OPEC Plus, the group of 23 mainly Middle Eastern and African oil-exporting countries led by the odd pairing of Saudi’s Crown Prince Mohammad Bin Salman and Vladimir Putin, finds itself at the centre of a geopolitical tug-of-war between Sino-American competition. With OPEC powers forming new alliances, Helen Thompson in UnHerd asks, has the West lost control of oil?
Oil might be a source of power, but trying to control its price is a politically hazardous business. Led by the odd pairing of the Saudi Crown Prince, Mohammad Bin Salman (MBS), and Vladimir Putin, the Opec Plus oil producers’ cartel exists to maintain a price floor for its fractious members in an energy environment where oil prices have crashed three times over the past two decades. But its importance in a geopolitical world defined by Sino-American competition is beginning to extend well beyond the gyrations of oil markets. Opec Plus has remained resilient even as the Beijing-Moscow-Tehran axis has hardened since Russia’s invasion of Ukraine, as well as the recent Chinese-brokered rapprochement between Saudi Arabia and Iran. This raises questions about whether Saudi Arabia is now defecting into the anti-Washington camp.
Opec Plus was formed in rather different geopolitical circumstances. In late 2016, the cartel constituted a rapprochement between the two large, and hitherto generally antagonistic, Eurasian oil producers as they were adjusting to the shock of the United States’ re-emergence as a top-tier oil producer. Forging an association between Opec and Moscow was an act of Saudi desperation. For the previous two years, Riyadh had sought to bankrupt the American shale sector by allowing prices to slump, but largely succeeded only in emptying its own foreign exchange reserves. When they finally reversed course in September 2016, the Saudis found that, having alienated most other Opec members with their recklessness, they could no longer control prices. Two months later, Russia and 10 other states agreed to support a second Opec oil output cut, and Opec Plus was born.
Undoubtedly, some broader geopolitical convergence between Riyadh and Moscow against Washington followed over the next three years. When King Salman visited Putin in October 2017 — the first ever state visit of a Saudi monarch to Moscow — the two leaders discussed military co-operation and the possibility of the Saudis purchasing Russian arms. But however much the threat of American shale united Opec Plus, a large geopolitical fault line ran through the new producer alliance: while Russia had been moving closer to Iran since Moscow’s intervention in Syria in September 2015, Saudi Arabia had been engaged in a proxy war with Iran in Yemen since 2014.
When, in September 2019, Iran — either alone or acting with its Houthi allies in Yemen — destroyed the large Saudi oil processing facility at Abqaiq with drones and cruise missiles, that chasm was laid bare. While the Saudis were crushed by the failure of their Patriot missile defence system, bought at great expense from the Americans, Putin appeared with the Iranian president and mock-solemnly pronounced that Moscow could sell Riyadh protection that would actually work. Denying even that Tehran was responsible for the ambush, Putin said that Russia was “supportive of Iran, wholeheartedly”.
Only four months later, Opec Plus had to deal with its first serious oil market crisis, as China’s demand plummeted at the start of the pandemic. The Russian-Saudi compact splintered. Unable to agree with Putin on how much production to cut, MBS sped off in the opposite direction, flooding the market in another bid to grab market share. In sending future prices into negative territory, MBS left it to Donald Trump, of all people, to patch Opec Plus together again — by threatening to withdraw American military support for Riyadh unless the Saudis and Russians agreed to slash output.
The Trump administration’s Abraham Accords, which saw the UAE and Bahrain normalise relations with Israel in September 2020, compounded the cartel’s lack of internal coherence on Middle Eastern matters. In oil terms, the Accords also appeared strategic: the UAE is the only member of Opec Plus other than Saudi Arabia with clear spare capacity, and Bahrain has been sitting on a known large offshore shale oil formation since 2018.
But for the past three years, events have conspired decidedly to strengthen Opec Plus. With the new Democratic administration in Washington unable to bring Iran into another nuclear deal in 2021, and post-pandemic growth in the shale sector nearly entirely concentrated in the Permian Basin, Biden, just eight months into office, had to ask Opec Plus to increase production. His trip to Riyadh the following summer for the same purpose yielded little. Indeed, in the months after Biden’s visit, Opec Plus appeared to toy with the American president, announcing a major production cut just weeks before the mid-term elections. Unable at any time during his presidency to influence the cartel, Biden has had to release so much reserve U.S. oil that in March 2023 the Strategic Petroleum Reserve contained only 58% of what it did three years previously.
Russia’s war has only amplified the autonomy of the Arab members of Opec Plus, paradoxically by recasting China’s role in the oil market. From at least the time of the cartel’s inception, the Chinese leadership has wished to deepen its relations with all the major Middle Eastern oil producers. Most ambitiously, it reached an agreement with Iran in 2019 — formalised in 2021 — on a 25-year co-operation programme, which will see China make large investments in Iran’s oil and gas sector.
But prior to February 2022, China was also willing to act with other large consumer countries to counter Opec Plus’s influence on oil markets. Notably, when prices were rising in the second half of 2021, China agreed to co-ordinate withdrawals from its reserves with those Washington was then making. Now, Moscow’s war against Ukraine appears to have ended any structural rationale for Sino-American co-operation on oil. As China can benefit from discounted Russian crude, it does not share the American interest in forcing Opec Plus collectively to supply more oil to bring down Middle Eastern prices. Moreover, oil and gas security for China lies only in maintaining diversity of supply, and hence avoiding over-dependence on Russia. Therefore Beijing’s interest lies in preventing a bifurcation of the Opec Plus market between Asia and Europe, as well as reducing the vulnerability of passage of tankers through the Strait of Hormuz to Saudi-Iranian friction.
These changes have restructured Saudi choices in a world in which Washington expects its allies to take its side in the Sino-American conflict.
Worth reading in full.
To join in with the discussion please make a donation to The Daily Sceptic.
Profanity and abuse will be removed and may lead to a permanent ban.
The West hasn’t lost control of oil, it gave it away with its lunatic Net Zero policies.
The West has plenty of oil, gas and coal. The USA became independent on foreign oil and gas and a net exporter during the OrangeManBad era, bud Creepy Joe scuppered that.
If we want control,again, We The (stupid) People need to get back control of our government – and that won’t happen with crosses on ballot papers.
All smoke and mirrors as far as I’m concerned. SA and its leader/oil are part of the planned take down of the West, which both TPTB in West and East are involved. Oh, and the likes of Russia/China aren’t coming to save us.. they are both fully signed up to the Globalist Agenda.. (the NET ZERO Scandemic) that is of course if they’re not playing 5D Chess.. yeah right..
This doesn’t mention BRICS and G7. The arrogance of the G7 members not to abolish this cabal, and just have the G20 or what ever, to include the now BRICS members has caused this potential division of world power and economy. The rise of the BRICS group also would indicate the reduction of confidence in the G7 as a trading partner.
Yet more consequences of stealing a US presidential election
What a strange question to ask
Western policy is to try to destroy the oil and gas market. That is what climate change and net zero is all about. Destroy all demand for oil and gas by effectively prohibiting its use (forced electric cars, gas stove prohibitions etc).
The west lost control of the oil market a long rime ago. That is why we are all being forced to adopt climate change ideology. Its the mechanism for “our” oligarchs to try to continue to exert power globally. We, their subjects, will no longer be allowed to enrich other oligarchs like the Saudis and instead will consume energy that our oligarchs control and produce (renewables).
Come on DS, wake up, get with the game.
Well said Stewart.. what a strange question indeed!
Yes it’s certainly a conundrum…..but I don’t genuinely think they believe the net zero nonsense involves them…..I really believe they think they will carry on as before…and it won’t affect them at all….
…they do it to make money, as you say..and to try to control the plebs….…..
They really do understand how important fossil fuels are..that is why they are trying to destroy the Government of probably the most abundant resource rich country in the world…Russia…
..they also know full well how important Russia is to China … the biggest economy backed by the biggest fuel powerhouse….a union their own idiotic foreign policy brought about….
Saudi joined the Shanghai Treaty Organisation as a dialogue partner earlier this year, and is also interested in joining BRICS..which would mean a good majority of the biggest oil producers are in an organisation with no ‘western’ countries having any input at all..which is a sobering thought.
I could well be wrong but it’s like watching a car crash..the majority of the world is, it seems, getting on with life, business ….and trying to grow their economies..while the ‘West’ just seems intent on self-implosion and a determination to make everybody’s life a misery one way or the other..but I can’t help thinking the reality of the green idiocy will become so plainly ruinous in the near future it will be in a way even they can’t ignore…
Indeed they will continue to use oil and gas themselves while depriving the masses of it. Just like generals eat warm meals and sleep in warm beds while soldiers fight and suffer in inhumane conditions.
One thing that people underestimate is just how expendable we all are to those who wield power and authority over us.
They have absolutely no problem at all sacrificing us to achieve their goals if they think they can get away with it.
The illusion of democracy goes hand in hand with the fantasy that our leaders care about us.
No, the oligrachs have bought land and factories in China. The best way to maximise their profits is to force up the cost of western production and move it all to China.
The real question is who will profit – Cui bono – from this ?
We cannot be surprised.
western ministers are to ban hydrocarbon use in a few short years which would undermine the markets for oil producers. Meanwhile, fumbling Joe threatened Saudi if it refused to pump more cheap oil short term.
alongside this insults have flowed and the incompetent departure from Afghan and Iraq undermine trust in a western defence shield.
very damaging behaviour by western governments.
Strange that Biden is preventing more oil being imported from Canada.