Biden said he would prefer multilateral diplomacy over unilateral sanctions (File)
Key OPEC members fear tensions in the OPEC + alliance will reappear with Joe Biden as US president, sources close to the organization said, and would miss President Donald Trump, who has moved from criticism of the group for help in a record reduction in oil production.
Biden could alter U.S. diplomatic relations with three OPEC members – the de facto leader Saudi Arabia and sanctioned countries Iran and Venezuela, as well as with Russia, a key non-OPEC producer.
Russia is the leading oil producer allied with OPEC, a group known as OPEC +. The strict application of U.S. sanctions against Iran and Venezuela has kept millions of barrels of oil a day from the market, and if Biden were to ease measures in the coming years, increased production could make it more difficult for OPEC to balance supply and demand.
Biden has said he would prefer multilateral diplomacy to the unilateral sanctions that Trump has imposed, though that doesn’t necessarily mean sanctions easing anytime soon.
In his campaign, Biden said he would revert to the 2015 Iran nuclear deal if Tehran resumed respect for the pact. Trump quit the pact in 2018, reimposing sanctions that reduce Iran’s oil exports.
Some OPEC members fear that a return in Iranian volumes will add to the unreduced oversupply elsewhere, and are concerned about Moscow’s continued participation in OPEC +.
“Sanctions against Iran can be reassessed and then Iran will be back in the market, so again there would be oversupply and the current cutback deal will be in jeopardy,” a source said. ‘OPEC before the election results are known.
“There is a risk that Russia will also leave the OPEC + agreement, which means a collapse of the agreement, because it was Trump who brought Moscow on board,” the source said.
Biden has named Russia as Washington’s most serious global threat.
During his campaign, he also pledged to reassess his ties with Saudi Arabia. Trump in April was involved in talks that led to a deal in which the Organization of the Petroleum Exporting Countries and Saudi Arabia worked with Russian-led allied producers to agree to a record cut supply of oil as the coronavirus epidemic hammers demand. Trump stepped in to put political pressure on Saudi Arabia and Russia to end a dispute that sparked a price war and led the two countries to plan to increase production just as the pandemic was causing restrictions on travel – and therefore on the demand for fuel.
The result was an unprecedented global deal to cut oil supplies by about 20 million barrels per day, or about 20%.
OPEC + alone agreed to cut 9.7 million bpd. For Trump, the motivation was to raise global oil prices and avoid bankruptcies and hundreds of thousands of job losses in the US energy industry as the election nears.
Trump has been a supporter of the oil and gas industry, rolling back environmental regulations and rejecting mainstream science about how emissions cause global warming. Earlier in his presidency, he criticized OPEC for seeking out higher prices and urged its members to pump more.
The US anti-OPEC legislation known as NOPEC – first introduced years ago – has not become law although it gained momentum earlier in his presidency. “Trump is now our friend – after the historic U-turn,” a high-level OPEC source said of an allied US OPEC member, declining to be named.
“From NOPEC to Art of the Deal,” he added, in a reference to the April OPEC + pact and in a 1987 book by Trump.
Trump has developed a close relationship with the de facto ruler of Saudi Arabia, OPEC’s main producer Mohammed bin Salman, or “MbS”, who relies on the United States for its weapons and protection from rivals. regions such as Iran.
The OPEC + alliance has supported oil prices since 2017 and any development that threatens the future of the alliance could weaken the market, with significant implications for OPEC and other producers, governments and traders. Trump has engaged with OPEC more actively than his predecessors, often taking to Twitter to comment on production decisions and fluctuations in oil prices.
Biden is seen as more likely to keep the cartel at bay. “My opinion is that Biden would rely more on the professional advice of his advisers and not micromanage like Trump is doing today,” said Chakib Khelil, Algeria’s decade-long oil minister and former president of the OPEC.
“Biden would not have the warm relationship with Putin that Trump seems to have,” Khelil added. Yet despite Biden’s campaign comments on US-Saudi relations, a radical reset is considered unlikely.
Regional Gulf sources and diplomats told Reuters that a Biden victory would not upend decades-long alliances. And a source familiar with Iranian oil thinking praised Biden’s victory, but said that he doubted the sanctions would be lifted quickly.
This would give OPEC + members enough time to adjust their deal to make room for more Iranian oil. “Even if Iran’s sanctions are lifted, it will take two to four months for Iran’s oil exports to return to pre-sanctions levels due to technical issues,” he said.
