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DUBAI: To offset Washington’s ban on energy imports from Russia, imposed in response to the war in Ukraine, US officials have quietly made overtures to an antagonistic pair of oil producers, Iran and Venezuela. It is too early to tell whether the unorthodox attempt to close the oil supply gap will bear fruit.

The main result of the administration’s efforts so far has been a pushback from Republicans and Democrats, as well as stark warnings from opposition groups in Venezuela and Iran about the dangers of hasty overtures to the regimes in Caracas and Tehran.

US President Joe Biden announced a decision to block all Russian oil, natural gas and coal imports on March 8, hoping to put additional economic pressure on Moscow to end its invasion of the Ukraine, which began on February 24.

Western nations have condemned what they see as an unprovoked attack on a sovereign nation and have responded with sanctions targeting Russia’s financial infrastructure and its wealthiest individuals.

Moscow said its “special military operation” aims to protect the safety of Russia and Russian-speaking residents of Ukraine’s Donbass region.

The US ban on energy imports could remove more than 10 million barrels of oil per day from Western markets. Last year, the United States alone imported nearly 700,000 barrels a day of crude oil and refined petroleum products from Russia. These will now cease.

“This measure will deprive Russia of billions of dollars in revenue from American drivers and consumers each year,” the White House said when announcing the ban.

Crude prices were already rising sharply due to increased global energy demand linked to the easing of COVID-19 related restrictions in many countries. Today, the war in Ukraine has sent prices skyrocketing, with repercussions on the prices of imported foodstuffs and consumer goods.

Analysts at JP Morgan and Bank of America predict that the disruption in Russian energy flows could push oil prices up to $185-$200 a barrel.

“Inflation will pick up in March and April as the ripple effects of the Russian-Ukrainian war push prices even higher at supermarkets, gas pumps and on utility bills,” predicted Bill Adams, Chief Economist of Comerica Bank, in a recent report.

For months, Republicans have blamed Biden and Democrats for soaring fuel prices, linking them to what they call the president’s “war on American energy.”

“Biden’s White House talking points on oil and gas appear to have been written by an 18-year-old intern following freshman socialism,” Republican Sen. Ted Cruz said.

Some analysts have argued that the higher prices before the Ukraine invasion were due to supply-demand mismatches related to the COVID-19 pandemic.

Russia is the world’s third largest oil producer after the United States and Saudi Arabia. It provides about 25% of Europe’s oil and about 40% of its natural gas needs. If Europe follows the lead of the United States and bans all Russian energy imports without having alternatives in place, the effects could be economically devastating for the continent.

An increasingly anxious Joe Biden administration is courting two global outcasts in a bid to counter the growing energy crisis. (AFP)

Additional supply from Arab oil producers, including Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, could help offset some of the supply shortfall. However, several OPEC members, including Saudi Arabia, have already ruled out an increase in oil production.

Under these circumstances, the Biden administration is turning to some of the most unlikely candidates to fill the gap, like Iran and Venezuela, regimes long shunned by Washington and pressured by sanctions.

However, years of antagonism have left these two regimes in no mood to come to the rescue – unless sanctions relief and political goodwill are offered in return.

In Iran’s case, that would mean accelerating the relaunch of the 2015 Joint Comprehensive Plan of Action, also known as the Iran nuclear deal, from which President Donald Trump unilaterally withdrew the United States in May. 2018 and reimposed the sanctions against Tehran.

Following the embargo imposed by the United States, Iran, which pumped an average of 2.4 million barrels of oil per day in 2021, was unable to sell even half of this that it produces.

Former Venezuelan National Assembly speaker and opposition leader Juan Guaido speaks during a press conference at Los Palos Grandes square in Caracas on March 17, 2022. (AFP)

Although Tehran has cultivated close ties with Moscow in recent years – a process facilitated by overlapping political objectives in Syria, for example – it feels a whiff of opportunity offered by the Ukraine crisis to free itself from at least some US sanctions, according to political analysts. . Iranian officials have said they are ready to increase oil production as soon as nuclear negotiators in Vienna approve a renewed deal.

“The Islamic Republic of Iran is ready to increase its production and exports to pre-November 2018 levels,” Javad Owji, Iran’s Oil Minister, said recently, according to a report by the regime’s official IRNA news agency.

“It is up to the major consuming countries to take the necessary measures to maintain stability and calm in the oil market,” he added after a recent OPEC meeting, according to Shana, the ministry’s official agency.

“I promise to reach the highest oil export capacity within one to two months, as soon as the green light from Vienna is given.”

Opponents of the Iranian regime have urged the Biden administration not to relax its pressure on Tehran, which the United States considers a state sponsor of terrorism. Iran’s powerful Islamic Revolutionary Guard Corps, a key supporter of Hezbollah and other militant groups across the Middle East, plays a key role in the country’s oil sector.

US allies in the Middle East fear Washington’s rush to fill supply gaps in the global oil market could lead to a weak new nuclear deal that will allow Tehran to retain a large stockpile of enriched uranium, continue to expand its ballistic missile program and continue to arm its proxy militias in the region.

Envoys in Vienna are holding talks on a possible relaunch of the Iran nuclear deal. (AFP)

Closer to home, the Venezuelan government, sensing a similar opportunity offered by US outreach, has signaled that it is also ready and ready to boost oil production and help close the supply gap, in exchange for sanctions relief – much to the chagrin of the opposition.

“Venezuela’s doors are open to invest, produce oil, gas and provide oil and gas stability to the whole world, including the United States,” Nicolas Maduro, the president of Venezuela, said in comments. published on the website of the public oil company, PDVSA.

Venezuela, which has the world’s largest known oil reserves, has been under U.S. oil sanctions since 2019. They were imposed shortly after Maduro was re-elected in a vote widely believed to be rigged. His socialist regime is blamed by many for endemic corruption and economic mismanagement in Venezuela, which caused an estimated 4 million people to flee the country.

So it was an important development when a delegation of senior White House officials traveled to Caracas on March 5 to meet with Maduro. These were the first high-level talks between the countries in years.

Although details of the meeting have not been fully disclosed, the delegation is believed to have discussed measures to ease sanctions and help Venezuela increase oil production, sources close to the Wall Street Journal told The Wall Street Journal. folder.

Felix Plasencia, Maduro’s foreign minister, said US oil companies would be welcome to return to Venezuela, “if they accept that the only legitimate government in Venezuela is that led by President Nicolas Maduro.”

Venezuela, which has the world’s largest known oil reserves, has been under U.S. oil sanctions since 2019. They were imposed shortly after Maduro was re-elected in a vote widely believed to be rigged. (AFP)

In what appears to have been an act of good faith, two American prisoners, including a former oil executive, were released from Venezuelan custody following the visit and Maduro agreed to resume talks with the domestic opposition .

Nonetheless, Biden’s overtures to Caracas have proven unpopular in Washington, with even prominent Democrats questioning the wisdom of mending the fences with an authoritarian regime — and a Russian ally to boot.

“The democratic aspirations of the Venezuelan people, like the determination and courage of the Ukrainian people, are worth far more than a few thousand barrels of oil,” said Democratic Senator Bob Menendez, chairman of the Senate Foreign Relations Committee.

Republican Senator Marco Rubio said, “The White House offered to abandon those who sought freedom from Venezuela in exchange for an insignificant amount of oil.”

Other opponents of a possible thaw in relations with Caracas point out that it would take tens of billions of dollars and years of investment to increase oil production in Venezuela, which would make this decision impractical in the face of supply problems. immediate.

Crippling Russia’s military economy by attacking its oil and gas revenues without causing significant damage to the global economy may prove too big a task for the United States to accomplish – taking it down a road littered with nasty deals with unsavory diets.

Whichever way Washington chooses to respond to the energy shortage, one thing is certain: Russia’s invasion of Ukraine has resulted in the biggest geopolitical upheaval in decades, fundamentally redrawing the global energy map.

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