(CNN) — Sources revealed to CNN that the Joe Biden administration has launched a large-scale pressure campaign in a last-ditch effort to dissuade allies in the Middle East from drastically reducing oil production.
This comes before the crucial meeting, on Wednesday, of the Organization of Petroleum Exporting Countries +, the international bloc of oil producers, which is widely expected to announce a significant production cut in an attempt to raise oil prices, which in turn will lead to higher gasoline prices in the United States at a perilous time for the The Biden administration, just 5 weeks before the midterm elections.
Over the past several days, the Biden administration’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 once morest cutting oil production.
It is expected that OPEC + members led by Saudi Arabia and its allies, including Russia, will announce production cuts that may amount to more than one million barrels per day, and this will be the largest reduction since the beginning of the Corona epidemic and might lead to a significant rise in oil prices.
According to a draft the White House sent to the Treasury Department on Monday and obtained by CNN, it described the prospect of cutting oil production as a “complete disaster” and warned that it might be considered a “hostile act.”
“It is important that everyone understands the severity of those risks,” a US official said of what was described as a broad management effort expected to continue in the run-up to the OPEC+ meeting.
Another US official stated that the White House “is suffering from a state of panic and panic,” describing the administration’s recent efforts as reflecting a determination to achieve its goal.
“We’ve made clear that energy supplies must meet demand to support economic growth and lower prices for consumers around the world, and we’ll continue to talk with our partners regarding that,” National Security Council spokeswoman Adrian Watson said in a statement to CNN.
For Biden, the dramatic cut in oil production might not have come at a worse time.
For months, the administration has been engaged in an intense domestic and foreign policy effort to mitigate the rise in 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, US gasoline prices are starting to rise once more, posing a political risk the White House is desperately trying to avoid.
As US officials have moved to test potential domestic options to avoid gradual increases over the past several weeks, news of an OPEC+ oil production cut is particularly challenging.
Watson declined to comment on the midterm elections, saying instead that “thanks to the efforts of the President (Biden), energy prices have fallen sharply from their high levels and American consumers are paying much less.”
All efforts are required
Amos Hochstein, the US president’s top energy envoy, played a leading role in the lobbying effort, which was much more comprehensive than previously amid intense concern in the White House regarding a possible cut.
Hochstein, with Senior US National Security Official Brett McGurk and US Special Envoy for Yemen Tim Lenderking, traveled to Riyadh late last month to discuss a range of energy and security issues as a follow-up to Biden’s high-level visit to Saudi Arabia in July.
Officials with the US administration’s foreign policy and economic teams also engaged in communicating with the governments of OPEC countries as part of recent efforts to stave off production cuts.
The White House asked US Treasury Secretary Janet Yellen to personally present the issue to some Gulf finance ministers, including from Kuwait and the UAE, and try to convince them that production cuts would be extremely harmful to the global economy.
The United States argued that a long-term reduction in oil production would create further downward pressure on prices, which is the opposite of what the big cut is intended to do, as “reducing now would increase inflation risks,” and eventually lead to higher interest rates. greater risks of stagnation.
The White House draft suggested that Yellen reach out to her foreign counterparts and inform them that “there is a significant political risk to your reputation and your relations with the United States and the West if you take such a step.”
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.
This comes less than 3 months following Biden traveled to Saudi Arabia, where he met Saudi Crown Prince Mohammed bin Salman on a trip that was partly motivated by a desire to persuade the kingdom, the de facto leader of OPEC, to increase its oil production, helping to reduce fuel prices that were high at that time.
And when, a few weeks later, OPEC + agreed to a modest production increase of 100,000 barrels, critics said Biden did not get much from that trip, which was described 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 rehabilitating the image of 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 block production cuts as not robust 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 them as “desperate.”
An informed source says that communication with the UAE was planned, but Kuwait rejected this effort.
Kuwait’s embassy in Washington did not immediately respond to a request for comment, nor did the Saudi embassy and the UAE embassy immediately respond to a request for comment.
Publicly, the White House has cautiously avoided saying regarding the possibility of a significant oil production cut, and White House spokeswoman Karen-Jean-Pierre told reporters on Monday: “We are not members of OPEC+, so I don’t want to pre-empt what this meeting might come out of.” .
She added that the focus of the United States remains “to take every step to ensure that the markets are supplied with enough to meet the demand of the growing global economy.”
OPEC’s efforts to boost prices
OPEC+ members are considering a more dramatic cut in oil production due to the sharp drop in prices, which have fallen sharply below $90 a barrel in recent months.
The OPEC+ meeting will also set the looming oil price ceiling 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 might set for consumers, not the market, to dictate the price of oil.
The White House draft to the Treasury included a US proposal that if OPEC + decided to cut this week, the United States would announce the buyback of up to 200 million barrels to refill its strategic reserve, an emergency stockpile of oil, which the United States has been exploiting this year to help in Reducing oil prices.
The senior US official said the Biden 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 added that the idea was to inform OPEC+ that the United States “would not leave them if they invested money in production, and therefore, prices would not collapse if global demand fell.”
