The US rethinks relations with Venezuela, Iran and Saudi Arabia

United States has long had three oil-producing countries at arm’s length —Venezuela, Iran and Saudi Arabia–, but now seeks a rapprochement at a time when oil prices fuel skyrocket amid the crisis stemming from the invasion russian from Ukraine.

It’s not clear, though, whether US diplomacy can get more crude fast enough to ease current shortages or get nations it once despised to give up beneficial trade relations with Russia.

For the Joe Biden administration, a rapprochement with the three oil nations could help stabilize oil and gas prices and tilt those countries further West away from Russia and China.

But the US president is also exposed to those countries rejecting the hand that is extended to them and being questioned for seeking a rapprochement with governments accused of human rights abuses and violence.

“It is in our interest to maintain stable energy supplies, including through diplomatic efforts,” Secretary of State Antony Blinken said Wednesday. “We have multiple interests and we use diplomacy to try to satisfy them.”

The tone used represented a change from Biden’s statement upon assuming the presidency, when he said that democratic values ​​would be pillars of his international policy.

Saudi Arabia has benefited in recent years from an alliance with Russia, another major oil producer, to contain oil and natural gas supplies and keep prices high.

Biden vowed to isolate Crown Prince Mohammed bin Salman and the rest of the Saudi royal family for abuses including the 2018 murder of US-based journalist Jamal Khashoggi.

“I don’t know to what extent (Biden) will be willing to submit to such humiliation,” commented Saudi analyst David Ottaway, alluding to Washington’s efforts to improve relations with Prince Mohammed and with Saudi Arabia, the country with the best chance. to solve the supply problem. “(Biden) He wanted to make this guy an outcast.”

As far as Iran and Venezuela are concerned, the US would like to find ways to get their oil flowing back into their territory. “The problem is that, in this situation, the room for maneuver of these countries increases significantly,” said Claudio Galimberti, an analyst at Rystad Energy.

“Iran will ask for many things to resume that relationship, the same as Venezuela,” Galimberti predicted. Also, it could take time for them to increase their production.

The devastating Russian military invasion of Ukraine, with the consequent shock to the markets and the suspension of the importation of Russian oil, caused the price of gasoline to reach an average of US$4.25 a gallon (four liters) on Wednesday.

Biden announced the suspension of Russian oil and gas imports on Tuesday, driving up oil prices in part because OPEC put a cap on production, pushed by Saudi Arabia and Russia, even though the Russians are not OPEC. organization.

The Biden administration is launching cautious negotiations with Venezuela, Iran and Saudi Arabia.

In the case of Iran, the United States does not publicly link its negotiations with oil, but it is carrying out negotiations on the Iranian nuclear program that, if successful, would cause the sanctions against that nation to be lifted and Iranian oil to flow legally again in the market.

For Biden, a failure of this “oil diplomacy” exposes him to humiliation by hostile rulers, dealing a heavy blow to his re-election chances.

A successful outcome of these efforts could have the same result.

“Our response to (Russian President Vladimir) Putin should not be to improve our relations with the Saudis,” Democratic Representative Ilhan Omar said in a tweet, recalling the war that Saudi Arabia has been waging for years in Yemen.

Other figures in Biden’s Democratic Party also made clear their discomfort with the sudden rapprochement with Saudi Arabia for more oil.

The Republicans, for their part, are above all critical of any rapprochement with Iran. In practice, said Richard Goldberg, who worked on the National Security Council under the Donald Trump government, the Biden government is willing to “finance terrorism” in order to buy its oil.

Western nations hope that his suspension of Russian oil purchases will force Putin to back down on Ukraine, though this may create other problems, as nations produce different types of oil, which require different refineries.

A high-level US delegation visited Venezuela last weekend for the first time since relations between the two countries cooled after Hugo Chavez came to power in the 1990s. The delegation was apparently well received by the illegitimate regime in Venezuela. Nicholas Maduro. On Tuesday of this week, Venezuela released two imprisoned Americans.

The rapprochement raises the possibility that the United States will lift its sanctions on Venezuela and that Venezuelan oil will return to its markets.

But even if that happens, the Venezuelan oil industry may not be ready to ramp up production in time to help contain rising oil prices after years of political turmoil and underinvestment have hit Venezuela’s oil sector hard.

A lifting of restrictions on the Venezuelan state oil company could see production rise by 400,000 barrels a day within months, according to Paul Shelson, head of the geopolitical advisory unit at S&P Global Commodity Insights.

As far as Iran is concerned, the negotiations that seek to restore limits to the Iranian nuclear program in exchange for a lifting of sanctions are coming to an end, for better or for worse. Those sanctions cover Iranian oil.

The Trump administration had withdrawn from a nuclear deal with Iran.

The Iranians could supply oil quickly and would be able to put a million barrels a day on the market, according to experts.

Iranian oil, however, could go to other countries before the United States.

On the other hand, experts warn that if the United States allows Russia to trade freely with Iran, the Russians could put their oil on the market through Iran.

Meanwhile, despite decades of a strategic alliance between Saudi Arabia and the United States, including the kingdom’s dependence on the Americans for its military needs, Prince Mohammed and King Salman show little interest in helping the Biden government out. of the quagmire in which he finds himself.

Biden said he wanted to make a pariah of the Saudi royal family over Khashoggi’s murder at the Saudi consulate in Istanbul. US intelligence services concluded that the crown prince was involved.

But the oil market situation prompted Biden to try to ease tensions and even called the old king last month.

“We are not going to separate our values ​​and our interests,” Blinken said Wednesday. “But we are working in a productive and constructive way with those countries,” he added.

Saudi Arabia and the United Arab Emirates (UAE) could put an additional two million barrels a day on the market if they wanted to. The UAE said on Wednesday that it will ask the Organization of the Petroleum Exporting Countries (OPEC) to consider increasing oil production.

Some OPEC nations, however, may be reluctant to do so for fear of snubbing Russia, thus hurting the organization’s ability to influence oil prices.