Trump Attacks OPEC, Europe Gas Dependence At UN General Assembly

When President Donald J. Trump addressed the United Nations General Assembly (UNGA) on September 25, he didn’t mince words about U.S. and allied energy security. The Organization of Petroleum Exporting Countries (OPEC), the oil cartel headed by America’s key Middle Eastern ally, Saudi Arabia, was in the President’s cross-hairs. Nor did he have much patience for Germany’s gas-fueled romance with Russia.

OPEC and OPEC nations, are, as usual, ripping off the rest of the world, and I don’t like it. Nobody should like it. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices, we want them to start lowering prices, and they must contribute substantially to military protection from now on.

We are not going to put up with it — these horrible prices — much longer.”

So, what does the President mean and what does he want to do? OPEC is growing, to become OPEC Plus. It will include Russia, Kazakhstan, Azerbaijan, and other countries previously outside of the oil-producing quasi-oligopoly. In addition, taken together, OPEC countries have 82% of the global oil reserves and 35% of production. Cutting production is a strong weapon in the hands of the reborn OPEC group to drive prices up, which Trump abhors, especially before the interim elections in November.

Earlier this year, I had a privilege to testify in support of NOPEC before the Commercial and Anti-Trust Law Subcommittee of the House Judiciary Committee. In the past, U.S. Government and private parties were prohibited from suing OPEC, even if the cartel behavior caused direct damage to them. This was done because the U.S. State Department in the past sided with OPEC, extending sovereign immunity to the state-owned oil companies, most probably not willing to annoy America’s Persian Gulf allies. However, courts said repeatedly that the doctrine of sovereign immunity does not cover business activities, and therefore, should not protect the likes of Saudi Arabia, Venezuela, Iran, as well as the members of OPEC Plus, such as Russia.

The NOPEC legislation, supported by U.S. manufacturers, would allow U.S. Government to threaten OPEC members with legal action if they deliberately cut production to drive prices up. However, in this day and age, America’s shale producers are likely to fill up the missing barrels, as higher prices make more Marcellus and other U.S. shale reserves economically viable.

Trump believes that the massive weapons purchases by the Gulf States do not sufficiently offset the multi-billion dollar funding of U.S. security missions in the Persian Gulf and beyond. Of the $80 billion the United States made in arms sales last year, Saudi Arabia, Bahrain, and the UAE were customers 1, 6, and 8 in total weapons purchases (respectively). The Qataris have recently spent $1.8 billion upgrading the U.S. air base in Al-Udeid. Apparently this isn’t enough.

Trump would like to see not just the rich oil producers, but also America’s European allies, and first and foremost, Germany, expanding their defense burden-sharing. He wants the rich Germans to pay for the American protection that Europe has enjoyed since the end of World War Two. Truly, the U.S. spent trillions of dollars maintaining the security umbrellas that greatly benefited its allies from Doha to Dusseldorf.

While describing the allied contributions to the U.S.-led alliances as “membership fees” of a golf club, or monthly payments to a security company, would be too crass, significant payments for shared defense would go a long way to improve Trump’s view of security burden sharing. The recently proposed massive military base in Poland, suggestively nicknamed Fort Trump, complete with a $2 billion price tag courtesy of the Polish taxpayers, is a case in point.

Reliance on a single foreign supplier can leave a nation vulnerable to extortion and intimidation. That is why we congratulate European states, such as Poland, for leading the construction of a Baltic pipeline so that nations are not dependent on Russia to meet their energy needs. Germany will become totally dependent on Russian energy if it does not immediately change course.”

He could also have mentioned the strategically important Polish liquefied natural gas (LNG) terminal. The regasification facility in Świnoujście, on the Polish coast of the Baltic Sea, is the only installation of that size in Northern and Central – Eastern Europe. It creates the possibility of re-export of LNG affecting the entire regional gas market. The project is creating a new gas market in the Baltic region, and will be expanded from 5 million tons a year to 7.5 million tons by 2022.

Never missing an opportunity to kick Germany, Trump critically referred to the Russian Nordstream 2 pipeline, which will grow German dependence on Russian gas from 35 percent to 55 percent. Championed by the German business and Chancellor Angela Merkel, the pipeline will provide Vladimir Putin with the annual revenue of $10 billion (and would avoid some $2bn in transit revenues by avoiding Ukraine) at the time when Washington and Moscow have the worst relations since the Cold War.