American presidents have long relied on Saudi Arabia and its leadership of OPEC to ease price pressure on oil markets, particularly in the lead-up to US elections. However, it appears that the organization has no inclination to help President Joe Biden during this election cycle, which may end up hurting the Democrats in critical races around the country.
Timely Saudi increases in oil production were granted, for example, to former US presidents Barack Obama and Donald Trump. Saudi Arabia boosted production to record levels in response to demands from Trump ahead of the 2018 midterm elections, and a Saudi oil adviser has said that the kingdom did the same for Obama’s 2012 reelection. When President Joe Biden’s turn came this October, however, OPEC turned against him. The Saudi-led cartel, which was enlarged to include Russia and others in 2016, chose not to raise production to bring down gasoline prices ahead of the US midterms, as President Biden had hoped it would. Instead, on October 5, OPEC+ cut production—and by a great deal. The cut helped keep oil above $90 per barrel, about a third higher than the 10-year average.
Biden’s repeated failure to win Saudi support in his battle with rising gasoline prices led him in November 2021 to announce an unusual series of releases of emergency stocks from the US Strategic Petroleum Reserve. Press reports suggest that the large, and for Biden, ill-timed OPEC+ cut arose from Saudi animosity toward the president and a desire to assist Republicans in the US midterm elections, in hopes of opening the way for Trump’s reelection in 2024. Saudi Arabia has been described as the driving force for the organization’s “preemptive” two million barrel per day cut. Russia, the United Arab Emirates, and other OPEC+ members apparently argued for moderation or delay.
Press reports suggest that the large, and for Biden, ill-timed OPEC+ cut arose from Saudi animosity toward the president and a desire to assist Republicans in the US midterm elections, in hopes of opening the way for Trump’s reelection in 2024.
Price hawkishness in OPEC is nothing new. But Iran and Venezuela are generally considered to be the instigators of reduced quotas designed to push up prices. What is new here is Saudi Arabia’s embrace of this strategy, particularly as Americans are headed to the ballot box. Riyadh had previously been the cartel’s voice of moderation, so what factors led the Saudis to change their behavior?
Accumulating Grievances in the Gulf and Washington
The two-year clash between Biden and Saudi Crown Prince Mohammed bin Salman appears to be part of the equation. But other factors have been damaging relations between the United States and its Gulf partners for at least a decade. From the Gulf perspective, there are many grievances, including frustrations with “fickle” US support—which has varied wildly from one administration to another—conflicting views on the Arab Spring uprisings, and the issue of sanctions on Iran’s nuclear program.
Also dismaying for Gulf leaders are repeated US presidential declarations that Washington has grown tired of getting involved in entanglements in the Middle East. Since the Obama administration, US presidents have stressed a strategic pivot to Asia, where most of the world’s population lives. And US pullouts from Iraq and Afghanistan have reduced the US presence in the Middle East.
On energy, the relationship gets worse. An increase in US shale oil production since 2008 has reduced OPEC’s oil market share. US producers also spurn participation in the cartel’s quota system. The US becoming the world’s largest oil producer has not stopped Biden and the Democratic Party from pushing for an energy transition from climate-damaging fossil fuels to renewables. America’s Gulf partners, and Saudi Arabia in particular, feel stuck in the crosshairs, as America is simultaneously stealing oil market share and pushing climate action, while also seeming to back away from defense commitments.
US umbrage starts with increasing levels of Gulf state repression and disregard for human rights, documented in declining rights scores and the increasingly brutal treatment of dissidents, up to and including murder.
The US perspective encompasses a similar litany of objections about Gulf behavior. The umbrage starts with increasing levels of Gulf state repression and disregard for human rights, documented in declining rights scores and the increasingly brutal treatment of dissidents, up to and including murder. Meanwhile, the Saudi-UAE launch of a failed war in Yemen—carried out using US-made weapons—has drawn deep opprobrium in Congress due to the war’s brutality. Requests from Riyadh and Abu Dhabi for additional US protection from Yemen’s Houthi drones and missiles have thus failed to gain support in Congress.
Then there is OPEC. The expansion of the cartel to include Russia—a response to free-riding US shale oil producers—is widening the US-Gulf divide. The cartel’s leadership has dispensed with any prior US sympathies and now appears to focus on the economic wellbeing of member states rather than that of the global economy. The election-time undermining of President Biden and the Democrats has essentially made the cartel a participant in US domestic politics, as well as a financial backer of Russia’s invasion of Ukraine. These positions are triggering a serious re-think of US-Saudi relations in Washington.
It is also worth noting that the US-Gulf turmoil has taken place amid a turnover in Gulf leadership. Assertive new ruling elites have surprised Washington by wielding far more independence of action than their predecessors. In the case of Riyadh, decreasing regard for Biden administration priorities has been accompanied by closer relations with Moscow.
Election Interference Through the Oil Market
The OPEC+ decision represents a pivotal moment in US-Gulf relations. Timely help from Gulf producers has allowed successive US presidents to maintain the fiction that they “exert control” over US fuel prices. This fiction has now been exposed, it having been demonstrated that in reality, their main lever has been spare capacity in Saudi Arabia. The OPEC+ cut demonstrates that Gulf help on oil prices now comes with conditions, and that US presidents must now demonstrate goodwill before being rewarded. Moreover, the US-OPEC reckoning is also laying bare something that used to be kept under wraps: some Gulf governments harbor partisan preferences. It is now clear that Saudi Arabia and Bahrain—along with Israel’s Likud Party—sit squarely in the Republican camp.
The OPEC+ cut demonstrates that Gulf help on oil prices now comes with conditions, and that US presidents must now demonstrate goodwill before being rewarded.
These two new realities leave the Biden administration on the back foot. Having Saudi Arabia arrayed against the president’s party at election time is dangerous in a country where political mood and gasoline prices are strongly correlated.
Party Preferences Emerge
Gulf leaders and US Republicans make common cause on many issues, including on Iran and climate policy. Saudi Arabia seeks to cope with climate change via a path that includes major roles for oil and gas, conversion to carbon-free hydrogen fuel, and the capture and storage of carbon emissions. To the extent that they concern themselves with climate, members of the Republican Party espouse the same solutions. Democrats, however, prefer a renewables-led route to net zero greenhouse gas emissions, which involves replacing fossil fuels with greener energy sources. Naturally, that route is less appreciated in the oil-dependent Gulf. And on Iran, both Republicans and many Gulf leaders have opposed the US-Tehran nuclear deal, although the Gulf is now seeking to de-escalate its conflict with Iran.
This politicization of US-Gulf relations could undermine long-running ties. Democrats could be inspired to act against Saudi Arabia if Republicans outperform expectations in November, and Saudi-US ties may wax and wane with control of the White House. Smaller Gulf monarchies are also being swept up in the US-Saudi quarrel by dint of their membership in OPEC+ and the cartel’s cooperation with Moscow. And while public statements from OPEC+ member states support the production cut, it appears that smaller GCC governments only backed the Saudi-initiated cut for unity’s sake.
The United Arab Emirates was one of the governments that privately opposed the cut, reportedly lobbying Riyadh to drop the idea.
The United Arab Emirates was one of the governments that privately opposed the cut, reportedly lobbying Riyadh to drop the idea. The UAE’s fiscal dependence on oil is the lowest in the GCC. Even so, Abu Dhabi, which collaborated closely with the Trump administration alongside Riyadh, has managed to improve ties with the United States under Biden.
The UAE had already been at odds with Saudi Arabia over its increasing price hawkishness, which the UAE views as contrary to its own national interests. Abu Dhabi, like Riyadh, is expanding production capacity. But Riyadh is moving from 12 to 13 million barrels per day, while Abu Dhabi is making a much larger jump, from 3.8 to 5 or 6. UAE leadership wants to bring that capacity online, rather than reserving it for emergency situations. Overall, there is a sense that climate action will make $100 per barrel oil an increasingly rare phenomenon. UAE President Mohammed bin Zayed is said to have demanded that national oil company ADNOC complete its output expansion by 2025, rather than 2030, as was previously planned. Some Emirati elites feel that if a larger UAE production quota is not forthcoming, withdrawing from OPEC+ may be a necessity.
Security Lapses
Regional leaders have also apparently concluded that the US-Gulf relationship based on the exchange of oil for security is fraying. Given the lackluster US response to what are perceived as major security violations, Gulf leaders have felt less compelled to uphold the oil side of this bargain. In 2019, during the Trump presidency, a salvo of cruise missiles and drones clobbered Saudi oil infrastructure, briefly taking nearly six million barrels of Saudi Aramco’s oil processing capacity offline. The outage was the largest in the history of the oil business, but caused no long-term market effects due to conditions of oversupply at the time.
President Trump downplayed the attack and suggested that responding was not a matter for Washington, but for the aggrieved party. “That was an attack on Saudi Arabia, and that wasn’t an attack on us. But we would certainly help them,” Trump stated. Under the Biden administration, Gulf frustrations have intensified. Saudi and Emirati officials, who were dismayed by Biden’s retraction of Trump’s terrorist designation for Yemen’s Houthi militants, also describe what they call insufficient protection from hundreds of incoming Houthi missiles and drones. Dozens of Saudis have been killed in strikes on oil installations, pipeline compressors, airports, and a crude oil storage tank in Jeddah that burned for days. Amid attacks on Saudi Arabia, however, the US military redeployed one of its Patriot missile batteries, forcing the Saudi government to procure a replacement from Greece.
Among Gulf elites, Washington’s insufficient response to Houthi attacks points up the contrast between its treatment of Gulf states and of Israel, which receives ironclad US military and diplomatic support, despite confronting fewer active threats.
Meanwhile, in Abu Dhabi, three workers were killed and seven injured in a Houthi attack on an ADNOC fuel storage facility. The UAE considered the incident a 9/11-type event, the first time the UAE has come under direct foreign attack in decades. The incident therefore acted as a catalyst for increased defense cooperation with Washington.
But among Gulf elites, Washington’s insufficient response points up the contrast between its treatment of Gulf states and of Israel, which receives ironclad US military and diplomatic support, despite confronting fewer active threats. Perhaps as a result, the UAE has procured an Israeli air defense system. Meanwhile, Gulf governments see yet another reason to retain strong relations with Russia, which also produces air defense systems.
An Important Relationship That Must Be Restored
New leaders in the Gulf apparently want to be treated as true US partners, rather than as dependents. But in order to do this, Gulf leaders will inevitably have to diversify security relations beyond the United States, an issue with which they have grappled since independence. Russia is one option, but it is a competing oil exporter that has a strong relationship with Iran. Moscow’s poor performance in Ukraine also offers a warning about its military capabilities. In the longer term, China and India will offer more compelling opportunities. But until they do, Gulf states will seek more input into US decisions that affect them.
The wayward US-Saudi relationship should be cause for alarm in Washington. The Biden administration needs to bring Saudi Arabia back into the fold. In addition, the politicization of Saudi-US ties is a dangerous development for both sides. The Gulf remains an important region for US interests in global economic stability, mainly due to the prominent role oil plays in nearly every aspect of shipping and transportation.
The Biden administration needs to bring Saudi Arabia back into the fold. In addition, the politicization of Saudi-US ties is a dangerous development for both sides.
But oil’s monopoly in this regard is slowly being chipped away at by electric vehicles that are gaining market share. In addition, oil substitutes such as biofuels, hydrogen, and ammonia are under development. Each electric vehicle that enters service insulates its owner from exposure to Saudi-led OPEC+ decisions. Nationwide, a more diverse set of US transportation options reduces Saudi influence in the United States, which means that any US rapprochement with Saudi Arabia need not be permanent. US-Saudi ties need only be as durable as oil’s monopoly on the US transportation market.
Oil is not going away, of course. But oil demand is shifting toward the developing world, where economic and population growth is strongest. Developing countries will soak up cargoes of Gulf oil far into the future, but those countries may never have the ability to protect their oil suppliers with a US-style security umbrella. The Gulf states must therefore seek alternative arguments for their strategic importance to the US.
It is also the case that the geopolitical power of oil producers is enhanced in a tight market. When markets are oversupplied, Washington has a freer hand with foreign policy. Any US retaliation for the OPEC+ cut should therefore be delayed until market circumstances can alleviate blowback. As oil demand plateaus and declines in the coming years, slack markets could become a more permanent feature. Over time, the combination of oversupply and alternative transportation fuels will make the US-Gulf relationship less of a strategic necessity.
