Oil prices jumped Monday by more than 1 percent following Saudi Arabia’s pledge over the weekend to cut crude production — amid a flurry of moves on the world stage that build on the kingdom’s ongoing push to assert its diplomatic influence on the region and beyond.
All in a few days, and in the run-up to a visit this week by U.S. Secretary of State Antony Blinken, the kingdom announced a voluntary cut of 1 million barrels of oil per day starting next month; hosted Venezuelan President Nicolás Maduro, a U.S. adversary, for an official visit; and is set to welcome the return of an Iranian Embassy to Riyadh, the Saudi capital, in a major step toward renewed relations with Tehran.
The moves are not directly connected, but build on a broader pattern of efforts to look beyond Washington as Riyadh pursues a surge of diplomatic activity.
As oil prices stagnate, OPEC Plus opts to extend production cuts
The country’s 10 percent oil production cut came on top of an announcement by the Organization of the Petroleum Exporting Countries, or OPEC, and its allies that it would maintain production targets throughout next year, extending an April decision to cut output for one year, until the end of 2024.
Western countries have in the past year accused OPEC and Saudi Arabia of siding with Russian interests. The Biden administration last year said Riyadh had “coerced” smaller oil-producing OPEC members to agree on cuts that boost Russian revenue and soften the blow of sanctions.
The impact of the decision by OPEC and Russia-led allies, who collectively pump about 40 percent of the world’s oil, was quickly reflected in the price of crude. But a similar jump in prices after the April decision eventually eased as the global economy slows, reducing the demand for oil.
The announcement came as Maduro touched down in the Saudi coastal city Jiddah, from where much of the Saudi government operates during the summer months. He was welcomed by a smiling Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto leader.
Maduro arrived one day before a scheduled visit by Blinken, who on Monday said he would utilize his upcoming trip to promote normalization between Saudi Arabia and Israel, a key U.S. ally. Washington has “a real national security interest” in promoting normalization, Blinken said Monday at the conference of the influential American Israel Public Affairs Committee, or AIPAC, a pro-Israel lobby. But Blinken said the Biden administration has “no illusions” that it could be accomplished swiftly or easily.
Saudi Arabia mends ties with Syria as part of regional diplomatic spree
Maduro is just the latest U.S. foe to visit the oil-rich kingdom: In May, Saudi Arabia welcomed Syrian President Bashar al-Assad, who had been made a pariah since 2011 after his brutal crackdown on protesters who protested his rule.
Iran’s finance minister also traveled to the country last month, the first official Iranian visit since the two countries in March announced a China-brokered agreement to resume ties after a seven-year break in relations.
Iran to reopen embassy in Saudi Arabia, state media says, as enmity softens
On Monday, Iran abruptly announced it would reopen its embassy in Saudi Arabia as soon as Tuesday. Two days earlier, Iran’s navy commander announced Tehran’s plans to create a naval coalition with Saudi Arabia, the United Arab Emirates and six other countries. Neither news was carried by Saudi media.
Riyadh’s warming relations with Iran have frustrated Israeli officials, whose efforts to isolate Iran diplomatically are undermined by the March deal. Saudi Arabia also recently strengthened cooperation with Russia and China, announcing last week that it will host the 10th session of the Arab-Chinese Business Conference next week, titled “Collaborating for Prosperity.”
“I think more and more this is the Saudi Arabia that Mohammed bin Salman said he would create, and indeed he did,” said Karen Young, senior research scholar at Columbia University Center on Global Energy Policy. The prerogative of this “new, active” Saudi Arabia is running a number of regional and global files simultaneously.
Saudi Arabia emphasizes national pride, with global implications
“They are kind of setting the pace,” Young said. “It does seem a little frenetic sometimes, but that’s what they want to be; they want to be these sort of pacesetters.”
While the oil cuts fit in the broader context of lackluster demand on oil as the global economy slows down, the diplomatic moves are “a play on the general insecurity in the region,” Young said. “The Americans are very sensitive whenever the [Persian] Gulf states say: ‘You’re not so present, you’re disengaging,’” she continued. Iran’s jarring announcement of the naval coalition, while probably disingenuous, “plays on the sensitivity of the United States.”
Saudi Arabia is seen as playing off the uncertainty of the future of the U.S. foothold in the Middle East. Its “Saudi First” approach has recently come to unapologetically underpin its foreign policy decisions. After allegations were lobbed last year against the kingdom for manipulating the oil market and aligning with Russia, especially ahead of U.S. midterm elections, Saudi Energy Minister Prince Abdulaziz bin Salman said: “I keep [hearing], ‘Are you with us or against us?’ Is there any room for, ‘We are for Saudi Arabia and for the people of Saudi Arabia?’”
The weight of Saudi Arabia as a competent regional and global player, however, is being put to test by other regional messes, including the war in Sudan, where Saudi involvement has intensified, and ally Egypt’s deepening economic crisis.
“Now, Saudi Arabia is the wave that the region has to ride,” Young said.