Putin, Trump and the Oil Endgame

Russia Faces a New Energy Squeeze as U.S. Pressure Mounts on Iran

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is displayed outside of OPEC's headquarters in Vienna, Austria, 3 March 2022. Photo credit: Lisa Leutner

The Russian President Vladimir Putin, who is an avid reader of history books, ought to be familiar with the famous quote attributed to the German Lutheran pastor Martin Niemöller indirectly condemning the complicity of German intellectuals and clergy following the Nazis” rise to power and their subsequent incremental purging of their chosen targets.

“First they came for the Communists … Then they came for the Socialists… Then they came for the trade unionists … Then they came for the Jews … Then they came for me / And there was no one left / To speak out for me.”

A similar predicament faces Russia today as the United States, under the leadership of President Donald Trump, took over Venezuela, a country with the largest oil reserves in the world, and is now slouching toward Iran, which holds the world's third-largest proven oil reserves—while also “looking” at Russian oil as a necessary tool.

Washington has shifted its policy toward Russian oil during the past year by first sanctioning the movement of Russian crude into the global market and subsequently allowing waivers on the very same sanctions.

There is no question that the exit of the United Arab Emirates from OPEC and the wider OPEC+ framework, with effect from 1 May, carries the imprimatur of the US President Donald Trump. Had there been a sub-category of nations in the US diplomatic playbook under the rubric “Most Favoured Rentier-Nations,” the UAE would undoubtedly top the list—being the hub of petrodollar recycling.

The timing and regional act of the UAE's exit from the oil cartel lends itself to various interpretations—a move to buttress its strategic autonomy, a challenge to the authority of Saudi Arabia, a masterly display of business savviness, etc. But in reality, the UAE is offering its services to Washington as a useful instrument for influencing energy prices and doubling down on its alignment with the US and Israel's pressure campaign against Iran.

Simply put, it is a political act, and it undermines OPEC+ discipline. The Kremlin, which did not counter the US's oil grab in Venezuela and was largely passive so far, mutely watching Trump's brutal attempt to take control of Iran's oil and gas reserves, cannot be oblivious of the near certainty that in the final countdown, he will make a pitch to isolate Russia and marginalise it in the geopolitics of oil.

OPEC+ was Putin's brainwave, pivoted on his bonding with Saudi Crown Prince Mohammad bin Salman, to forestall American hegemony over the global energy market following the shale revolution and the US” emergence as the world's number one energy exporting country. (See my article Pay Heed to the Butterfly Effect of the Putin-Salman Oil Deal in Hangzhou, Asia Times, 7 September 2016.)

The Kremlin knows how aggressive Washington can be when it comes to dominating the world oil market. The US wilfully destroyed the Nord Stream gas pipelines, severing Europe's flourishing energy links with Russia, and thereupon replaced Russia as Europe's main energy supplier and brought in American oil companies to reap windfall profits.

Succinctly put, the UAE's exit from OPEC signifies that the tectonic plates are shifting in the global energy market. There is going to be a severe weakening of the OPEC+ ideologically. If the US cut OPEC down to size by hijacking Venezuela, it has since made OPEC+ dysfunctional by breaking the Saudi-Russian axis. The body blow isolated Russia. It remains to be seen how long the UAE would keep its membership of the BRICS and SCO.

Contrary to the prevailing view of most analysts that the hold of the US on the GCC states will weaken after the war, the opposite may well be happening. Washington hinted that certain other GCC countries have also approached it, like the UAE, seeking currency swap arrangements.

Meanwhile, Axios reported that CENTCOM has prepared a plan for “a short wave of strikes” on Iran. The US has brought into the GCC bases a lot of equipment specifically needed for undertaking ground operations in Iran. According to Israeli reports, two cargo ships and several planes carrying 6,500 tonnes of military equipment from the US, including thousands of munitions and light armoured utility vehicles, arrived in Israel on Thursday.

But Iran is not going to capitulate. The statement issued by the Supreme Leader Mojtaba Khamenei on Thursday categorically ruled out a transactional relationship with the US. He underscored that the resistance ideology will be at the core of Iran's foreign policies. Mojtaba called the modern technological capacities Iran has developed, which are his father Ayatollah Ali Khamenei's legacy—in particular, in the fields of nano and bio to nuclear and missile technology—the country's “national capital.”

Against such a tumultuous backdrop, the two Kremlin readouts on Putin's meeting with the visiting Iranian Foreign Minister Abbas Araghchi on Monday and his phone call to President Trump on Tuesday can be seen as signifying Russia's solidarity with Iran. (here and here)

Clearly, last week's developments highlighted the comfort level between the new leadership in Tehran headed by Mojtaba and the Kremlin. Putin disclosed that he is in contact with Mojtaba, and they are on the same page in their intention “to maintain our strategic relations.”

Equally, the presence of the head of GRU Admiral Igor Kostyukov at Putin's meeting with Aragchi underscored that Moscow is supportive of Iran's independent foreign policies as a regional power. That said, how far it translates as practical help remains a matter of conjecture at the moment.

Putin followed up Monday's meeting with a phone call to Trump the very next day. In an exchange that was “conducted in a friendly manner and was frank and businesslike,” Putin warned Trump that “if the United States and Israel resume military action, this would inevitably lead to extremely adverse consequences not only for Iran and its neighbours but also for the entire international community.” Putin further emphasised that “a ground operation on Iranian territory would be particularly unacceptable and dangerous.”

In an overview, the situation around Iran no longer remains a binary issue between Washington and Tehran. Indeed, Russia has the capability to ensure Iran is not reduced to the Stone Age—being the world's most powerful nuclear power, a veto-holding Security Council member, an energy superpower with massive military prowess, and so on. But Trump is unlikely to be deterred. He remains fixated on gaining control of Iran's oil reserves.

All eyes are on the US-Israeli military juggernaut. CENTCOM chief Adm. Brad Cooper arrived in the region to meet with troops aboard the USS Tripoli, an assault ship stationed in the Arabian Sea. Cooper arrived after briefing Trump on Thursday on Washington's various military options against Iran. The US carrier groups are now finally in position, replenished and reloaded for the next round. From the US perspective, the ceasefire has served its purpose.