNG exporters were OK, although they tripled internal American NG prices, which receded a bit (2-2.5 higher than historical, but still very competitive with Europe and Asia). Second, arm exports. “Gulf regimes” would surely “suffer” if it was cut-off, number one, they could stop the war in Yemen, number two, patch up relationships with Iran, “bitter pill” but, dare I say, exactly what a doctor would prescribe. As it is, USA and West in general fosters very unhealthy attitudes in the Gulf, plying “regimes” with weapon and encouraging them to be combative, and remain as dictatorial as before. Independence, reduction of conflicts, both external and internal, this is a “calamity” that an independent course could offer.

    Thinking about it, irate Democratic senators threaten Gulf monarchies with a win-win solution (USA could gain from diverting engineering expertise it retained to peaceful endeavors), but, alas, they will not prevail, with MIC being as powerful as it is (combination of money power which is moderate compared to energy and medical complexes, with Deep State and think tank machinery). What we see is a periodic tantrum injecting a healthy (but still insufficient) dose of mutual distrust between the Gulf and USA.

  3. Noah Scape
    October 12, 2022 at 10:02

    There are several nations that want to shake off the U.S. dollar hegemony, because it is a wet blanket on freedom and sovereignty and control of their economies. Being dominated, dictated to, is insulting. Democracy at home, but authoritarian dictatorship globally – basic American hypocrisy.

    Some national leaders have made bold moves to establish a new trading currency in recent history- Saddam Hussein in Iraq, Libya’s Gaddafi and the African Gold Dollar idea – America killed them, ran them down in the streets and shot or hung them. More recently China, Russia, and now, GASP!! The House of Saud… America seems surprised.

    U.S. dollar as global reserve currency was a way to stabilize all those shaky national currencies after World War Two. It has also been a great source of wealth for America – even civilians benefitted with lower cost imports.

    Things have changed, but America clings to it’s glory years status, and like an insecure bully it will lash out at any who defy it, as they have so many times since World War Two. Military-assisted economics won’t be tolerated forever.

    The Saudis influencing the next US election? If America looks into a mirror, they might see a shoe on the other foot.

    Scorched earth as economic policy might be America’s reaction as a MULTIPOLAR world emerges from the darkness of domination – anything but cooperation, that is just not the American way.

    Hopefully, I am wrong. Could sensible appeasement be considered over confrontation?

  4. A
    October 12, 2022 at 07:35

    Great and on-point article. One aspect of the economic war on Russia from the US and EU many journalists have missed was how the US and EU basically stole overseas money and assets from the wealthy elite/oligarch of Russia. Will the wealthy elite/oligarchs of other countries, such as Saudi Arabian oligarchs and its monarchy, worry about their own overseas “investments?” Yes, as will the wealthy elite/oligarchs of every country. They don’t want to lose that money, homes, boats, stocks, sports teams, etc. When the US and EU did this to the Russian oligarchs, The US and EU probably hurt their standing with oligarchs across the globe. And since this scum rules almost every country on our planet. It wasn’t a smart move for a capitalist oligarch-loving country.

  5. Peter Grynch
    October 11, 2022 at 18:14

    If the Saudis manage to effect the November elections in a way that derails the Biden agenda, the United States will owe them a big “ThankYou.” They will have saved our ailing democracy.

  6. robert e williamson jr
    October 11, 2022 at 18:09

    So much for the POTUS claim that “No one fucks with a Biden . .” while talking to Forth Myers Beach mayor Ray Murphy.

    Appearances seem to indicate that both the Israeli’s and the Saudi’s are doing exactly that. To bad their actions screw with the average American’s life more than it does the presidents.

    This all such insane bullshit. Just the same with American’s claiming, ” they want a better life for their children”, while at the same time turning away from the problems of global warming and apparently, “rubber stamping” the inaction of the federal government and including the do nothing know nothing congress.

    The only refreshing thing here is M.K.B. efforts to shed some much needed light on this fiasco.

    Thanks CN

    • robert e williamson jr
      October 13, 2022 at 00:35

      Heads up!

      Anyone interested might desire to see Scott Ritters, US V Pipelines. I have left a comment there with three sources of good info these current and not so current events.

      “Who Dunnit”? Who blew the nord stream pipelines?

      The Saudi’s right on cue are cutting oil production and driving energy prices up currently,. As of eight days ago the Saudi’a and Russia agree to cut oil production to keep oil prices at $100 a barrel.

  7. Crotte
    October 11, 2022 at 16:02

    Looks more like a head shot to me looking for a complete knockout to Joey Boy. Might take time to work1

  8. Robert Sinuhe
    October 11, 2022 at 15:28

    What I gather from Mr.Bhadrakumar’s article is that the U.S. has not only shot itself in both feet but working on the other extremities as well. What has been an ongoing source of dismay is why hasn’t anybody come to the fore to understand this? I guess the answer to my own question is either they know and feel they can paper over all this with a blue and yellow flag and Russiaphobia or they have a mistaken view of their own power. This doesn’t sit well for the rest of us.

  9. October 11, 2022 at 14:59

    I’m unconvinced by Bhadrakumar and others that are clutching pearls over OPEC+. The Saudi’s have tens of billions invested in the West. I doubt they are willing to throw that away. They also have a long history of working with British and American Deep States.

    It seems likely that there’s more to the Saudi moves than meets the eye, such as:

    1) Neocons will use OPEC+ actions to demand that something be done. Might that “something” be war with Iran? Biden has already dragged his feet on a renewed JCPOA. That alone is enough to give one pause about USA-Saudi intentions.

    2) Neither the Saudi’s or the USA Deep State want to see a trial over 911. The 911 families have had some success in pushing for a trial and have forced USA to release some info (earlier this year). That info was greatly redacted and may not be all info that they have. Continuing to hold fast to such secrecy after more than 20 years is extremely extremely embarrassing to USA.

    Now, Saudi uses “oil as a weapon”* to:

    – change the media narrative from “Saudi monsters” to: “we need the Saudis!”

    – provide an avenue for a National Security ‘out’ that may ultimately nix any 911 trial. We have already seen Biden essentially forgiven MBS for Kashoggi’s murder.

    3) Increasing price of energy will also help USA energy companies. Coal, long disdained by environmentalists has made a come-back, and higher energy prices make fracking more appealing.

    As a climate-change aware, Democratic Party President, Biden’s can’t help fossil fuel companies – unless there’s a national security reason that he can trot out. The Saudi’s have provided one. Awww … shucks, Biden HAS TO act like a Republican.

    • Robert v scheetz
      October 12, 2022 at 10:16

      Since Bandar “Bush” and Saudi Intel know where the bodies are buried it is likely 9/11 plays a role in this –Saudi insurance against Washington confiscating its assets. But Biden can maybe counter by pumping Venezuelan oil??

  10. October 11, 2022 at 14:56

    “Isn’t it amazing that Russian oil companies will benefit from higher prices while at the same time keeping output steady?”

    Actually, output may increase as blowing up the Nordstream gas line is likely to increase the demand for oil.

  11. Jeff Harrison
    October 11, 2022 at 14:22

    Has anybody besides me noticed that for the US it’s always about the US. Saudi wanting to raise the price of oil to fill the hole in their finances left by their ill advised war in Yemen and the cost of their purchase of overpriced US made weapons never enters into the discussion. Mr Bhadrakumar’s assessment I think is clear eyed except for a couple of points. One, the price cap was never realistic depending as it did on most of the delivery vehicles for oil being under the direct control (tanker ownership) or indirect control (insurance and financing) of the US and its vassals. While many of the tankers are owned by US and vassal controlled companies, with Russia refusing to sell at the price set by the US and its vassals, I think we’ll be seeing a lot of VLCCs being sold to non-vassal states for the purpose of hauling Russian oil. Insurance and financing were never really an issue. If the US and our vassals push through with this, both Russia and China have the ability to provide insurance and financing quite apart from ‘The West’.

    Two, I’m fairly confident that the rest of the world has been watching the US’s attempts to squash China in the chip universe. And they’ve watched as the US has forced any number of countries to provide the US data that will allow the US to control what they do such as this most recent “you can’t sell chips made with chip forges of US origin to China” (how are we even going to enforce that?). I’m also fairly confident that the oil rich West Asian countries don’t want the US trying to tell them who they can and can’t sell oil to because their oil rigs are of US origin.

  12. Shep
    October 11, 2022 at 13:00

    Thank you as always for your insight. Looks like a checkmate from Putin.

  13. LeoSun
    October 11, 2022 at 12:05

    The debris that surrounds Biden today is a large messy pile. He didn’t realize that the lackadaisical way the Russian offensive in Ukraine rolled on was because Putin was concentrating on the economic war and the energy war, the outcome of which will determine the future of U.S.’ global hegemony, which has been riveted on the dollar being the reserve currency.” M.K. Bhadrakumar

    PUTIN (RUSSIA) did NOT GO INTO Ukraine to play NATO’S war game.

    PUTIN (RUSSIA) went INTO Ukraine to CHANGE It!!! R.I.P., NATO/USA.” Sincerely, OPEC+/Moscow,

    And, the Divided $tates of Corporate America’s Oldigarch shuffles through the graveyard, posing as POTUS masquerading as Human. Suffice it to say, POTUS is NOT given the keys to the family’s car. W/o a doubt, POTUS can’t possibly be in command of The Nuclear Codes. “A calabash with holes cannot be filled.”

  14. JonnyJames
    October 11, 2022 at 11:32

    Excellent points in this article. One important point here is the “petrodollar” and the dollar’s use as numeraire currency for global commodities, credit markets, IMF loans etc. As Mr. Bhadrakumar points out, the Saudis agreed to accept only USD (after Henry K. had a little talk with them in 1973). This was after the dollar crisis and oil embargo. (The gold window had been closed in 1971). The international “dollar glut” is rolled over into US Treasuries, US stocks and bonds, and US weapons. This is crucial for the value and maintenance of the “imperial currency”.

    The “red line” for the US is when KSA and OPEC start to accept other currencies (or gold) directly for petro products. The demand for and value of the dollar would likely collapse if not used as “world money”. In short, Dollar Hegemony is key to maintaining US power. No Dollar Hegemony, no US Empire, and a sharp decline in the US economy and living standards.

    If KSA ever crosses this “red line” all bets are off for MBS. Many would welcome the demise of the brutal Saudi regime. Chopping off dozens of people’s heads in mass executions, chopping up journalists into pieces and stuffing them into trash bags is part of the KSA’s and the West’s respect for the Rule of Law (TM). and Human Rights. However, the potential fallout for regime change would be potentially catastrophic.

    We live in some interesting times…

  15. forceOfHabit
    October 11, 2022 at 11:28

    “Biden realizes belatedly that territorial conquests in Ukraine is not the real story but embedded in it is the economic war…”

    B.S. Biden barely realizes where he is at any given moment. He may be in office, but he is not in control. It is the powers behind the throne that are starting to wake up to how badly they have miscalculated their economic war on Russia, a war they are only now realizing they are doomed to losing if they haven’t already lost.

  16. Tim N
    October 11, 2022 at 10:54

    So, the neoliberals and the neocons screwed up again? That’s what happens when you think you’re the smartest people in the room and your actions never have consequences.

  17. Guy St Hilaire
    October 11, 2022 at 10:41

    The slide downwards continues . What goes round comes around !

  18. michael888
    October 11, 2022 at 06:54

    Wars are always about money. The Poor die fighting battles to make the Rich richer.

    Excellent article and perspective we don’t get from State (controlled) Media.

  19. Jams O'Donnell
    October 11, 2022 at 03:53

    Russia has pointed out on a number of occasions that Turkey cannot be a member of the SCO while also being a member of NATO. With the economy of Europe, and especially Germany, rapidly going down the drain there is less and less appeal for Turkey in being close to the EU and more and more profit to be made from the SCO countries. So Turkey has every incentive to leave NATO. This would be a huge blow to the ‘west’ as Turkey has by a long way the largest land forces in Europe. In the meantime Erdogan can use this threat to obtain concessions from Washington. Win-win situation for him.

    • Deniz
      October 11, 2022 at 13:18

      NATO departure would turn Turkey into another Syria overnight as the CIA would undoubtedly turn their terror tactics on Turkey. I’ll take double talking Erdogan over ethical purity and a destroyed country any day.

    • Peter Grynch
      October 11, 2022 at 18:17

      The inflation rate in Turkey is currently 80% per year. They have other things to worry about.

    • nwwoods
      October 12, 2022 at 12:25

      Turkey continues to be miffed over its long delayed it’s admission into the EU, when in fact the EU has never had any intention of allowing EU membership to a powerful Muslim country. I can foresee Turkey finding alternatives increasingly attractive.

Comments are closed.