Biden could modify U.S. diplomatic relations with three members of OPEC – de facto leader Saudi Arabia, and sanctioned countries Iran and Venezuela, as well as with key non-OPEC producer Russia. Russia is the leader of oil producers allied with OPEC, a group known as OPEC+.

Strict enforcement of U.S. sanctions on Iran and Venezuela has kept millions of barrels of oil per day off the market, and if Biden should relax measures on either in years to come an increase in production could make it harder for OPEC to balance supply with demand.

Biden has said he would prefer multilateral diplomacy to the unilateral sanctions Trump has imposed, although that may not mean a relaxation in sanctions any time soon. In his campaign, Biden said he’d return to Iran’s 2015 nuclear deal if Tehran resumes compliance with the pact.

Trump quit the pact in 2018, reimposing sanctions that cut Iran’s oil exports. Some in OPEC fear that a return of Iranian volumes will add to oversupply without cutbacks elsewhere and worry about Moscow’s continued participation in OPEC+.

“Iran sanctions can be re-evaluated and then Iran will be back to the market, so again there would be oversupply and the current cut deal will be at risk,” an OPEC source said before the election result was known.

“There is the risk of Russia leaving the OPEC+ deal too which means a collapse of the agreement, as it was Trump who brought Moscow on board,” the source said.

GLOBAL THREAT

Biden has named Russia as Washington’s most serious global threat. During his campaign, he also pledged to reassess 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 allied producers led by Russia to agree a record oil supply cut as the coronavirus outbreak hammered demand.

Trump stepped in to put political pressure on Saudi Arabia and Russia to end a dispute that had sparked a price war and resulted in both countries planning to raise output just as the pandemic led to restrictions on travel – and consequently in demand for fuel.

The result was an unprecedented global deal to cut oil supply by about 20 million barrels per day, or around 20 percent. OPEC+ alone agreed to cut 9.7 million bpd.

For Trump, the motivation was to raise global oil prices and prevent bankruptcies and hundreds of thousands of job losses in the U.S. energy industry as the election loomed.

Trump has been a proponent of the oil and gas industry, rolling back environmental regulations and rejecting mainstream science on how emissions are causing global warming.

Earlier in his presidency, he had criticized OPEC for seeking higher prices and urged members to pump more. Anti-OPEC U.S. legislation known as NOPEC – first introduced years ago – didn’t become law despite having gained some momentum earlier in his presidency.

“Trump is now our friend – after the historic U-turn,” said a senior OPEC source from a U.S. ally OPEC member, declining to be named. “From NOPEC to Art of the Deal,” he added, in a reference to the April OPEC+ pact and a 1987 book by Trump.

SIGNIFICANT IMPLICATIONS

Trump developed a close relationship with top OPEC producer Saudi Arabia’s de facto ruler Mohammed bin Salman, or “MbS”, who relies on the United States for weapons and protection against regional rivals such as Iran.

The OPEC+ alliance has been propping up oil prices since 2017 and any developments that threaten the future of the alliance could weaken the market, with significant implications for OPEC and other producers, governments and traders.

Trump engaged more actively with OPEC than his predecessors, often taking to Twitter to comment on production decisions and oil price moves. Biden is seen as more likely to keep the cartel at arm’s length.

“My view is that Biden would rely more on professional advice from his advisers and would not micromanage as Trump does today,” said Chakib Khelil, Algeria’s oil minister for a decade and a former OPEC president.

“Biden would not have the cosy relationship with Putin that Trump appears to have,” Khelil added.

Still, despite Biden’s campaign comments on the U.S.-Saudi relationship, a radical reset is viewed as unlikely. Gulf regional sources and diplomats have told Reuters a Biden win would not upend decades-long alliances.

And a source familiar with Iranian oil thinking welcomed Biden’s win but said he doubted sanctions would be lifted swiftly. This would give OPEC+ members long enough 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. “Therefore, OPEC+ has enough time to decide on a new production ceiling.”

The post OPEC would miss ‘friend Trump’, wary of strains under Biden, sources say first appeared on Garner Ted Armstrong Evangelistic Association.

The United States reinstated economic sanctions on Iran after President Donald Trump abandoned a landmark nuclear deal in May 2018.

Mr. Trump says he wants to apply “maximum pressure” on the government in Tehran to compel it to renegotiate the accord. But Iran’s leaders have remained defiant.

The substantial impact the sanctions have had on the country is clear, and the economic hardship Iranians are facing helped trigger widespread protests in November 2019 that were brutally quashed by the authorities.

The economy has fallen into a deep recession

Iran’s economy was badly affected for several years by sanctions imposed by the international community over the country’s nuclear programme.

In 2015, President Hassan Rouhani agreed to a deal with the US and five other world powers to limit Iranian nuclear activities in return for the lifting of those sanctions.

The following year, after the deal was implemented, Iran’s economy bounced back and GDP grew 12.3%, according to the Central Bank of Iran.

But much of that growth was attributed to the oil and gas industry, and the recoveries of other sectors were not as significant as many Iranians had hoped.

Growth fell back to 3.7% in 2017, helping to fuel the economic discontent that led to the biggest anti-government protests in Iran for almost a decade that December.

The reinstatement of US sanctions in 2018 – particularly those imposed on the energy, shipping, and financial sectors that November – caused foreign investment to dry up and hit oil exports. The sanctions bar US companies from trading with Iran, but also with foreign firms or countries that are dealing with Iran.

In May 2019, Mr. Trump ended exemptions from US secondary sanctions – such as exclusion from US markets – for major importers of Iranian oil and tightened restrictions on the Iranian banking sector. He said the decision was “intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue”.

As a result of the sanctions, Iran’s gross domestic product (GDP) contracted an estimated 4.8% in 2018 and is forecast to shrink another 9.5% in 2019, according to the International Monetary Fund. The unemployment rate meanwhile rose from 14.5% in 2018 to 16.8% in 2019.

The IMF is forecasting zero growth in 2020, which would support Mr. Rouhani’s assertion in October that Iran has ridden out “the storm” caused by the sanctions.

• Has Iran’s economy benefited from the nuclear deal?

Oil exports have plummeted

At the start of 2018, Iran’s crude oil production reached 3.8 million barrels per day (bpd), according to data gathered from secondary sources by the Organization of the Petroleum Exporting Countries (Opec). The country was exporting about 2.3 million bpd.

Most of the oil was bought by eight countries or territories that were granted six-month exemptions by the US when sanctions on the Iranian energy sector took effect – China, India, Japan, South Korea, Taiwan, Turkey, Greece, and Italy.

By March, Iran’s oil exports had fallen to 1.1 million barrels per day on average – AFP

A condition of the waivers was that the importers reduce their purchases of Iranian oil, and by April 2019 Iran’s oil exports had fallen to 1 million bpd on average, according to Bloomberg. That reduced the government’s revenue by billions of dollars.

Two months later, President Trump decided to allow the exemptions to expire and declared that he “intended to bring Iran’s oil exports to zero”.

By October 2019, Iran’s crude oil production had fallen to 2.1 million bpd on average, according to Opec’s data. Bloomberg reported that only 260,000 bpd on average was being exported.

However, analysts have said the figure may not reflect actual deliveries due to reported activities by Iran and its customers to conceal purchases or avoid tracking of tankers.

Iranian tankers have been accused of flouting international rules by turning off their Automatic Identification System (AIS) transponders. Iran is also said to frequently conduct ship-to-ship transfers to move oil and oil products.

The plummeting oil sales have also led to a significant fall in Iran’s foreign exchange earnings. The IMF estimates that Iran’s reserves of foreign currency have been reduced to $86bn – 20% below their level in 2013.

A senior US official, Brian Hook, said in December 2019 that he believed Iran had access to only 10% of those reserves because of restrictions on its financial sector and that as a result, it would struggle to prop up its currency and prevent inflation.

Iran’s government itself forecasts that oil export revenues will be reduced by 70% in the next Iranian fiscal year.

• Is it about to get more expensive to fill my car?

The rial has halved in value

Image captionCurrency traders were offering 143,000 rials to the US dollar at the end of April – AFP

President Rouhani kept the Iranian currency stable for almost four years. But it has lost 50% of its value against the US dollar on the unofficial market since the US abandoned the nuclear deal, according to foreign exchange websites.

The fixed official rate of 42,000 rials to the dollar is used for a limited range of transactions, so most Iranians rely on currency traders. Bonbast.com reported that traders were offering 13,650 rials to the dollar in early December 2019.

The rial’s slide has been attributed to Iran’s economic problems and a high demand for foreign currency among ordinary Iranians who have seen the value of their savings eroded and their purchasing power cut sharply.

The rial has regained some of its value since September 2018, when the Central Bank of Iran released more dollars into the market and authorities cracked down on currency dealers as prices reached a record low of 176,000 to the dollar.

Iran’s currency woes have also led to shortages of imported goods and products that are made with raw materials from abroad, most notably babies’ nappies.

• What babies’ nappies tell us about Iran’s economic woes

Living costs have risen dramatically

AFP

President Rouhani managed to get inflation down to 9% in 2017. But the IMF estimated that it soared to 30.5% in 2018 and projected that it would reach 35.7% in 2019.

The World Bank has said that inflation in Iran has been especially high for food items, with meat products 116% more expensive year-on-year in April 2019, and that the rural population has been disproportionally affected.

The Statistical Centre of Iran reported that the Consumer Price Index (CPI) 12-month rate of inflation for households stood at 42% in late October 2019. Food and beverage prices were up by 61% year-on-year and the price of tobacco was up by 80%.

The price rises led to long queues at government-subsidized grocery shops, particularly for rationed meat. In an attempt to lower prices, the government banned livestock exports, flew in hundreds of thousands of cows and sheep from abroad.

In November 2019, the government unexpectedly announced it was cutting petrol subsidies. It said the price of petrol would rise by 50% to 15,000 rials a litre ($0.12; £0.09 at the unofficial market exchange rate), and that drivers of private cars would be allowed to purchase only 60 litres each month before the price rose to 30,000 rials.

Mr. Rouhani said the $2.5bn in savings would allow the government to provide additional help to 18 million families. But the price rises caused widespread anger, and hundreds of thousands of people took to the streets across Iran.

A crackdown by security forces left at least 208 people dead and thousands injured, according to Amnesty International. The government dismissed such figures as “utter lies”.

• Videos reveal crackdown Iran tried to hide
• Iranians describe the impact of US sanctions

Source: https://www.bbc.com/news/world-middle-east-48119109

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The article, which cites three sources familiar with Saudi energy policy, said that in recent months the option to remove the USD as its primary currency to sell its oil in has been discussed internally by senior Saudi energy officials.

The iFX EXPO is Back in Limassol!

The threat has also been communicated to senior US energy officials, one source said, whilst the other two sources say the plan has been discussed with OPEC members.

The No Oil Producing and Exporting Cartels Act (NOPEC)  is a bill that aims to remove sovereign immunity from US antitrust law. Established in 2000, the proposed legislation would allow OPEC states to be sued for manipulating oil prices by curbing output.

Although there have been several failed attempts to make the bill into law, it has begun to get more traction since Donald Trump was elected President of the US. This is because, in a book published in 2011 before he was elected, Trump said he supported NOPEC.

However, since being in office, the President has not voiced any support for NOPEC. Rather, on multiple occasions he has highlighted the importance of US-Saudi relations.

Saudi Arabia Poses a Large Threat to the USD

The likelihood that NOPEC will be passed is small, as is the likelihood that Saudi Arabia will follow up on his threat. Nonetheless, should the country resort to drastic measures, the foreign exchange (forex) industry would change as we know it.

The USD is the most traded global currency, accounting for a daily average volume of $2.2 trillion, according to the Bank for International Settlements.

Among other factors, one of the influences to the USD’s strength is that many commodities are priced in dollars, such as gold, copper and oil. The Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME), the top two global energy exchanges, traded a billion lots of oil derivatives last year, recording a nominal value of around $5 trillion.

Saudi Arabia controls a 10th of global oil production and its oil firm, Saudi Aramco, is the biggest oil exporter in the world. Although oil prices fluctuate constantly, it is estimated to contribute around 2 to 3 per cent of global gross domestic product (GDP). Although not all oil volumes are traded in the USD, Reuters suggests that around 60 per cent is traded in the currency.

As stated above, although the NOPEC deal is not likely to be passed and Saudi Arabia will most likely not follow up on its threat, even tensions between the two countries could have an impact on the USD, although, nowhere near to the levels should the country carry out its threat.

Source: https://www.financemagnates.com/forex/saudi-arabia-threatens-to-ditch-usd-oil-trades-if-nopec-passes/

The post Saudi Arabia Threatens to Ditch USD Oil Trades if NOPEC Passes first appeared on Garner Ted Armstrong Evangelistic Association.

The surprise declaration could make Qatar the first Middle East nation to leave the cartel since its founding in 1960. It again injects politics into an organization that long has insisted it is nonpartisan, stealing headlines just as the cartel deliberates production cuts to halt a slide in global crude oil prices.

Although contributing only a fraction of OPEC’s overall production, Qatar’s decision also throws into question the viability of the cartel. Once muscular enough to grind America to a halt with its 1970s oil embargo, OPEC needed non-members like Russia to push through a production cut in 2016 after prices crashed below $30 a barrel. That’s unlikely to change, especially as the United States regained the throne of the world’s top oil producer.

“The Qatari leadership is no longer interested in remaining an active part of an organization that largely shuns it,” the Eurasia Group said in an analysis. “The two individuals that markets focus on are Saudi Arabia’s energy tsar Khalid al-Falih and Russia’s Alexander Novak. Qatari energy officials are not consulted, at the very least not sufficiently, and its leaders are no longer an active part of the organization’s machine.”

The decision was announced by Saad Sherida al-Kaabi, Qatar’s minister of state for energy affairs. He said Qatar, the world’s largest exporter of liquefied natural gas, planned to increase its exports from 77 million tons of gas per year to 110 million tons. He also said Qatar wants to raise its oil production.

“In light of such efforts and plans, and in our pursuit to strengthen Qatar’s position as a reliable and trustworthy energy supplier across the globe, we had to take steps to review Qatar’s role and contributions on the international energy scene,” al-Kaabi said.

There was no comment from Vienna-based OPEC, which meets Thursday to discuss possible production cuts. In November, al-Falih said OPEC and allied oil-producing countries will probably need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market.

Qatar produces only about 600,000 barrels of crude oil a day, making it OPEC’s 11th biggest producer. The loss of production, under 2 percent of overall OPEC supply a day, won’t greatly affect the cartel’s position in the market.

Anas Alhajji, an oil analyst, said Qatar’s decision “has no impact on the market either way whether they’re in or they’re out.”

“The cost for them is higher than the benefit” of remaining in OPEC, Alhajji said. “This is just like shutting down a losing business.”

Sheikh Hamad bin Jassim Al Thani, Qatar’s former prime minister who remains a powerful figure in the country, called the withdrawal from OPEC a “wise decision.”

“This organization has become useless and adds nothing to us,” Sheikh Hamad wrote on Twitter. “They are used only for purposes that are detrimental to our national interest.”

Qatar, a country of 2.6 million people where citizens make up over 10 percent of the population, discovered its offshore North Field gas deposit in 1971, the same year it became independent.

It took years for engineers to discover the field’s vast reserves, which shot Qatar to No. 3 in world rankings, behind Russia and Iran, with which it shares the North Field. It also has made the country fantastically wealthy, sparking its successful bid for the 2022 FIFA World Cup.

Qatar also hosts the al-Udeid Air Base, the home of the forward headquarters of the U.S. military’s Central Command and about 10,000 U.S. troops.

Qatar’s wealth has seen it take on a larger importance in international affairs. Its political stances, often supporting Islamists, have drawn the ire of its neighbors, particularly Saudi Arabia, OPEC’s largest exporter.

In June 2017, Bahrain, Egypt, Saudi Arabia and the United Arab Emirates cut ties to Qatar in a political dispute that is still going on. They also launched an economic boycott, stopping Qatar Airways flights from using their airspace, closing the country’s sole land border with Saudi Arabia and blocking its ships from using their ports.

They say the crisis stems from Qatar’s support for extremist groups in the region, charges denied by Doha. The four nations also have pointed to Qatar’s close relationship with Iran. Qatar restored full diplomatic ties to Iran amid the dispute.

OPEC, or the Organization of the Petroleum Exporting Countries, was formed in 1960 as a reaction to Western domination of the oil industry.

Qatar was the first nation outside of its founding members to join the cartel, entering its ranks in 1961. Counting Qatar, OPEC has 15 members, including Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC nations like Ecuador, Gabon and Indonesia have either withdrawn or suspended their membership in the past, only later to rejoin. Qatar could potentially do the same.

OPEC sets production targets for its members in an effort to control the price of oil available on the global market.

President Donald Trump repeatedly has criticized both OPEC and U.S. ally Saudi Arabia over rising oil prices in recent weeks, demanding a production increase to drive down U.S. gasoline prices. That rising supply, coupled with the Trump administration allowing many countries to continue to import Iranian oil despite his targeting of Tehran with sanctions, has seen global prices drop.

Benchmark Brent crude, for instance, reached over $85 a barrel in early October, only to drop sharply in the time since. It traded at just over $61 a barrel Monday.

———

This story has been corrected to show that the name of the minister is Saad Sherida al-Kaabi.

Source: https://abcnews.go.com/International/wireStory/qatars-energy-minister-country-pulling-opec-59569080

The post Qatar will pull out of OPEC amid tension with Saudi Arabia first appeared on Garner Ted Armstrong Evangelistic Association.

It would seem that the Saudis won’t just spend money to pay for forming alliances with the U.S. next to the infamous orb in Riyadh and trying to form an anti-Iran bloc in the region. The decision by regional powers to have an asymmetrical relationship with the United States often results in fragility and a violation of their national interests. The security services that countries with no autonomy purchase with cash tends to be a nuisance and, if necessary, a threat against their employer.

Trump’s crude words must not be viewed independently of his address to the United Nations, where he warned the Organization of the Petroleum Exporting Countries (OPEC) members not to raise oil prices. After all, Saudi Arabia remains one of the world’s largest oil producers. In other words, the Trump administration doesn’t want the Saudis to raise oil prices in order to pay the United States.

In response to Trump’s statement, Saudi Crown Prince Mohammed bin Salman gave an interview to Bloomberg, where he attempted to defend his country’s pride. The crown prince told reporters that Riyadh had already paid for the weapons that it purchased from the United States. He added that Saudi Arabia had been around since 1744 – three decades earlier than the United States. To be clear, those words weren’t intended as a criticism of Donald Trump. Riyadh works very hard to irreversibly align its policies with Washington’s priorities. For this purpose, the Saudis have ended up adopting the Israeli position on Palestine and Jerusalem. Having taken huge risks to make concessions that amounted to a break with traditional Saudi foreign policy, the House of Saud appears to think that it has no choice but to embrace Trump. Hence the crown prince’s efforts to downplay the U.S. president’s remarks: A friend, he argues, can say good or bad things.

Another incident that captured the world’s attention was the disappearance of Saudi journalist and dissident Jamal Khashoggi at the Saudi Consulate in Istanbul. Last week, he entered the Saudi Consulate to obtain official papers necessary to get married in Turkey, and never came back. Turkish police are concerned that Khashoggi was murdered, dismembered and carried out of the Saudi mission in multiple bags.

Riyadh has a long history of abductions and enforced disappearances when it comes to dissidents. The 1979 disappearance of Nassir al-Sa’id in Beirut, the 2003 abduction of Prince Sultan bin Turki in Geneva immediately come to mind. So does the suspicious disappearance of Saud bin Saif al Nasr. Again, the detention and forced resignation of Lebanese Prime Minister Saad Hariri wasn’t too long ago.

The Khashoggi scandal could deal a serious blow to Turkey-Saudi relations. If the authorities are right about what happened, it will be difficult for Riyadh to explain why it decided to kill a dissident at the Saudi Consulate in Istanbul. At this point, President Recep Tayyip Erdoğan said that he is “very sorry” and pledged to “closely monitor” the investigation. Going forward, Turkish and Saudi officials need to work together to shed light on this incident.

Moreover, we must point out that this affair amounts to a scandal with serious international repercussions for the Saudis. Having spent millions of dollars over several weeks to portray himself as a “reformist” in Washington, the Saudi crown prince now faces fierce criticism there. There is talk about the U.S. Congress moving to “punish” Saudi Arabia – which could derail ongoing efforts to create the Middle East Strategic Alliance that is intended to bring together Egypt, Jordan and the six members of the Gulf Cooperation Council. Riyadh must understand the limits and dangers of collaborating with Donald Trump. It has no choice but to engage Turkey on the basis of cooperation.

Greed must be brought under control. Covert operations only serve to ruin friendships.

Source: https://www.dailysabah.com/columns/duran-burhanettin/2018/10/11/saudi-arabia-is-in-big-trouble

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