Washington
CNN
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The Biden administration launched a massive pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from it Significantly reduce oil productionAccording to multiple sources familiar with the matter.
The boost comes ahead of the OPEC+ meeting, which is widely expected to announce a major production cut in a bid to lift oil prices, on Wednesday. This, in turn, will lead to higher US gasoline prices at an uneasy time for the Biden administration, just five weeks before the midterm elections.
Over the past several days, President Joe Biden’s top energy, economic and foreign policy officials have been enlisted to pressure their foreign counterparts in Middle Eastern allies including Kuwait, Saudi Arabia and the United Arab Emirates to vote against cutting oil production.
Members of the Saudi-led oil cartel and its allies including Russia, known as OPEC+, are expected to announce potential production cuts. Up to over 1 million barrels per day. This would be the largest cut since the beginning of the pandemic and could lead to a significant spike in oil prices.
Some of the draft talking points that the White House distributed to the Treasury on Monday and obtained by CNN called the prospect of the production cut a “total disaster” and warned that it could be seen as a “hostile action.”
“It’s important that everyone realize how serious the risks are,” a US official said of what has been framed as a broad management effort that is expected to continue in the run-up to Wednesday’s OPEC+ meeting.
Another US official said the White House was “in a state of panic and panic,” describing the administration’s recent efforts as “taking the gloves off.” According to a White House official, talking points are crafted and shared by staff and have not been approved by White House leadership or used with foreign partners.
In a statement to CNN, National Security Council spokesman Adrian Watson said: “We’ve made clear that energy supplies must meet demand to support economic growth and lower prices for consumers around the world and will continue to talk with our partners about that.”
For Biden, the dramatic cut in oil production could not have come at a worse time. For months, the administration has been engaged in an intense domestic and foreign policy effort to mitigate rising energy prices in the wake of Russia’s invasion of Ukraine. The work seemed to be paying off, as US gasoline prices fell for nearly 100 days in a row.
But with only a month left before the crucial midterm elections, Gasoline prices in the United States began to rise again, which poses a political risk the White House is trying hard to avoid. As US officials move to gauge potential domestic options to avoid gradual increases over the past several weeks, news of the major OPEC+ action presents a particularly acute challenge.
Watson, a spokesperson for the National Security Council declined to comment on the midterm elections, saying instead, “Thanks to the president’s efforts, energy prices have fallen sharply from their high levels 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 comprehensive than previously reported amid intense concern in the White House about a possible cut. Hochstein, along with Chief National Security Officer Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues as a follow-up to Biden’s high-profile visit to Saudi Arabia in July. .
Officials from the administration’s foreign policy and economic teams have also engaged in outreach to OPEC governments as part of recent efforts to stave off production cuts.
The White House asked Treasury Secretary Janet Yellen to present the issue in person to some Gulf finance ministers, including from Kuwait and the United Arab Emirates, and try to convince them that production cuts would be extremely harmful to the global economy. The US argued that lowering oil production in the long run would create more downward pressure on prices – the opposite of what a significant cut would be designed to achieve. Their reasoning is that “cutting for now would raise inflation risks”, lead to higher interest rates and, ultimately, greater risks of recession.
The draft White House talking points suggested that Yellen reach out to her foreign counterparts: “There is a significant political risk to your reputation and your relations with the United States and the West if you move forward.”
A senior US official admitted that the administration has been pressing the Saudi-led coalition for weeks to try to persuade them not to cut oil production.
It comes less than three months after President Joe Biden traveled to Saudi Arabia and met Crown Prince Mohammed bin Salman on a trip that was partly motivated by a desire to persuade Saudi Arabia, the de facto leader of OPEC, to increase its oil production. It would help bring down gas prices that were high at the time.
When OPEC+ agreed a few weeks later to a modest production increase of 100,000 barrels, critics argued that Biden did not get much out of the trip.
She described the trip as a meeting with regional leaders on issues critical to the national security of the United States, including Iran, Israel and Yemen. It has been criticized for its lack of results and image rehabilitation for 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 aides, McGurk and Hochstein, shuttled between Washington and Saudi Arabia to plan and coordinate the visit.
One diplomatic official in the region described the US campaign to prevent production cuts as less of a hassle, and more of an attempt to underscore a defining international moment given economic fragility and the ongoing war in Ukraine. Although another source familiar with the discussions told CNN, a diplomat from one of the countries dealt with described it as “desperate.”
A source familiar with the outreach says a call was planned with the UAE, but Kuwait rejected the effort. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Nor is Saudi Arabia. The UAE embassy declined to comment.
Publicly, the White House has cautiously avoided considering the possibility of a major cut in oil production.
“We are not members of OPEC+, so I don’t want to pre-empt what this meeting could unfold,” White House Press Secretary Karen-Jean-Pierre told reporters on Monday. Jean-Pierre said the focus remains on the US “taking every step to ensure that the markets are supplied with enough to meet the demand of the growing global economy”.
OPEC+ members are weighing a more dramatic cut due to the sharp drop in prices, which have fallen sharply below $90 a barrel in recent months.
Commenting on Wednesday’s OPEC+ meeting in Vienna will also be the looming oil price cap that European countries intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not just Russia, have expressed dismay at the prospect of a price cap due to the precedent they could set for consumers, not the market, to dictate the price of oil.
Points of White House talk to the Treasury included a US proposal that if OPEC+ decides to cut this week, the US will announce a buyback of up to 200 million barrels to refill its Strategic Petroleum Reserve (SPR), an emergency stockpile of oil. The United States has been using this year to help bring down oil prices.
The senior US official said the administration had made it clear to OPEC+ months ago that the United States was ready to buy OPEC oil to replenish the Strategic Petroleum Reserve. The official said the idea was to tell OPEC+ that the US “would not leave them hanging” if they invested money in production, and therefore, that prices would not collapse if global demand fell.
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