When President Barack Obama signed the latest round of US sanctions against Iranian oil on the last day of 2011, he and his advisers were careful to include Section 1245 of the National Defense Authorization Act for Fiscal 2012 (HR 1540) and to emphasize it will apply only if the president determines “the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient to permit purchasers… to reduce significantly in volume their purchases from Iran.”
This section and the intense discussions Treasury Secretary Timothy Geithner led with Riyadh to secure alternative Saudi supplies to Iranian oil if needed ought to have capped the price spiral. But it did not.
An indirect explanation for this was discernible in the words of Saudi Deputy Oil Minister Abdulaziz bin Salman bin Abdulaziz upon arriving in New Delhi last Friday, Feb. 24.
He stressed his government’s concern to keep the global oil market well supplied, “…and that has always been our endeavor,” he said.
But when he was asked if oil prices would rise further if supplies from Iran dropped, the Saudi minister said cryptically: “We don’t engage ourselves in any of these discussions.”
DEBKA-Net-Weekly’s Gulf sources report that the Saudi deputy minister’s evasiveness gave an extra spurt to the rumors circulating in the international oil market that the Saudi royal court had decided to use oil as a tool of coercion against the US President and his policies on Iran and Syria.
US allows Iran to retain its nuclear achievements
Riyadh is playing a tit-for-tat game which goes like this: We (the Saudis) will increase oil production to make up shortfalls of Iranian supplies to the Chinese, Japanese, South Koreans, Indians and certain EU countries to induce them to subscribe to anti-Tehran sanctions – but you (the Americans) must in return dismantle Iran’s nuclear weapon program either by diplomatic means or military action.
When the Obama administration turned to a third avenue, international negotiations with Tehran, Riyadh reacted by readjusting its commitment to keep the world supplied with enough crude to overcome the boycott on Iranian oil: (See DEBKA-Net-Weekly 529 of Feb. 17: Obama Gets His Way – US and Iran Set to Resume Nuclear Talks) They shrugged off responsibility for prices.
The Saudis were especially incensed by the concomitant lure Washington offered Tehran for talks: a license to continue uranium enrichment regardless of the diplomatic process and maintain nuclear development at its present level. This left Iran sitting pretty with a short timeline for producing a bomb whenever Tehran so decides.
Enraged by US military inertia on Syria
Saudi King Abdullah is also hopping mad over the world powers’ military inertia on Syria where the continuous pounding of cities inflated the death toll this week past one hundred civilians per day and Bashar Assad faces charges of war crimes. The King has a bone to pick with Moscow as well as Washington. In fact, he slammed down the phone on Russian President Dmitry Medvedev Wednesday, Feb. 22, after being informed that Moscow would neither permit the overthrow of Bashar Assad in Damascus nor countenance any nuclear accord with Iran – whether it was reached in multiple negotiations or with the United States alone – which altered the current state of Tehran’s nuclear program.
“There is no going back,” Medvedev told the Saudi King.
Abdullah retorted sharply that Moscow’s approach was totally unacceptable to the oil kingdom, whether pursued by the United States, Russia or Iran.
“We (the Saudis) will force them to back away from the level they have currently reached,” Abdullah told Medvedev.
The Obama administration’s policy on Syria, epitomized in the repudiation of military force for removing the Assad regime, is just as unacceptable to Riyadh as its position on Iran.
(See a separate article in this issue).
Saudis to Obama: Oil could rocket past $150 unless he strikes Iran
Oil industrial sources in the Gulf say that King Abdullah is venting his displeasure selectively. Saudi Arabia will provide enough oil to replace the Iranian shortfall to Tehran’s biggest buyers in the Far East who are also good friends of Riyadh. But he feels no compulsion to abide by the other part of the Saudi-US understanding which is to keep prices down.
Soaring prices will carry an unsubtle Saudi message to President Obama, a very high-placed oil source in the Gulf told DEBKA-Net-Weekly: Either attack Iran and get the Islamic Republic off our backs, or we’ll let oil prices rocket up to $150 per barrel and beyond – and you won’t be re-elected in November.
This week crude oil prices hit a nine-month high.
American officials and oil industry figures offered various pretexts for the hikes, such as general concerns about Iran’s nuclear program or, according to Treasury Secretary Geithner, Iranian saber-rattling. None admitted that the dominant factor in the upwardly mobile price level is uncertainty over America’s next steps for handling the Syrian crisis and Iran’s fast-moving nuclear weapons program. The Obama administration is reported by our sources as being under heavy pressure from Saudi Arabia and Israel for a confrontation with Iran beyond diplomacy and the current sanctions.
The most recent news from Washington is that so far the president is holding fast to his standing policies despite efforts to pin him down to a harder line ahead of his critical White House meeting with Prime Minister Binyamin Netanyahu on March 5. He may still change his mind.
Straws in the wind will be avidly sought in the major policy speech President Obama is scheduled to deliver at the opening of the AIPAC (pro-Israel lobby) convention in Washington Sunday, March 4.