Three checkered oil regimes that American President Joe Biden and past US leaders have spectacularly snubbed — Venezuela, Saudi Arabia and Iran — are now targets of US outreach as global fuel prices reach jarring levels during the Ukraine crisis.
But it’s not clear any US diplomacy could get more crude oil on the market fast enough to help the current supply crunch or tear once-shunned oil states away from what — for Saudi Arabia in particular — are profitable alliances with Russia.
RISKY MOVE BY AMERICA
For the Biden administration, the US overtures to three problematic oil giants at best could lead to stabilizing rising oil and gas prices and draw those governments closer to the West and away from Russia and China. At worst, Biden risks humiliating rebuffs and condemnation for outreach to governments accused of rights abuses and violence.
“We have an interest globally in maintaining a… steady supply of energy, including through diplomatic effort,” Secretary of State Antony Blinken said Wednesday on the moves toward countries that have been out of US or Biden administration favour, and in the case of Iran an armed threat.
“We have a multiplicity of interests, and use diplomacy to try to advance them,” Blinken said.
The phrasing, as Russia’s war raises the stakes in many areas, was a marked change from Biden’s praise at the outset of his presidency of democratic values as “America’s abiding advantage” in diplomacy.
SAUDI ARABIA’S CLOSE TIES WITH RUSSIA
Saudi Arabia has profited richly in the past couple of years from teaming with fellow top petroleum producer Russia to keep global oil and natural gas supply modest and prices high.
And Biden came to office vowing to isolate the crown prince, Mohammed bin Salman, and the rest of the Saudi royal family over abuses that include the 2018 killing of US-based journalist Jamal Khashoggi.
Biden and the young crown prince are not known to have ever talked.
“I don’t know whether he’s up to eating that much crow,” Saudi Arabia analyst David Ottaway said of attempts now by Biden to improve his administration’s relations with Prince Salman and Saudi Arabia, the country that could most easily end the global supply crunch. “He was gonna make a pariah of this guy.”
As for Iran and Venezuela, the US would welcome positive diplomatic outcomes that bring back oil from those nations, but “the problem is that in that situation, their negotiation power increases dramatically”, Claudio Galimberti, senior vice president of analysis at Rystad Energy.
“So Iran will make a lot of very steep requests in order to rejoin the deal and so would Venezuela,” the energy analyst said. Plus, it could take time to ramp up production.
The Biden administration is making cautious overtures to all three oil giants, Venezuela, Iran and Saudi Arabia.
In the case of Iran, administration officials are not publicly linking their diplomacy to oil, although they are pursuing a deal on Iran’s nuclear program that could see international sanctions on that country lifted and Iran’s oil quickly back on the market legally.
For Biden, failure in the high-profile oil diplomacy risks humiliating treatment from unfriendly rulers abroad, potentially re-election-damaging condemnation at home.
And success? Potentially, likewise.
US BAN ON RUSSIAN OIL, GAS IMPORTS
Russia’s devastating military invasion of Ukraine, and resulting market disruptions and sanctions hitting Russia’s petroleum exports, helped drive the U.S. average gasoline price to a bracing USD 4.25 on Wednesday.
Biden announced a ban on Russian oil and gas imports the day before, compounding high prices from the OPEC production cap engineered by Saudi Arabia and non-OPEC member Russia.