A year ago, Mohammed bin Salman was an outcast in Washington, D.C. This week, President Joe Biden will meet https://www.washingtonpost.com/opinions/2022/07/09/joe-biden-saudi-arabia-israel-visit the Saudi Arabian crown prince on his home turf to ask for more oil. The turnaround underscores how the kingdom can benefit from the fallout from Russia’s invasion of Ukraine – if it wants to.
The U.S. president is in a bind. Western sanctions against Russian oil, which accounts for 10% of the globe’s 100 million daily barrels, have lifted prices higher than $100 a barrel since March, and pushed U.S. gasoline prices above https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0U_PTE_NUS_DPG&f=W $4 a gallon. Biden’s short-term objective is to persuade Saudi to boost oil production above its current output of around 11 million barrels per day.
His second goal is broader. India and China, both key Saudi customers, have recently been buying over 1 million barrels of Russian oil a day more than their 2021 level, at a 30% discount to a barrel of Brent crude. Biden wants Saudi to divert some of its surplus to the European Union, where an official embargo on Russian oil is due to start in December.
Saudi leaders have several reasons to reject what amounts to a reshuffling of the global energy market into two camps: one spanning the United States, Europe and the Persian Gulf, and the other including Russia, China and India. In 2020, two-thirds of Saudi’s daily oil exports went https://www.eia.gov/international/analysis/country/SAU to China, India, South Korea and Japan, with only 17% heading to Europe and the United States. Saudi is also close https://www.wsj.com/articles/biden-to-visit-a-saudi-arabia-that-is-closer-to-russia-than-ever-11657633689 to Russia in the so-called “OPEC+” producer group. Finally, the U.S. president personally blamed https://www.breakingviews.com/considered-view/biden-finds-mohammed-bin-salman-is-too-big-to-nail the crown prince – known as MbS – for the murder of journalist Jamal Khashoggi by Saudi agents in 2018, and labelled the country a “pariah”.
Yet the U.S. plan could suit MbS. While Asia will continue to be a major oil export market, Chinese and Indian importers have an incentive to keep buying the black stuff from Russia. Diverting output to Europe and America should allow Saudi to sell more at nearer the market price.
The second windfall would be western goodwill. Saudi’s “Vision 2030” plan to diversify its economy away from fossil fuels requires providers of capital to ease their post-Khashoggi decision to shrink investment in the kingdom. Just $5.5 billion of foreign direct investment flowed https://unctadstat.unctad.org/countryprofile/generalprofile/en-gb/682/index.html into Saudi in 2020, a fifth of the level in 2010. There are early signs https://www.bloomberg.com/news/articles/2022-03-29/saudi-arabia-s-fdi-hit-decade-high-last-year-on-aramco-deal?sref=yYqHJdKG that is changing. Easing the West’s energy crunch could help unblock the flow of money.
U.S. President Joe Biden will hold bilateral talks with Saudi King Salman bin Abdulaziz and his leadership team, including Crown Prince Mohammed bin Salman, when he visits the Middle East, a White House spokesman said on July 7.
In an opinion piece published in the Washington Post on July 9, Biden said his aim was to reorient and not rupture relations with a country that has been a U.S. strategic partner for 80 years.
“I know that there are many who disagree with my decision to travel to Saudi Arabia. My views on human rights are clear and long-standing, and fundamental freedoms are always on the agenda when I travel abroad,” Biden wrote.
Source: Reuters (Editing by Peter Thal Larsen and Oliver Taslic)