US President George W. Bush came out of his private talks with King Abdullah in the king’s private Bedouin tent at the Jandariya Farms outside Riyadh Tuesday, Jan. 15, saying he was hopeful that OPEC would authorize an increase in oil production to tame soaring prices.
The king agreed to consider increasing output, contrary to the view advanced by Saudi oil minister Ali Naimi that productions would be raised “only when the market justifies it.”
His consent marked success in the first of the US president’s four missions in Riyadh, which were:
1. To bring oil prices down from $100 to $70 the barrel.
2. To build on and flesh out the secret US-Iranian framework of understanding sealed at the end of last year while also integrating the Iranian nuclear issue. (See DEBKA-Net-Weekly issues 328-332 from Dec. 7, 2007 to Jan. 11, 2008 and separate article in this issue)
Curbing Oil Prices
Abdullah agreed to Saudi Arabia putting the proposal to raise output by at least two million barrels a day before the Organization of Petroleum Exporting Countries, OPEC meeting in Vienna on Feb. 1. The cartel usually takes its lead from Riyadh.
But the Saudi monarch, according to DEBKA-Net-Weekly‘s Gulf sources, took exception to the argument put forward by President Bush in a number of interviews that the price of oil may be driven up by growing American demand, but also to a greater extent by the expanding demand in China and India.
The US president went on to suggest that oil-producing nations “open their spigots for their own good.” Producers should realize, he said, that “high energy prices affect the economies of consuming nations.” If those economies weaken, they will eventually be buying fewer barrels of oil. Energy demand had outstripped new supply,” Bush told reporters. “That’s why there’s high price.”
King Abdullah differed. Saudi Arabia and OPEC play very small roles in setting the high prices, he maintained, pointing instead to speculators.
“Speculators are adding $20 to $30 to the price of a barrel of oil,” Saudi oil minister Naimi remarked later: “If you look at who is in the market, you’ll find a lot of financial institutions are using the market speculatively as a hedge”
The monarch also announced his government’s intention of sinking tens of billions of dollars in building new refineries and broadening their infrastructure. He hinted broadly that America’s 15-year neglect of investment in refining projects had contributed to pushing up the price of crude.
Still, the US president maintained that if the two governments pooled their efforts for taming prices they would succeed – as they in 1980, when they brought it down from $40 a barrel to less than $10.
DEBKA-Net-Weekly‘s sources reveal that Bush paved the way for his Gulf meetings by harnessing his French opposite number, President Nicolas Sarkozy for some advance softening up of Saudi and Gulf rulers.
Sarkozy had been making the rounds of Riyadh and the Persian Gulf shortly before the US president’s arrival. He told them it was imperative to bring oil prices down to $70 a barrel, along with a warning. High prices would trigger a recession in the United States and worldwide, on the one hand, and mega-investment in building nuclear reactors, on the other. Both would have the eventual effect of cutting down oil consumption.
This line was coordinated between the White House and the Elysee as part of a package for Paris, which included Washington’s green light for France to tie up deals for the sale of French nuclear reactors and arms to their oil-rich hosts.
One of the transactions Sarkozy signed during his tour will net France up to $6 billion, the price of building a nuclear reactor in the United Arab Emirates
Sarkozy also came away with the UAE’s consent for France to become one of the first non-American foreign powers to establish a military, naval and air base in the oil-producing Persian Gulf region.
The French base in Abu Dhabi will be manned permanently by up to 500 military personnel, according to the director of the project Vice Adm. Jacques Mazars.
The French president claimed he was not breaking altogether new ground. In 1995, France and the emirates signed a mutual defense pact. The new accord was presented as its extension of that pact, which would provide a valuable defense symbol for a region looking over its shoulder at Iran’s spreading influence.
Sarkozy crowed to reporters accompanying him: This deal is a sign that France is taking part in the stability of this part of the world.
France and UK switch Atlantic alliance roles
DEBKA-net-Weekly’s Gulf sources remark that, for first time in more than half century, since the dying days of European colonialism, the United States has drafted a European ally for aid in pursuing its strategic goals in the Arabian Gulf:
Cementing US political and strategic positions;
Fortifying the US front against Iran;
Help in curbing rocketing oil prices.
Paris is being rewarded by being co-opted to a diplomatic-military-intelligence partnership with Washington in the conduct of its policies for Syria, Lebanon and the Persian Gulf.
When the US took its first steps in the Persian Gulf during World War Two, Britain was the dominant power there and in Iran. In those days, the Americans were wary of stepping on British toes and jeopardizing their Atlantic Alliance. In time, as the British Empire faded and American military and economic might burgeoned, the US ended up playing solo on the Persian Gulf stage.
France, in contrast, never achieved a proper foothold in the region atop the largest lake of oil in the world. Its entree now is ushered in by the Bush administration.
This crucial turnaround is the direct result of the changing guards in London and Paris: Gordon Brown has succeeded Bush’s good friend, Tony Blair – only to pull British troops out of Iraq – and Sarkozy has taken over from the standoffish Jacques Chirac.
Whereas Chirac was extremely reluctant to work with the Americans in the Middle East and Persian Gulf, Sarkozy is jumping in with both feet. Bush only has to say the word, and the French president is happy to lend his support for any problem – from oil prices to Iran, Syria or Lebanon.
Washington may gain a Europe dominated by two pro-US leaders
If this partnership proves durable, it will also resonate on the power structure in Europe. Losing its special relationship with the United States, the United Kingdom under an inward-looking prime minister and characterized by built-in Euro-skepticism, stands to lose ground in Europe to the more extrovert France.
DEBKA-Net-Weekly‘s Washington sources contend that, if Sarkozy can convince the German Chancellor Angela Merkel that, after falling short on his commitments, he can turn a new leaf and be a reliable partner, Europe and the European Union will be dominated by two pro-American leaders.
This coup is a foreign policy bonus gained by the Bush White House almost unintentionally, after years of coolness to Europe as a world power.
Washington signaled its welcome of this unexpected turn of events by means of a sudden Pentagon announcement in mid-December reversing the long-scheduled liquidation of American West European military bases for West Europe in Germany.
About five years ago, Washington decided those bases were superfluous and would be better used in more strategic parts of the world, such as the Far East and the Middle East, including the Gulf.
Going back on this decision reflects America’s new-found appreciation of the rising importance of Europe as a key American strategic partner. One of the considerations is that, without a US military presence, Europe might become increasingly dependent on Russia for its energy and vulnerable to its influence.
While the Cold War is relegated to the past, Russian president Vladimir Putin‘s ambitious machinations are not lost on Washington.
The first test of the Bush-Sarkozy double act, with Chancellor Merkel and Saudi King Abdullah in the supporting cast, is how well they succeed in reining in oil prices in the coming weeks.