The U.S. is considering imposing new sanctions on Russia in an effort to end its oil war with Saudi Arabia, which has sent crude prices spiraling to historic lows.
According to a report published Thursday in The Wall Street Journal, President Donald Trump’s administration is mulling more direct intervention to bring Moscow and Riyadh back to the table, under pressure from American oil companies to do so amid the lowest U.S. oil prices in 18 years.
U.S. oil producers are being punished by the sharp drop in prices. The crisis stems from Russian and Saudi concerns over the U.S. shale industry, which in recent years has transformed the market, making America self-sufficient in oil and the world’s top producer.
The coronavirus economic slowdown exacerbated a global oversupply of oil, as demand fell around the world, particularly in Asia. In response, OPEC — led by the Saudis — called for oil production cuts to boost prices.
But Russia, which has been cooperating with the cartel for three years under the OPEC-Plus agreement, refused to fall in line. The Saudis responded by ramping up production to flood the market with oil, collapsing prices and eating into Moscow’s coffers.
The Journal reported that American oil and gas producers — excluding integrated firms like Chevron and Exxon Mobil — have been pushing the White House to alleviate the pressure they are facing, with some at risk of bankruptcy with U.S. oil prices having fallen some 60 per cent in the year to date.
Lobbyists have visited the White House, and the Treasury and Commerce departments to ask for assistance, the Journal reported. Two of the most common requests were diplomatic intervention and additional purchases for the Strategic Petroleum Reserve, according to multiple people familiar with the meetings.
The Journal cited an unnamed administration official who said that the U.S. would ask the Saudis to return to lower production levels, and could prepare additional sanctions on Russia to show Riyadh that its rival would not benefit too much from bolstered prices.
The administration official and a second unnamed person familiar with the matter did not give details on the sanctions, nor what action from Moscow might prompt the U.S. to impose them. Newsweek has contacted the White House to request comment on the report.
The president said Thursday he would take action at the “appropriate time.” Though low prices are hurting U.S. producers, Trump has lauded the benefit for American consumers.
The president also suggested that Russia could ultimately suffer most, noting that the current situation is “very devastating to Russia because when you look, their whole economy is based on that.”