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White House launches latest push to get OPEC to cut oil output to avoid ‘total disaster’





Washington
CNN

The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to dissuade allies in the Middle East from dramatically cutting oil production, according to multiple sources familiar with the matter.

The push comes ahead of Wednesday̵[ads1]7;s crucial meeting of OPEC+, the international cartel of oil producers that is widely expected to announce a significant cut in output in a bid to boost oil prices. That, in turn, will cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.

In recent days, President Joe Biden’s top energy, economic and foreign policy officials have been enlisted to lobby their foreign counterparts in Middle Eastern allies including Kuwait, Saudi Arabia and the UAE 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 production cuts potentially up to more than one million barrels per day. It would be the biggest cut since the start of the pandemic and could lead to a dramatic increase in oil prices.

Some of the draft discussion points circulated by the White House to the Treasury Department on Monday and obtained by CNN portrayed the prospect of an output cut as a “total disaster” and warned that it could be taken as a “hostile act.”

“It’s important that everyone is aware of how high the stakes are,” a US official said of what was framed as a broad administration effort expected to continue ahead of the OPEC+ meeting on Wednesday.

The White House “is cramping and panicking,” another US official said, describing this latest administration effort as “taking off the gloves”. According to a White House official, the talking points were drafted and exchanged by staff and not approved by White House leadership or used with foreign partners.

In a statement to CNN, National Security Council spokeswoman Adrienne Watson said, “We have been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world, and we will continue to talk with our partners about that .”

For Biden, a dramatic cut in oil production could not come at a worse time. For months, the administration has engaged in an intensive domestic and foreign policy effort to curb soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to be paying off, with US gasoline prices falling for nearly 100 days in a row.

But with just a month to go before the critical midterm elections, US gas prices have begun to creep back up, posing a political risk the White House is desperately trying to avoid. As U.S. officials have moved to gauge potential domestic options to stave off gradual increases in recent weeks, news of major OPEC+ actions poses a particularly acute challenge.

Watson, the NSC spokesperson declined to comment on the midterms, instead saying, “Thanks to the president’s efforts, energy prices have fallen sharply from their highs and American consumers are paying far 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 extensive than previously reported, amid extreme concern in the White House over the potential cut. Hochstein, along with top national security official 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. .

White House launches latest push to get OPEC to cut oil output to avoid ‘total disaster’

Officials across the administration’s economic and foreign policy teams have also been involved in reaching out to OPEC governments as part of the latest effort to avert a production cut.

The White House has asked Treasury Secretary Janet Yellen to take the case personally to some of the Gulf states’ finance ministers, including from Kuwait and the United Arab Emirates, and try to convince them that an output cut would be extremely damaging to the global economy. The US has argued that a long-term cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would have been designed to achieve. Their logic is that “cuts right now would increase the risk of inflation,” leading to higher interest rates and ultimately a greater risk of recession.

“There is great political risk to your reputation and your relationship with the United States and the West if you go ahead,” the White House draft of talking points suggested Yellen communicate with her foreign counterparts.

A senior US official acknowledged that the administration has been lobbying the Saudi-led coalition for weeks to try to convince them not to cut oil production.

It comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman on a trip driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to increase oil production which would help bring down the then sky-high gas prices.

President Joe Biden (L) and Saudi Arabia's Crown Prince Mohammed bin Salman (R) arrive for the family photo during the Jeddah Security and Development Summit (GCC+3) at a hotel in Saudi Arabia's Red Sea coastal city of Jeddah on July 16, 2022.

When OPEC+ agreed a few weeks later to a modest 100,000 barrel increase in production, critics argued that Biden had gotten little out of the trip.

The trip was billed as a meeting with regional leaders on issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for restoring the image of the crown prince who had been directly blamed by Biden 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 planning and coordinating the visit.

A diplomatic official in the region described the US campaign to block production cuts as less of a hard sell and more of an attempt to underscore a critical international moment given the economic fragility and the ongoing war in Ukraine. Although another source familiar with the discussions told CNN, it was described by a diplomat from one of the countries contacted as “desperate”.

A source familiar with the outreach says a call was planned with the UAE, but the effort was rebuffed by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Neither did Saudi Arabia. The UAE embassy declined to comment.

Publicly, the White House has carefully avoided considering the possibility of a dramatic oil production cut.

“We are not members of OPEC+, and so I don’t want to get ahead of what could potentially come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters on Monday. The U.S. focus, Jean-Pierre said, continues to “take every step to ensure that markets are adequately supplied to meet the demand of a growing global economy.”

OPEC+ members are weighing a more dramatic cut because of what has been a precipitous decline in prices, which have fallen sharply below $90 a barrel in recent months.

Also hanging over Wednesday’s OPEC+ meeting in Vienna will be the looming oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not just Russia, have expressed displeasure at the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.

Included in the White House’s talking points to the Treasury Department was a US proposal that if OPEC+ decides against a cut this week, the US would announce a buyback of up to 200 million barrels to replenish its Strategic Petroleum Reserve (SPR), an emergency stockpile of petroleum which the US has used this year to help lower oil prices.

The administration has been making clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC’s oil to fill the SPR. The idea has been to convey to OPEC+ that the US “will not leave them hanging dry” if they invest money in production, the official said, and therefore prices will not collapse if global demand slows.



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