Saudi Arabia Warns Trump Against Fulfiling Campaign Threat To Stop Saudi Oil Imports
Following threats issued by the incoming U.S. President Donald Trump during the election campaign that if he is elected as president, his administration would block oil imports from Saudi Arabia, the world’s largest oil exporter has warned Trump to consider his policies carefully before taking drastic action because of possible consequences to the U.S. and global economy.
According to the Saudi Minister of Energy, Industrial and Mineral Resources Khalid al-Falih, also chairman of Aramco, blocking all oil imports from Saudi Arabia could prove damaging to the U.S. economy, the Financial Times reports.
Trump had threatened during campaign that he would stop imports of oil from Saudi Arabia and some other Arab countries if they refuse to commit ground troops or reimburse the U.S. in the fight against ISIS, CNN Money reports.
“Without us, Saudi Arabia wouldn’t exist for very long,” Trump said in an interview with the New York Times earlier in March.
And later, while campaigning, Trump said that his administration would work to ensure U.S. energy independence from “our foes and the oil cartels” (a reference to the Organization of Petroleum Exporting Countries) and also strive for “complete American energy independence,” according to RT.
With Trump having won the presidential election, unexpectedly, it seems that the Saudis are now worried that what they had probably dismissed as empty threats could eventually materialize as U.S. policy.
On Wednesday, the Saudi Minister of Energy, commented on the threats for the first time, warning that banning Saudi oil could backfire for the U.S. and global economy.
Speaking in an interview with the Financial Times, al-Falih said that “at his heart President-elect Trump will see the benefits [of importing Saudi oil] and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy.”
According to the Saudi minister “energy is the lifeblood of the global economy” and the U.S. “benefits more than anybody else from global free trade.”
“The U.S. is sort of the flag-bearer for capitalism and free markets,” Al-Falih continued. “The U.S. continues to be a very important part of a global industry that is interconnected, that is dealing with a fungible commodity which is crude oil. So having equalization through free trade is very healthy for oil.”
CNN Money reports that Jason Bordoff, former Obama energy adviser and professor at Columbia University, said it was impractical to ban oil imports from any major source given the present condition of integration of the global oil market.
Bordoff warned that banning oil imports from a major producer, such as Saudi Arabia, could disrupt diplomatic and commercial relations and “violate the longstanding U.S. commitment to free and open energy markets.”
Experts also point out that despite the shale oil boom that made the U.S. the third largest crude oil producer in the world, the country still needs Saudi oil and OPEC oil. Recent statistics from the U.S. Energy Information Administration show that the U.S. was importing 3.4 million barrels of oil from OPEC countries daily in August.
About a third of the total, amounting to about 1.1 million barrels, came from Saudi Arabia alone, making the country the largest Middle Eastern supplier of crude oil to the U.S. and second-biggest after Canada.
Saudi Arabia’s share of total U.S. oil imports was 11 percent, with OPEC members supplying about 31 percent, compared with Canada’s 41 percent share.
But following the onset of crisis in the oil markets in the last two years, with prices plummeting from a peak of about $115 per barrel in 2014 to about $40 today, Saudi Arabia’s economy has taken a big hit. The country is suffering dwindling foreign reserves and budget deficits, estimated at nearly $100 billion last year.
The shale oil boom in the U.S. has translated to lower demand for OPEC oil. The glut in the global oil market due to new shale oil extraction technologies caused the fall in global oil prices. But OPEC has not been able to shore up prices by reducing supply due to fears about losing market share. On the contrary, OPEC has been forced to increase production, causing further falls in oil prices.
Describing Trump’s charged campaign rhetoric as “50,000 feet announcements,” the Saudi energy minister expressed confidence that Trump’s perspective of things would change after he enters office and that he would reconsider some of the campaign promises he made to win votes.
“It is common that once presidents start governing then a lot more substance comes out,” Falih told Financial Times.
[Featured Image by Sidali Djarboub/AP Photo]