By Tapping Oil Reserves, U.S. Takes on OPEC

Here is today’s Foreign Policy brief: The United States taps its oil reserves in a coordinated move with major oil consumers, Germany is set to announce a new coalition government, and Abu Dhabi’s crown prince visits Turkey.

Note to readers: Morning Brief will take a brief break for the U.S. Thanksgiving holiday and resume on Monday, Nov. 29.

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U.S. President Joe Biden pledged to tame rising oil prices on Tuesday and “address the mismatch between demand exiting the pandemic and supply” by announcing the release of 50 million barrels of oil from the U.S. strategic oil reserve.

The United States won’t be alone in tapping into its reserves, with the White House announcing it had coordinated a release with some of the world’s largest oil consumers: China, India, Japan, South Korea, and the United Kingdom.

Though the decision will likely drive down gas prices in the short term, it puts the United States on a collision course with its Gulf partners in OPEC, who have been gradually producing more oil, month by month, in a bid to meet demand while keeping prices at a level that sustains their oil-dependent economies.

Kevin Book, the managing director of the energy consultancy firm ClearView Energy Partners, said the announcement sets up a new rivalry in the oil market, with OPEC+ on one side and “IEA+”—a group of International Energy Agency member nations plus IEA “association” members India and China—on the other.

The addition of new stocks to the oil market may affect the decision-making of OPEC+ members when they meet on Dec. 2 to decide production levels. A boost of 400,000 barrels per day had been expected before Biden’s announcement, but initial signs now point to the oil cartel pursuing a smaller increase.

The move represents an interesting alignment between usually conflicting sides, with China and the United States appearing to speak as one as both countries seek economic gains as the COVID-19 pandemic enters its third year. It also speaks to the relative strength of U.S. leverage over its Gulf partners, particularly Saudi Arabia.

As Book put it: “The way I think about it is the first call always goes to OPEC or, in this case, OPEC+, and the first answer was transparently: No. The next call could be to specific producers, and in this particular case the answer there also appears to have been: No.”

That leaves the U.S. Strategic Petroleum Reserve (SPR). “The main persuasive power that the U.S. has is the SPR because the threat is that our barrels undercut producer profits,” Book said. “And so this deliberate effort to build up the SPR by layering on other strategic reserves is a force multiplier or at least a notional force multiplier. But the math has to work, and it’s not yet clear that it will.”

The success of the decision will depend on how firm, and how often, the group of oil consumers can stand together.

Green light for German coalition. Olaf Scholz is set to become Germany’s chancellor sooner than expected. His Social Democratic Party along with the Greens and the Free Democratic Party are planning to finalize a long-expected coalition deal Wednesday, according to Deutsche Welle. The three parties will join what is known as a traffic-light coalition—based on each party’s colors—and have invited journalists for a press conference later Wednesday.

Gantz to Morocco. Israeli Defense Minister Benny Gantz travels to Morocco Wednesday as the two countries appear set to deepen relations following Morocco’s inclusion in the Abraham Accords. Gantz is expected to sign new security cooperation agreements with Morocco as part of the trip, Israel’s Defense Ministry said last week. Gantz is the second high-level Israeli official to travel to the country this year after Foreign Minister Yair Lapid paid a visit in August.

IAEA board meets. The International Atomic Energy Agency’s Board of Governors meets Wednesday in Vienna, a day after the organization’s director-general, Rafael Grossi, returned from Tehran following talks with Iranian officials. Even though the IAEA is still at odds with Iran over unexplained uranium traces at some nuclear sites and a failure to allow for the replacement of monitoring cameras, the board is not expected to censure Iran ahead of Monday’s nuclear talks in Vienna.

MBZ to Turkey. Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan visits Turkey Wednesday for talks with President Recep Tayyip Erdogan. The visit comes as Erdogan has hinted that the United Arab Emirates would soon make “serious investments” in Turkey and as the two countries seek to mend ties damaged by their opposing roles in Libya’s civil war.

The Quirinale Treaty. French President Emmanuel Macron and Italian Prime Minister Mario Draghi are expected on Friday to sign the Quirinale Treaty, a bilateral deal designed to improve industrial and defense ties. The agreement is also seen as a way to realign power in the European Union ahead of the departure of German Chancellor Angela Merkel and as France prepares to take over the bloc’s rotating presidency.

Taiwan democracy summit invitation angers China. Beijing has accused the Biden administration of a “mistake” after the U.S. government invited Taiwan to participate in its democracy summit alongside more than 100 other governments, including some with dubious democratic credentials.

Taiwan is a self-governing democracy, but the invitation has rankled Beijing, which regards the island as a rogue province and is increasingly threatening it militarily. Biden’s public comments regarding a U.S. commitment to defend Taiwan, as well as the small but growing presence of U.S. troops there, have escalated tensions. Zhu Fenglian, a spokesperson for the Chinese government, reiterated Beijing’s opposition to “any official interaction between the U.S. and China’s Taiwan region.”

Putin hosts Armenian and Azerbaijani leaders. Russian President Vladimir Putin will host the leaders of Armenia and Azerbaijan for trilateral talks in Sochi on Friday. It will be the first time Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev have met in person since January, when Putin convened the two leaders to set out the terms of a cease-fire deal between the countries following Azerbaijan’s victory in the 2020 Nagorno-Karabakh conflict.

Honduras votes. Honduras holds it presidential and parliamentary elections on Sunday, with the country’s relationship with Taiwan and China on the ballot. Left-wing candidate Xiomara Castro currently leads polls and has pledged to forge closer ties with Beijing, in contrast to the country’s current warm stance toward Taiwan. Castro is the wife of former President Manuel Zelaya, who was deposed in a 2009 coup. She faces off against Nasry Asfura, a two-term mayor of Tegucigalpa and member of the ruling National Party.

Can the international community mobilize to transform our global food systems to benefit people and the planet? Tune in for FP’s Food+ Summit on Dec. 1-2, when government officials and industry experts will share the efforts that are underway to feed the world while restoring the Earth’s ecosystems. Sign Up Here

Russia is to give bare-knuckle boxing official recognition amid a surge of popularity as its boxing federation created a new department to oversee the sport, which is banned in many countries. Unofficial bouts have gained a wide audience during the pandemic, fueled by domestic interest as well as U.S. viewers, according to organizers. Those behind the fights have dismissed concerns that the sport endangers participants, arguing that the gloves-off nature means fighters can take fewer punches to the head than in traditional boxing.