It is difficult to interpret the words of the President of the United States from a meeting with the President of the Russian Federation in Helsinki. Submission in the Nord Stream 2 case met with a quick response from senators who want mandatory sanctions against this project. It is worth taking a look at statements about the common regulation of raw material prices. Would the Kremlin want to involve the US in an oil deal? – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
A mood swing in the Nord Stream 2 case
The Center for Eastern Studies rightly emphasizes that at the meeting on 16 July, no agreement was reached on any matter which was the subject of talks. Trump spoke neutral about the Nord Stream 2 project criticized by Poland. After the cross-party criticism of his performance in Helsinki, the president’s words were counteracted by the threat of new sanctions against Russia by the Congress sent by the chairman of the House of Representatives, Paul Ryan. One of those was the possibility of punishing Nord Stream 2 partners. For this reason, I repeat the thesis that the US mood swing in the Nord Stream 2 issue is going on and it is not said that there will be no sanctions.
Americans declared in June that they will not impose sanctions against Nord Stream 2 before the Europeans who are divided on this matter. Therefore, it is not possible to diagnose a turn in the US policy towards Nord Stream 2 in Helsinki. The change consisted in the fact that President Trump changed the rhetoric from critical in Brussels to neutral in the capital of Finland. It can therefore be concluded that Trump used the Nord Stream 2 subject instrumentally as an argument in a political dispute with Germany, which was the recipient of criticism of the president.
However, the more pro-Russian the US president is, the greater is the chance of movements directed against Russia by his political opponents, which can also be found in the Republican Party. For this reason, there are even voices about the possibility of impeachment of Donald Trump. Sanctions against Nord Stream 2 remain on the table, but there is no US decision to introduce them. The topic becomes an element of internal political struggle with the unpredictable president. This is probably where the draft law on compulsory sanctions against Nord Stream 2 and LNG exports to NATO allies, by a group of republican senators, was cut off, thus separating itself from Trump’s publicistic allegations in Helsinki.
The Kremlin’s dream of an oil alliance
In Helsinki, President Vladimir Putin proposed a handful of solutions that would help improve bilateral relations with the USA. Putin’s proposal included the possibility of coordinating the energy policy of the United States and Russia. Donald Trump did not respond to this invitation. We also do not know what coordination it would be. It is less likely in the gas sector, which in the US operates under market conditions and it is difficult to imagine the imposition of price regulation by the executive, e.g. LNG exported from the USA.
The prospect of cooperation in the oil sector and the impact on prices indirectly through participation in the oil agreement would be more interesting. Americans have been invited many times to talk with other “independent producers”. The absence of the United States among the signatories of the agreement on coordinated reduction of oil production is a nightmare for powers who support the status quo. Every surprising data on the increase in oil production or stocks in the US overturned the estimates of the OPEC oil cartel and non-OPEC oil signals (ie the OPEC + Group) who wanted to lower their output in order to raise prices. Meanwhile, the value of the barrel has grown, surpassing the expectations of the signatories of the oil agreement, which resulted in the decision of the last OPEC summit to reduce the cuts to the level set in the system. I suggested then that the sides to the agreement could return to the price war, which would re-destabilize and lower oil prices. This, however, may increase again – due to the fault of the USA.
Return of sanctions on Iranian oil exports in November may, according to various estimates, lead to a reduction in its exports at the level of a historical record of 2,7 million barrels per day, from 1 to 2 million barrels. The Mehr agency estimates that the drop already recorded due to concerns of Iran’s partners who will withdraw from cooperation will amount to 500 million barrels in July. Americans, however, reassure that they will fill the gaps. Brian Hook, director of the US Department of State for policy making, argues that there is enough supply in the world oil market and the United States will “minimize” possible bottlenecks. At the same time, he admitted that the goal of American action is to “make as many countries as possible minimize oil imports from Iran to zero as soon as possible”. Iran’s representative in the OPEC oil cartel Hossein Kazempour Ardebili assessed that sanctions will raise oil prices even if the US ally, Saudi Arabia, will raise production, and Trump will become a hostage to the production of this country and Russia.
A substitute for heavy Iranian oil will be needed. It will not be light oil from the US or Saudi Arabia. The Russian Urals and the REBCO mix are suitable for this. It should be strongly emphasized that the idea of President Putin did not meet with the response of the Americans. There is a clear Kremlin’s interest in such a scenario. A suggestion about it appeared in the expert commentary after the meeting in Helsinki. The author is an expert of the Energetic Center of the Moscow School of Management in Skolkov, Alexander Sobko. – The ideal solution in the oil field would be to create a balancing system between OPEC + members and shale producers in the US – he admits. – However, difficulties and problems on this route are known to everyone – he adds in an interview with RIA Novosti. In his opinion, the US, on the one hand, can support oil through the increase of profitability of shale extraction, and on the other cheaper – because it will translate into a drop in gasoline prices perceived at fuel stations in the US. The price of gasoline is important for Trump’s internal policy, which – which is worth re-emphasizing – has a significant impact on his actions on the international arena. In addition, the example of words about Nord Stream 2 shows that one should be reserved about the US President’s declaration that does not necessarily reflect the real position of the administration.
Bad fruit of Helsinki
The Kremlin’s dream will be difficult to implement. Nonetheless, speculation about the US-Russia agreement, as well as the uncertainty about their position on Nord Stream 2 and other key issues for the transatlantic community, are the main fruits of the Helsinki meeting, which should never take place. Trump is unpredictable and undermines the credibility of the US.