U.S. Officials Had a Secret Oil Deal With the Saudis. Or So They Thought.

The New York Times

U.S. Officials Had a Secret Oil Deal With the Saudis. Or So They Thought.

Mark Mazzetti, Edward Wong and Adam Entous – October 26, 2022

President Joe Biden, center, is greeted by dignitaries as he arrives at King Abdulaziz International Airport in Jeddah, Saudi Arabia, on Friday, July, 15, 2022. (Doug Mills/The New York Times)
President Joe Biden, center, is greeted by dignitaries as he arrives at King Abdulaziz International Airport in Jeddah, Saudi Arabia, on Friday, July, 15, 2022. (Doug Mills/The New York Times)

WASHINGTON — As President Joe Biden was planning a politically risky trip to Saudi Arabia this summer, his top aides thought they had struck a secret deal to boost oil production through the end of the year — an arrangement that could have helped justify breaking a campaign pledge to shun the kingdom and its crown prince.

It didn’t work out that way.

Biden went through with the trip. But earlier this month, Saudi Arabia and Russia steered a group of oil-producing countries in voting to slash oil production by 2 million barrels per day, the opposite of the outcome the administration thought it had secured as the Democratic Party struggles to deal with inflation and high gas prices heading into the November elections.

The move led angry Biden administration officials to reassess America’s relationship with the kingdom and produced a flurry of accusatory statements between the two governments — including a charge by the White House that Saudi Arabia was helping Russia in its war in Ukraine.

Lawmakers who had been told about the trip’s benefits in classified briefings and other conversations that included details of the oil deal — which has not been previously disclosed and was supposed to lead to a surge in production between September and December — have been left fuming that Crown Prince Mohammed bin Salman duped the administration.

This account is based on interviews with American officials and officials from Gulf Arab nations, as well as Middle East experts with knowledge of discussions between the two nations.

What happened over the last half-year is a story of handshake agreements, wishful thinking, missed signals and finger-pointing over broken promises. Far from rebuilding a relationship with a leader Biden had once pledged to treat as a “pariah” after the murder of journalist Jamal Khashoggi, the outcome has been another low point in America’s tumultuous ties with Saudi Arabia.

The episode is also a revealing example of how Saudi Arabia, under the leadership of its ambitious and often ruthless crown prince, appears eager to shed some of its longtime reliance on the United States, with Crown Prince Mohammed trying to position Saudi Arabia as a powerhouse of its own.

American officials said that, even days before the OPEC+ decision, they had received assurances from the crown prince there would be no production cuts — and when they learned of the Saudi reversal, they made a futile last-ditch push to change minds in the royal court.

The Saudi Energy Ministry said in a statement that “the kingdom rejects these allegations and stresses that such mischaracterizations made by anonymous sources are entirely false.”

The ministry added, “The decisions of OPEC Plus are reached by the consensus of all members and determined solely by market fundamentals, not politics.”

White House officials admit they were angered and surprised by what they said was a Saudi about-face, but insist their overall strategy to lower energy costs is working.

At the same time, U.S. officials are bracing for another potential price surge in December, if a European embargo on Russian oil goes into effect and the Saudis refuse to increase oil production to make up for the anticipated reduction in supply. The officials say that would be a sure sign that the Saudis were helping the Russians by undermining the American and European-led plan.

“While we clearly disagreed with the OPEC Plus decision in early October, we recognize the importance of continuing to work and communicate with Saudi Arabia and other producers to ensure a stable and fair global energy market,” said Amos Hochstein, Biden’s energy envoy.

Even some of the president’s staunchest supporters have called the episode an example of the administration sacrificing principles for political expediency — and having little to show for it.

“There’s now a level of embarrassment as the Saudis merrily go on their way,” said Rep. Gerald E. Connolly, D-Va., a member of the House Foreign Affairs Committee.

Biden administration officials began planning in the spring for the president to make a summit stop in Saudi Arabia while also visiting Israel over the summer. They knew such a trip would bring criticism.

But some of the president’s aides saw both short- and long-term benefits for the trip and had quietly tried to repair the relationship. They said it was important to work with the kingdom on the Yemen war and Iran, and to expand Israel’s acceptance in the region. More immediately, they believed, the trip could shore up a Saudi commitment to convince OPEC to increase oil production as Russia’s war in Ukraine had led to surging global fuel prices.

Leading proponents of the visit, including Hochstein and Brett McGurk, the top National Security Council official for Middle East policy, met during the spring with Crown Prince Mohammed and his advisers. American officials said that in May, they reached a private oil deal with the Saudis that had two parts.

First, the Saudis would accelerate an OPEC+ production increase of 400,000 barrels per day already planned for September, moving it to July and August. Then the Saudis would get the cartel to announce a further production increase of 200,000 barrels per day for each month from September to December of this year.

On June 2, OPEC+ announced they would move up the production increase scheduled for September — fulfilling the first part of the secret deal.

That same day, the White House announced Biden would soon make a trip to Saudi Arabia.

The price of oil was slowly dropping by the time Biden arrived in Jeddah, Saudi Arabia, on July 15 for his meeting with Crown Prince Mohammed and other Arab leaders. The image of the American president bumping fists with the Saudi crown prince he once vilified endures from the trip, but behind the scenes, White House officials believed they had at least shored up Saudi commitments on a number of fronts.

Saudis officials seemed eager to demonstrate to the Americans that they had delivered on their commitments — during the summit, they gave members of Biden’s delegation a chart showing oil prices had fallen to $101 per barrel, down from more than $120 per barrel after the war in Ukraine began.

The Americans came away from the summit with the belief that the agreement was on track and that Crown Prince Mohammed was satisfied. But in Riyadh, top Saudi officials were privately telling others that they had no plans for further meaningful oil production increases.

American officials say they believe that Crown Prince Mohammed was particularly influenced by a high-level Sept. 27 meeting in which Prince Abdulaziz, the energy minister, argued that cuts were needed to keep prices from plummeting. The U.S. officials said they learned Prince Abdulaziz asserted that the Saudi government would lack the resources to fund economic diversification projects at the heart of Prince Mohammed’s domestic agenda.

Some U.S. officials believe that the Russians influenced the Saudi about-face, pointing to Prince Abdulaziz’s strong working ties with top Russian officials close to Putin.

Saudi officials vehemently denied marching in lock step with Russia and said they have viewed themselves as a neutral mediator in Russia’s war with Ukraine. Some American officials said that an answer to whether Riyadh has truly cast its lot with Moscow will come on Dec. 4, when OPEC+ is scheduled to meet again.

Author: John Hanno

Born and raised in Chicago, Illinois. Bogan High School. Worked in Alaska after the earthquake. Joined U.S. Army at 17. Sergeant, B Battery, 3rd Battalion, 84th Artillery, 7th Army. Member of 12 different unions, including 4 different locals of the I.B.E.W. Worked for fortune 50, 100 and 200 companies as an industrial electrician, electrical/electronic technician.