John Clarke assesses the contradictions and tensions arising from OPEC’s decision to cut oil production by 2 million barrels a day in the midst of rising global economic instability and imperial rivalry

The recent decision of the Organisation of the Petroleum Exporting Countries (OPEC) and its OPEC+ allies ‘to cut oil production by 2 million barrels per day (has) sent shockwaves throughout global markets.’ According to Forbes, this move represents an unexpectedly huge reduction in the global supply of some 2% that ‘will push up oil prices and worsen inflation.’ It will also ‘exacerbate the economic downturn, as high oil prices serve as a de-facto tax on the economy. In fact, the majority of global recessions were preceded by high oil prices.’

OPEC presented this move as a necessary response to ‘rising interest rates in the West and a weaker global economy.’ However, it is readily apparent that other considerations are at play here. Saudi Arabia occupies a hugely influential position within OPEC and the cut that has been put into effect represents ‘a friendly gesture to Russia (itself a member of OPEC) and a great boost to their revenue streams (but) it is also a broadside against the Biden administration preceding the midterm elections.’

US rebuffed

The tensions between the Saudi rulers and the present occupants of the White House are very significant but OPEC’s decision also raises bigger questions about weakening US power and influence in the context of a dangerous and escalating global rivalry. For its part, the Kremlin was delighted with this result and its spokesperson declared that “This at least balances the mayhem that the Americans are causing.” He also praised the “balanced, thoughtful and planned work of the countries that take a responsible position within OPEC (that) is opposed to the actions of the US.”

For its part, the Biden Administration is greatly disturbed by what has unfolded. Though oil prices have fallen from $120 a barrel in June to $80 at present, the White House declared in a statement that it was ‘disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.’

The statement declared that Biden ‘will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices.’ It also, rather weakly, suggested that OPEC’s move was ‘a reminder of why it is so critical that the United States reduce its reliance on foreign sources of fossil fuels.’ It seems that, when fundamental interests are on the line, green rhetoric gives way to regret that the climate crisis can’t be driven by domestic fossil fuel reserves.

It is striking that the OPEC cut went through despite a major US effort to prevent it. As CNN bluntly put it, ‘The Biden administration launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.’ This lobbying effort spanned weeks and involved many of the highest officials, including personal interventions with ‘some Gulf state finance ministers’ by Treasury Secretary Janet Yellen. These urgent appeals to leading figures within OPEC were complemented by more robust forms of pressure. Written material released by the White House prior to the decision warned that a major production cut would be a ‘total disaster’ and went so far as to suggest that it might even be considered a ‘hostile act.’ Neither plaintive appeals nor dire warnings, however, were enough to prevent the feared outcome.

That the OPEC move will exacerbate global economic instability and increase the prospects for a major slump is clear enough. It is equally obvious that the US-led effort to weaken the Putin regime has been undermined to a significant degree. However, the production cut also speaks volumes with regard to the weakening of the dominant position of the US on a global scale.

The Atlantic Council, as a body that ‘galvanizes US leadership and engagement in the world, in partnership with allies and partners, to shape solutions to global challenges,’ is an impeccable champion of the interests of US imperialism. In this regard, its perspective on the OPEC debacle is extremely interesting and quite telling. As the Council expressed it

‘The fundamental problem between the United States and Saudi Arabia is one of continued, misaligned expectations. Saudi Crown Prince Mohammed bin Salman (MBS) continues to demonstrate his preference for global engagement that is transactional, similar to how both China and Russia generally engage in the world. The problem is, that’s not traditionally how Washington conducts foreign policy, preferring long-term strategic relationships.’

There’s a lot to be found within this circumspect if somewhat pompous formulation. The ‘long term strategic relationships’ that are referred to here are the kind that develops between dominant and subservient powers. ‘Global engagement that is transactional,’ on the other hand, emerges when those who are supposed to be junior partners start to assert their own interests and look for accommodations with rival major powers. This rather sums up the tensions and contradictions that underlie the failure of the US to assert its interests in the face of the OPEC production cut.

As I’ve suggested, there are particular elements of discord between the Biden administration and Saudi Crown Prince Mohammed bin Salman. However, longer-term and far deeper factors are at work. The US wasn’t firm enough in its response to the Arab Spring uprisings in 2011 as far as the Saudi autocrats were concerned. The nuclear deal with Iran was also a source of major resentment. Developments of this kind have increased friction but fundamental economic interests are also on the line.

At this juncture, the US confronts alarming global economic instability and the related question of rivalry with both Russia and China. Moves towards a price cap on Russian oil that the G7 has taken are deeply disturbing to OPEC and Saudi Arabia in particular. Biden is anxious to keep oil prices low, in the face of a mushrooming economic crisis and this runs counter to OPEC’s objectives.

The release of 1 million barrels a day from the US strategic petroleum reserve was entirely unwelcome news for its oil-producing ‘allies,’ as they faced the consequences of falling prices. The ‘misaligned expectations’ that the Atlantic Council speaks of coming down to the readiness of Saudi Arabia and the other oil producers to assert their own immediate interests and their ability to form political and trading alliances with Russia and China. The power and influence of the United States is still enormous but it simply isn’t what it once was.

Limited options

Clearly, Biden is unsure how best to respond and has been relatively measured in his public utterances so far. Senate majority leader Chuck Schumer was less restrained and thundered that “What Saudi Arabia did to help Putin continue to wage his despicable, vicious war against Ukraine will long be remembered by Americans. We are looking at all the legislative tools to best deal with this appalling and deeply cynical action.”

Despite this angry rhetoric by a key political ally, it is clear that ‘Mr. Biden’s options to counter the production cut are limited and carry trade-offs.’ He could take measures of retaliation but OPEC has powerful options of its own. Driving up domestic oil production would be politically problematic and any accommodation with Iran or Venezuela to generate more oil supplies will be fraught with huge difficulties.

At root, the confrontation with OPEC isn’t simply a geopolitical misstep by a particular US president and it reflects a weakening of US ‘world leadership.’ The ability and readiness of Saudi Arabia and its closest collaborators to assert their own interests and to draw support from a hated US rival is enormously significant. In conditions of global instability and increasingly dangerous rivalry between major powers, it is a highly telling political development.