Washington
CNN
—
The Biden administration launched a large-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from drastically reduce oil productionaccording to multiple sources familiar with the matter.
But that effort appears to have failed, following Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that, as expected, announced a major cut to production in an effort to increase oil prices. That, in turn, will likely cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.
On Wednesday morning, the OPEC+ oil ministers meeting in Vienna agreed to an even bigger production cut than the White House had feared: 2 million barrels a day, starting in November, according to a reading of the meeting. published on Wednesday. The ministers said the cuts were necessary “in light of the uncertainty surrounding the global oil market and economic outlook.”
President Joe Biden told CNN’s Arlette Saenz on Wednesday that he was “concerned” about the cuts, which he considered “unnecessary.” Secretary of State Antony Blinken told reporters when asked about the move that “when it comes to OPEC, we have made our views clear to OPEC members.”
Over the past few days, Biden’s top foreign, economic and energy policy officials have been enlisted to pressure their foreign counterparts in allied Middle Eastern countries, including Kuwait, Saudi Arabia and the United Arab Emirates, to vote against it. of the reduction in oil production. Wednesday’s production cut amounts to the biggest cut since the start of the pandemic and could cause a dramatic spike in oil prices.
Some of the preliminary talking points circulated by the White House to the Treasury Department on Monday and obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”
“It’s important that everyone knows how much is at stake,” a US official said of what was framed as a broad administration effort expected to continue ahead of Wednesday’s OPEC+ meeting.
The White House is “having a spasm and panicking,” said another US official, describing this latest effort by the administration as “taking off the gloves.” According to a White House official, the talking points were drafted and exchanged by staff members and were not approved by White House leadership or used with foreign partners.
In a statement to CNN, National Security Council spokeswoman Adrienne Watson said: “We have made it clear that energy supply must meet demand to support economic growth and lower prices for consumers around the world and we will continue to talking to our partners about it. ”
For Biden, a dramatic cut in oil production couldn’t come at a worse time. For months, the administration has engaged in an intense domestic and foreign policy effort to mitigate rising energy prices in the wake of the Russian invasion of Ukraine. That work seemed to pay off, as US gas prices fell for nearly 100 days straight.
But with only a month to go before the critical midterm elections, Gas prices in the US have started to rise again, which represents a political risk that the White House is desperately trying to avoid. As US officials have moved to assess possible domestic options to avoid gradual increases in recent weeks, news of a major OPEC+ action presents a particularly acute challenge.
Watson, the NSC spokesman, declined to comment on the midterms, saying instead: “Thanks to the President’s efforts, energy prices have fallen dramatically from their peaks and American consumers are paying much less at the pump. “.
Amos Hochstein, Biden’s top energy envoy, has played a leading role in the lobbying effort, which has been far more extensive than previously reported amid extreme concern in the White House about the potential cut. Hochstein, along with senior national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a variety of energy and security issues as a follow-up to the visit by senior Biden profile to Saudi Arabia in July. .
Officials from the administration’s foreign and economic policy teams have also been involved in reaching out to OPEC governments as part of the latest effort to prevent an output cut.
The White House has asked Treasury Secretary Janet Yellen to make the case personally to some finance ministers of the Gulf states, including those of Kuwait and the United Arab Emirates, and try to convince them that a cut in the production would be extremely detrimental to the world economy. The US has argued that, in the long term, a cut in oil production would create further downward pressure on prices, the opposite of what a significant cut would achieve. His logic is that “cutting right now would increase inflation risks,” lead to higher interest rates and, ultimately, a higher risk of recession.
“There is great political risk to her reputation and her relations with the United States and the West if she goes ahead,” suggested the draft White House talking points that Yellen communicated to her foreign counterparts.
A senior US official acknowledged that the administration has been pressuring the Saudi-led coalition for weeks to try to convince them not to cut oil production.
It comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman in a trip fueled in part by a desire to convince Saudi Arabia, OPEC’s de facto leader, to increase oil production that would help reduce gasoline prices that were skyrocketing at the time.
Biden’s meeting with Saudi crown prince is criticized
When OPEC+ agreed a modest 100,000-barrel production increase a few weeks later, critics argued that Biden had gotten little out of the trip.
The trip was billed as a meeting with regional leaders on issues critical to US national security, including Iran, Israel and Yemen. He was criticized for his lack of results and for rehabilitating the image of the crown prince whom Biden directly blamed for orchestrating the murder of Washington Post columnist Jamal Khashoggi.
In the months leading up to the meeting, Biden’s top Middle East and energy advisers, McGurk and Hochstein, shuttled back and forth between Washington and Saudi Arabia to plan and coordinate the visit.
A diplomatic official in the region described the US campaign to block production cuts as less of a hard sell and more of an effort to highlight a critical international moment given the fragile economy and ongoing war in Ukraine. Though another source familiar with the discussions told CNN that a diplomat from one of the targeted countries described it as “desperate.”
A source familiar with the outreach says a call with the United Arab Emirates was planned, but Kuwait rejected the effort. The Kuwaiti embassy in Washington did not immediately respond to a request for comment. Neither is Saudi Arabia. The United Arab Emirates embassy declined to comment.
Publicly, the White House has cautiously avoided weighing the possibility of a drastic cut in oil production.
“We are not members of OPEC+, so I don’t want to get ahead of what might come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters on Monday. The US approach, Jean-Pierre said, remains “to take every step to ensure markets are sufficiently supplied to meet demand from a growing global economy.”
OPEC+ members are weighing a more drastic cut due to what has been a precipitous drop in prices, which have fallen sharply below $90 a barrel in recent months.
Also pending at Wednesday’s OPEC+ meeting in Vienna will be the looming oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not just Russia, have expressed discontent with the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.
Included in the White House’s talking points with Treasury was a US proposal that if OPEC+ decides not to cut this week, the US will announce a buyback of up to 200 million barrels to replenish its Strategic Petroleum Reserve (SPR), an emergency oil reserve that the United States has been tapping into this year to help lower oil prices.
The administration has made it clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC’s oil to replenish the SPR. The idea has been to convey to OPEC+ that the US “won’t leave them hanging” if they spend money on production, the official said, and therefore that prices won’t collapse if global demand declines.