With OPEC+ cutting production, oil prices will rise. Saudi Arabia and Russia will benefit from this move. Thanks to increased revenues, Russia will be able to prosecute its war against Ukraine better. The US sees Russia as a threat to the security of Europe, and of the world.
Washington, DC sees this as betrayal. Since the days of President Franklin Delano Roosevelt, the US has guaranteed Saudi security. In those days, the US imported a lot of Saudi oil. Over the years, the US has become largely energy independent. It has massive oil and gas reserves. Its gas production has shot up dramatically, giving it a great economic advantage.
Today, Saudi Arabia is exporting its oil not to the West but the East. China and India are the two biggest importers of Saudi oil. Given this trend, the Saudis have been moving away from the US. Under Crown Prince Mohammed bin Salman (MBS), Saudi-US relations have declined. President Joe Biden’s visit to Saudi Arabia and his infamous fist bump with MBS did not quite work. The Saudis did not increase oil production to drive down oil prices before the US midterm elections.
The OPEC+ oil production cut will lead to a revaluation of US-Saudi relations. The glue binding them together has just become thinner. Currently, Iran is siding with Russia as well but this OPEC+ action might stir talk of reviving the now-dead Iran nuclear deal.
In what the Pentagon calls this new volatile, uncertain, complex and ambiguous (VUCA) world, we will see the edge of the wedge between Saudi Arabia and the US will get sharper. OPEC+ and the US are now on a collision course in a modern rerun of the 1973 crisis when oil producers wanted a higher price. This time, the crisis will be both geopolitical and economic.
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