US Could Turn to Iran for Oil, A Move That Won't Please Saudi Arabia & UAE

The US ban on Russian oil imports and a revival of the Iran nuclear deal are causing unease in the Middle East.

The WSJ reported MBS and MBZ have declined to take calls from US President Joe Biden in recent weeks. The White House denied claims. 

(Photo: Aroop Mishra/The Quint)

Saudi Crown Prince Mohammed bin Salman (MBS) and the UAE's Sheikh Mohammed bin Zayed al Nahyan (MBZ) have declined to take calls from US President Joe Biden in recent weeks, the Wall Street Journal reported on Tuesday, 8 March.

White House press secretary Jen Psaki, however, claimed two days later during a press briefing on 10 March that the WSJ report, which even claimed that MBS refused to speak to Biden regarding the US ban on Russian oil imports, was "inaccurate".

"That report is inaccurate, so let me start there," Psaki said. "The president did speak with the Saudi king just a few weeks ago, several weeks ago, it’s all running together at this point in time. There were no rebuffed calls, period."

Regardless of the accuracy of the WSJ report, relations between the US and its Middle Eastern allies have cooled down recently due to multiple reasons, such as:

• Lack of American support for the Saudi-led coalition regarding the war in Yemen

• Washington's refusal to add Houthis to its list of terrorist organisations

• Controversy regarding legal immunity for MBS, who is facing lawsuits in the Jamal Khashoggi murder case

But tensions go beyond these factors, and at the centre of it all is one country – Iran. Two events occurring simultaneously are causing unease in the Middle East.

First, the US banned oil imports from Russia earlier this week because the latter invaded Ukraine.

Secondly, the Biden administration has been seeking to revive the 2015 Iran nuclear deal, that would lead to the removal of the US sanctions that were imposed on it, allowing Tehran to legitimately export oil to the US.

How are these two events connected to each other, and why is the connection creating a rift between the US and its key Arab allies?

US Ban on Russian Oil Imports 

Biden announced earlier this week that he was banning all imports of oil and natural gas from Russia in another round of sanctions against Vladimir Putin's regime.

The move is expected to have devastating consequences for oil prices worldwide. The mere prospect of an oil ban due to the threat of war looming in Eastern Europe had already sent prices skyrocketing by 30 percent last month.

As the ban was announced, the price of crude oil touched $130 a barrel. Analysts warn that with the ban in place, prices could go as high as $160 a barrel if the boycott against Russian oil continues.

Inevitably, US residents are also going to be affected. A gallon of regular gasoline is now being sold in the US for an average of $4.31. That could, experts say, go up to $5 a gallon.

The US, therefore, needs to find an alternative. That is where Saudi Arabia and the UAE come in.

These two nations control about 2 million to 2.5 million barrels a day but have been reportedly keeping output levels low to ensure that the price of oil doesn't come down.

Biden would want his Arab allies to pump more oil into the world market in order to get the prices down.

It could also import more crude oil from Saudi Arabia, which is the third largest supplier of the same for the US after Canada and Mexico.

The Iran Nuclear Deal 

The second important event occurring simultaneously is the Iran nuclear deal negotiation.

The details of the Joint Comprehensive Plan of Action can be found here.

In summary, according to the deal which was originally signed in 2015, Iran had to stop producing enriched uranium and plutonium, both of which are key components of nuclear weapons.

It also agreed to allow the International Atomic Energy Agency (IAEA) to conduct regular inspections at its facilities.

In exchange, the US, the EU, and the UN lifted nuclear-related sanctions on Iran.

President Trump, however, called the JCPOA a "disaster" and "the worst deal ever" and something that could lead to "a nuclear holocaust". He then went on to withdraw the US from the deal in May 2018.

Due to a new US administration, talks restarted on 29 November 2021. Since then, Iran has been eager to seal the deal.

A return to the 2015 nuclear deal would see sanctions removed. But more importantly, it would allow the Iran to legitimately export its oil, thereby giving the country enormous profits because of soaring oil prices.

The Biden government has also been trying to wrap up the deal quickly so that sanctions can be eased and Iranian oil can stabilise the market.

The Cold War in the Middle East 

Iran is a Shia state, while Saudi Arabia and UAE are both Sunni states.

The sectarian differences make them sworn rivals, especially given the geopolitics of the Middle East.

Both nations have engaged in proxy wars with each other for years in countries like Yemen, Syria, Lebanon, and Bahrain.

The Saudi-led coalition (with countries like the UAE, Bahrain, Kuwait and Qatar among others) had intervened in 2015 to support the government that had been ousted by the Houthis.

The Houthi rebels are backed by Iran, who have lately been launching missile attacks into the UAE.

How It All Comes Together 

Here's what it looks like. The US bans Russian oil, leading to a reduction in supply and a rise in prices.

It wants Saudi Arabia and UAE to make more oil flow in the market so that prices fall.

That is not happening, with both countries stating that they are sticking to the output pact agreed with OPEC and its allies (including Russia).

Lacking options, the US seems to be turning to Iran.

When the US is seen drifting towards Iran vis-à-vis the JCPOA, it worries Saudi Arabia and the UAE because an Iran that is unburdened by sanctions, would be a rejuvenated Shia force in the Middle East.

If the Saudi Arabia and UAE want to keep the US away from Iran, it has to provide an alternative to Iranian oil, which is its own oil.

The cost of that would be a reduction in its own profits. Only time will tell which path they choose to take.