Top US senator warns Saudi Arabia over oil price war with Russia

The strategic relationship between the United States and Saudi Arabia may change if Riyadh does not end its oil price war with Russia, a leading US senator from oil-rich Alaska state has warned.

“The Saudis have really brought in a supply shock at exactly the wrong time,” Republican Senator Dan Sullivan told the CNBC network on Wednesday.

“These kind of crises really make it clear … who your friends are and who aren’t your friends.”

Sullivan told CNBC a group of US senators has written to Saudi Crown Prince Mohammed bin Salman (MBS) and held a conference call with the Saudi ambassador to Washington.

“All of the senators who were on that letter, on that conference call with the ambassador, have been strong supporters of the US-Saudi relationship,” Sullivan said. “That is going to change if the Saudis don’t start playing a more constructive role with regard to energy markets.”

Sullivan said he reminded the Saudi ambassador of the US’s role in defending the kingdom.

“We have been there for you … First Gulf War, Saddam Hussein is getting ready to roll through your country. It wasn’t the Saudi military that stopped him … It was the First Marine Division, 82nd Airborne. Americans died in that war,” Sullivan said he told her.

Saudi-Russia price war

The US politician’s remarks came as the US hoped to intervene to end the Saudi-Russia oil price war. 

Last month, a three-year supply pact between the Saudi-led Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia fell apart after Moscow refused to support Riyadh’s plan for deeper production cuts to offset dwindling demand resulting from the coronavirus pandemic.

As Saudi Arabia and Russia started to flood the market with oil following the collapse of the deal, prices fell by roughly two-thirds – an 18-year low – due to poor demand and the global spread of the pandemic.

Saudi Arabia, the world’s biggest crude exporter, on Wednesday ramped up the price war, boosting crude oil supply to a record 18.8 million barrels on a single day despite pressure from Washington.

On Thursday, crude oil futures jumped 10 percent after US President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war.

The collapse in prices has threatened the once-booming US drilling industry with bankruptcies and significant layoffs, and Washington has scrambled for ways to protect the sector.

‘Wrong behaviour’

Another Republican Senator Ted Cruz, who represents the leading oil-producing state of Texas, also participated in the conference call with the Saudi ambassador.

“That behavior is wrong, and I think it is taking advantage of a country that is a friend,” Cruz is reported to have told the ambassador.

Recently, the US legislators have taken a tougher approach towards Riyadh, showing the kinds of legislative threats facing the kingdom if it does not respond to the administration.

A bill introduced last month by Sullivan and fellow Republican Kevin Cramer would remove US troops from the kingdom and relocate them. Though the bill is unlikely to get the votes to reach Trump’s desk, it sent a signal to Saudi’s de facto leader, Prince Mohammed.

Meanwhile, Trump is expected to discuss a range of options with oil executives to help the industry, including the possibility of tariffs on oil imports from Saudi Arabia, according to the Wall Street Journal.

Major drillers expected to participate in the initial meeting on Friday include Exxon Mobil Corp, Chevron Corp, Occidental Petroleum Corp, and Continental Resources, according to the newspaper.