© Reuters. FILE PHOTO: G20 leaders summit in Osaka 2/3
By Timothy Gardner, Steve Holland, Dmitry Zhdannikov and Rania El Gamal
WASHINGTON/LONDON/DUBAI (Reuters) - As the United States pressed Saudi Arabia to end its oil price war with Russia, President Donald Trump gave Saudi leaders an ultimatum.
In an April 2 phone call, Trump told Saudi Crown Prince Mohammed bin Salman that unless the Organization of the Petroleum Exporting Countries (OPEC) started cutting oil production, he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from the kingdom, four sources familiar with the matter told Reuters.
Reuters asked Trump about the talks in an interview Wednesday evening at the White House, at which the president addressed a range of topics involving the pandemic. Asked if he told the crown prince that the U.S. might pull forces out of Saudi Arabia, Trump said, "I didn't have to tell him."
Saudi Arabia’s government media office did not respond to a request for comment. A Saudi official who asked not to be named stressed that the agreement represented the will of all countries in the so-called OPEC+ group of oil-producing nations, which includes OPEC plus a coalition led by Russia.
“Saudi Arabia, the United States and Russia have played an important role in the OPEC+ oil cut agreement, but without the cooperation of the 23 countries who took part in the agreement, it would not have happened,” said the Saudi official, who declined to comment on the discussions between U.S. and Saudi leaders.
On April 12, under pressure from Trump, the world’s biggest oil-producing nations outside the United States agreed to the largest production cut ever negotiated. OPEC, Russia and other allied producers slashed production by 9.7 million barrels per day (bpd), or about 10% of global output. Half that volume came from cuts of 2.5 million bpd each by Saudi Arabia and Russia, whose budgets depend on high oil-and-gas revenues.
Despite the agreement to cut a tenth of global production, oil prices continued to fall to historic lows. U.S. oil futures dropped below $0 last week as sellers paid buyers to avoid taking delivery of oil they had no place to store. Brent futures, the global oil benchmark, fell towards $15 per barrel - a level not seen since the 1999 oil price crash – from as high as $70 at the start of the year.
Cramer, the Republican senator from North Dakota, told Reuters he spoke to Trump about the legislation to withdraw U.S. military protection from Saudi Arabia on March 30, three days before the president called Crown Prince Mohammed.
Asked whether Trump told Saudi Arabia it could lose U.S. military support, U.S. Energy Secretary Dan Brouillette told Reuters the president reserved the right to use every tool to protect U.S. producers, including “our support for their defense needs.”
THIRTEEN ANGRY SENATORS
Trump initially welcomed lower oil prices, saying cheap gasoline prices were akin to a tax cut for drivers.
On March 18, the senators – a group that included Sullivan of Alaska and Ted Cruz of Texas – held a rare call with Princess Reema bint Bandar bin Sultan, the Saudi ambassador to the United States. Cramer called the conversations “brutal” as each senator detailed the damage to their states’ oil industries.
“She heard it from every senator; there was nobody that held back,” Cramer told Reuters.
“I said the one person that you don’t have on the call that can be very helpful is Mark Esper,” the defense secretary, Cramer recounted, saying he wanted Esper to address how U.S. military assets in Saudi Arabia might be moved elsewhere in the region to protect U.S. troops.
BENDING THE KNEE
On the April 2 call with Prince Mohammed, Trump told the Saudi ruler he was going to “cut them off” the next time Congress pushed a proposal to end Washington’s defense of the kingdom, according the source with knowledge of the call. Trump also publicly threatened in early April to impose tariffs on oil imports from Saudi Arabia and Russia.
After the conversation with the Saudi crown prince, and another the same day with Putin, Trump tweeted that he expected Saudi Arabia and Russia to cut output by about 10 million barrels, which “will be GREAT for the oil & gas industry!"
Riyadh and Moscow later confirmed they had restarted negotiations.
On April 3, Trump hosted a meeting at the White House with senators Cramer, Cruz, and Sullivan, and oil executives from companies including Exxon Mobil Corp (N:XOM), Chevron Corp (N:CVX), Occidental Petroleum Corp (N:OXY) and Continental Resources (N:CRL).
During the public portion of the meeting, Cramer told Trump that Washington can use the billions of dollars it spends defending Saudi Arabia on other military priorities “if our friends are going to treat us this way.”
After prolonged and fractious negotiations, top producers pledged their record output cut of 9.7 million bpd in May and June, with the understanding that economic forces would lead to about 10 million bpd in further cuts in production from other countries, including the United States and Canada.
Trump hailed the deal and cast himself as its broker. “Having been involved in the negotiations, to put it mildly, the number that OPEC+ is looking to cut is 20 Million Barrels a day…” he tweeted shortly after the deal.
Riyadh also took credit. Saudi energy minister Prince Abdulaziz told Reuters at the time that the crown prince had been “instrumental in formulating this deal.”