Saudi Arabia has had a bad week: the kingdom, having spent tens of millions in “donations” to fund not only the Clinton Foundation which is now irrelevant, but also allegedly to sponsor 20% of Hillary’s presidential campaign, has suddenly found itself with no “influence” to request in exchange for its “generosity.” Instead, it is forced to engage in something it loathes: open diplomacy.
As a result, its first attempt at engaging with the US president-elect, amounts to what is effectively a thinly veiled threat wrapped as a warning. As the FT reports, “Saudi Arabia has warned Donald Trump that the incoming US president will risk the health of his country’s economy if he acts on his election promises to block oil imports.”
In a sign of the difficulties Mr Trump faces over his campaign pledges to create “complete American energy independence” from “our foes and the oil cartels”, Saudi Arabia’s energy minister pointedly reminded the president-elect that the US “benefits more than anybody else from global free trade”, adding, “energy is the lifeblood of the global economy”.
The veiled threat is obvious: should you proceed to stimulate and subsidize the US shale industry – whose resurgence under Obama drastically cut the amount of US oil imports – in a bid for energy independence, there will be consequences. And just like that we can add Saudi Arabia to the long list of countries – like China first and foremost – that is engaging in veiled threats that preserving the status quo is in the best interest of America.
“At his heart President-elect Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy,” Khalid al-Falih, who is also chairman of Aramco, the state-run oil company, told the Financial Times in Marrakesh, where he is leading Saudi Arabia’s delegation in UN climate talks.
The Saudi minister said that although the US imported millions of barrels of oil, it had also “benefited hugely” from being able to freely sell “significant amounts” of exported products. This free trade had underpinned a thriving refining industry and a shale revolution that had been able to “create a lot of jobs and value”, he said.
Appealing to Trump’s patriotism, the Saudi added that “the US is sort of the flag-bearer for capitalism and free markets.”
The gambit is risky: if Trump pushes hard with restoring shale production and providing economic benefits to US energy companies, which in turn would lead to a surge in global oil supply and a sharp drop in oil prices, Saudi Arabia – whose budget deficit has already soared in the past two years due to low oil prices – faces a financial, economic and social crisis.
The appeals continued:
“The US continues to be a very important part of a global industry that is interconnected, that is dealing with a fungible commodity which is crude oil. So having equalisation through free trade is very healthy for oil.” Falih said Saudi Arabia was still waiting to see exactly what Mr Trump does once he takes office in January and some of his campaign rhetoric had amounted to “50,000 feet announcements” that could change.
“It is common that once presidents start governing then a lot more substance comes out,” he said, adding that Saudi Arabia believed the new administration should be given time to “digest all the issues”, including how it implements the Paris climate deal being discussed in Marrakesh.
As a reminder, Trump has vowed to “cancel” the accord that almost 200 nations sealed in December and has called climate change a “hoax” fabricated by China to hurt US industry. Saudi Arabia has been among a vocal group of countries insisting that the US election outcome will not affect their plans to curb greenhouse gases under the Paris deal, which Mr Falih described as “a watershed agreement” and “a great thing” that needed to be implemented “sooner rather than later”.
Why? Because by pursuing Obama’s “clean” agenda, the Saudis have a smokescreen, pardon the pun, that eliminates some of the possible production upside from US companies. Take that away, and OPEC’s entire “production cut” calculus falls apart, especially if US shale is set to pump much more under Trump.
The Saudi energy ministry, clearly distraught about the risk of global warming, continued:
Reflecting the frustration of many countries in Marrakesh, Mr Falih said the industrial and technological strength of the US meant it would find it easier to abide by the Paris accord than poorer nations.
“If you think of economies like India and China and other energy intensive economies, I think the US has a lot more flexibility to meet Paris with less sacrifices,” he said.
And there’s the keyword: sacrifices – that’s precisely what Saudi Arabia is asking Trump to do by perpetuating the status quo, one which ultimately benefits OPEC exporters.
“The US already enjoys a competitive advantage in terms of its energy costs and I think, given what is happening in technology and renewables, especially in the US capabilities in that regard, I think the US will find that provided everybody lives by Paris, the US would retain if not improve its global competitive position.”
Other government leaders are likewise intent on forcing Obama to pick the option that benefits the global community instead of domestic US workers:
As government leaders arrived in Marrakesh on Tuesday, François Hollande, France’s president, led calls for Mr Trump to stick with the Paris accord.
“The US, the most powerful economy in the world, the second-largest emitter of greenhouse gases, must respect the commitments that were made,” he said. “It’s not simply their duty, it’s in their interest.”
Actually, it is precisely in the interest of American workers, for many of whom the “shale miracle” provided well-paying jobs, at least until the Saudi gambit with low oil prices, tried to put them all out of business.
We look forward to the decision Trump will make on this very sensitive issue: will he side with Saudi Arabia and pursue the status quo, or will he stay true to his campaign promises and push for policies that benefit American workers – and US motorists as the outcome would be even lower gas prices – even if, or rather especially if, it means the Saudi gambit to influence the Trump administration fails.
The post Saudi Arabia Warns Trump Not To Block Oil Imports appeared first on crude-oil.top.