WSJ: Saudi Arabia willing to raise oil output to help secure Israel deal

Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high—a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defense pact with Washington, Saudi and US officials said, Report informs via the Wall Street Journal.

That understanding is part of an effort to seal a three-way agreement that would also likely include US nuclear assistance and represents a notable shift by Riyadh, which a year ago rebuffed a Biden administration request to help lower oil prices and fight inflation, severely straining relations.

Still, Saudi negotiators emphasized that market conditions would guide any action on production and officials familiar with the talks said the discussions didn’t represent a long-term agreement to cut prices.

Talks on a deal have centered on Saudi recognition of Israel—a move that could revamp the geopolitics of the Middle East—in return for US weapons sales, security guarantees and help building a civilian nuclear program. An agreement would be a diplomatic coup for President Biden as he faces a tough re-election battle.

Saudi Arabia hasn’t recognized Israel since its founding in 1948, and a deal establishing diplomatic relations would expand Israel’s ties to the Arab world, potentially constrain Iran’s military ambitions and curb China’s efforts to supplant American influence in the region.

Two top White House officials, Brett McGurk and Amos Hochstein, flew late last month to Saudi Arabia, where they emphasized that soaring petroleum prices would make it harder to win support in Washington, the officials said.

The White House may need congressional support for a deal. Negotiators are now discussing a new defense pact with the kingdom that could require Senate approval as well as US support for Saudi efforts to create a civilian nuclear program, and billions of dollars in weapons sales.

The trip by McGurk and Hochstein came amid a climb in oil prices, with the global benchmark, Brent crude, rising 25% this quarter and trading as high as $95 a barrel. It has pulled back in recent days, trading above $84 a barrel Friday.

The Saudis have been pressing for higher prices as they pour tens of billions of dollars into megaprojects aimed at transforming the kingdom’s economy. Public acknowledgment that the Saudis could act to cool the oil market next year might have the effect of capping oil prices under $100 a barrel, a historically high level that has in the past fueled inflation and led to calls in Washington for action.

As the world’s largest oil exporter, Saudi Arabia has a unique capacity to influence crude prices, with the ability to restrict the world’s oil supply or flood it. The kingdom has used that power to calm markets during periods of global turmoil, but under Crown Prince Mohammed bin Salman, the nation’s oil policy has become known as “Saudi First,” as the kingdom looks to fund its economic diversification.