The Potential Global Economic and Geostrategic Impact of the Biden Decision on the Release of Strategic Oil Reserves

US President Joe Biden’s unprecedented decision to release one million barrels of oil per day for the next six months is aimed at restoring prices to reasonable levels. This is a decision with potentially dramatic implications, economic and geostrategic, on a global level.

The decision of the US government will prove once again the enormous power of the economic weapon in modern international relations. Under certain conditions and from the perspective of the international economy, it can prove to be just as devastating as a nuclear strike. So it is true that there is by definition an incentive to avoid using it. At the same time, it would be interesting to consider theoretically what the use of this weapon in the hands of regimes with the characteristics of Russian and Chinese would be.

However, the US can not indefinitely disrupt the market to force the rest to increase production. Theoretically, Washington has the potential to release more reserves, which will be taken over by the domestic oil industry. US opponents are aware of this possibility and will take it into account in their response.

It remains to be seen in practice whether they will “discipline” or we will lead to an escalation of the conflict. Whether the group of countries drawn up with Russia will remain united, or the US warning shot will create cracks, as the tolerances of each are different and are determined by the economic and geostrategic data of each country.

In the case of the Persian Gulf monarchies, military dependence on the United States will be taken into account. No matter how many billions are spent on state-of-the-art weapons systems, they alone cannot achieve what is being pursued for a number of reasons. More specifically,

The key US message to the EU

The key US message is to its Atlantic allies within NATO, but also to the EU. Washington is trying to reassure them that US guarantees understand and take into account the inextricable link between the economy and military power. And the US wants to deal with the suspicion of the Europeans with their move and not only that part of the US motivation is to speculate, selling their own shale gas at a very high price.

By releasing strategic reserves, the US is trying to achieve strategic-geopolitical goals, even though price pressures are at the expense of their narrow economic interests. High hydrocarbon prices are securing huge gains in the US, which have played a key role in replenishing Russian gas in Western markets.

By releasing strategic stocks in such volume and depth, the US seeks to significantly squeeze commodity prices in international markets. In essence, it is an “indirect subsidy” for the supply of energy to the allies, so as not to stifle their economies.

The key US message to Russia

The main goal of American policy, however, is Vladimir Putin and his decisions to demand payment in rubles for Russian hydrocarbons, thus seeking to boost demand for the hryvnia in order to regain some of the ground lost due to pressure from the West sanctions.

The key US message to the Monarchies of the Persian Gulf

But Washington’s decision also seeks to “calm down” the Gulf monarchies, which, in collusion with Russia, have refused to discuss with the United States measures to stabilize the international energy market at lower prices, increasing their output. Qatar did not follow the position of the Sunni monarchies. Doha has taken a more lenient stance towards the US and the EU, pledging not to succumb to the temptation to sell liquefied natural gas (LNG) to customers who are willing to pay more.

The US decision puts countries such as Saudi Arabia and the United Arab Emirates in a serious dilemma. Knowing that their security problem can not be covered by Moscow, but also that Israel can not move head-on at the expense of American choices, despite the obvious differences, Washington indirectly blackmails the monarchies with developments in Iran.

The American decision also affects the Islamic Republic of Iran. On the one hand, it has to make its final decision on the revival of the nuclear deal with the West. On the other hand, it will have to monitor developments inside, as there seems to be concern about the day after the death of the supreme spiritual leader, Ayatollah Ali Khamenei. The resurgence of the issue of succession in important western media and the reference to the possibility of a serious diversion are reminiscent of “there is no smoke without fire”.

As for the impact of the decision to release US strategic reserves, on the one hand it reduces Tehran’s revenues, but on the other hand it gives impetus to the completion of the nuclear deal, to the extent that it creates a prospect of Tehran joining the West’s energy suppliers. Neither the Gulf Arab monarchies nor Israel like this, while Qatar maintains the lead in relations with Iran.

But this general escalation of relations brings the Sunni monarchies closer to Israel, for the same reasons that dictated the “Abraham Accords.” That is, the common treatment of Iran as a threat to national security. The reaction of the Gulf Cooperation Council (GCC) to the developments remains to be seen, as renewed pressure on Qatar should not be considered unlikely.

The Chinese Dragon

One of the winners of the American decision, is the strategic rival China! This may not have been part of Washington’s motives and / or desires, but it does serve the interests of Beijing, a colossal energy consumer with special ties to both Iran and other Gulf hydrocarbon producers.

But because nothing has a one-dimensional reading, this motivates the Chinese to weigh their policy toward Moscow differently from the point of view of their economic interests. Supplier and customer have different interests. Therefore, although China will not give up its rhetorical support to Russia, at the end of the day it will do on a regular basis whatever its interests dictate in each case.

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The Liberal Globe is an independent online magazine that provides carefully selected varieties of stories. Our authoritative insight opinions, analyses, researches are reflected in the sections which are both thematic and geographical. We do not attach ourselves to any political party. Our political agenda is liberal in the classical sense. We continue to advocate bold policies in favour of individual freedoms, even if that means we must oppose the will and the majority view, even if these positions that we express may be unpleasant and unbearable for the majority.

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