Inside Story Of How Trump Got MbS To 'Bend The Knee': Cut Oil Supply Or Lose US Protection

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by Tyler Durden
Thursday, Apr 30, 2020 - 02:30 PM

The full story of President Trump's intervening in the Russia-Saudi price war which sent oil prices plunging to historic lows has been revealed in a new explosive report. Trump's pressure resulted in the surprise April 12 unprecedented OPEC+ production cut by 9.7 million barrels per day (bpd), which saw the Saudis and Russians begrudgingly agree to cut 2.5 bpd each.

Ourselves and others strongly suggested at the time that no doubt there were strong quid pro quo type ultimatums being delivered behind the scenes — consistent with Trump's prior eyebrow raising boasts about Riyadh ponying up $1 billion in 'protection money' in return for defense against Iran — but new Reuters confirmation is out Thursday morning, and the details are more delicious than could have been expected, complete with the report actually describing of Saudi leaders that they genuinely panicked and fast began "bending the knee" when confronted by Trump's slash output or else threat.

It began with an April 2nd phone call, Reuters details, wherein Trump pressed Saudi Crown Prince Mohammed bin Salman with the following ultimatum: OPEC must immediately begin cutting production or see all American troops withdrawn from the kingdom.

Crown Prince Mohammed bin Salman, file image.

This after Trump had publicly threatened tariffs on oil imports from Saudi Arabia and Russia, which was the first suggestion at the time his intervention would run deep if the crisis would not resolved in a way satisfactory to US producers' interests amid both the historic price meltdown and broader economic unraveling of the coronavirus pandemic.

Reuters describes it was nothing less than a "threat to upend a 75-year strategic alliance" and a gamble that ultimately resulted in a major "diplomatic victory for the White House". And here's where things get particularly good, given the report describes that Trump's pressure campaign sent the 34-year old Saudi de facto ruler into nothing less than a temporary panic

Trump delivered the message to the crown prince 10 days before the announcement of production cuts. The kingdom’s de facto leader was so taken aback by the threat that he ordered his aides out of the room so he could continue the discussion in private, according to a U.S. source who was briefed on the discussion by senior administration officials.

A senior US official summarized Trump's aggressive strong-arm rhetoric as essentially saying to Riyadh: “We are defending your industry while you’re destroying ours.”

American forces arrive at Prince Sultan Air Base in Saudi Arabia in June 2019, via US Air Force.


Crucially, at that time there were bills being introduced from multiple Republican corners of the Senate that would punish Saudi Arabia over failure to cut oil production by removing all US troops from the kingdom in a month's time, including Patriot missile and other anti-air defense systems, essential to defending the kingdom from a repeat of the Sept.14 Abqaiq–Khurais Aramco facility attack (blamed ultimately on Iran) which proved temporarily devastating to refining and export capability. Shia Houthi rebels in neighboring Yemen have also been using increasingly sophisticated missiles to attack sites inside Saudi Arabia.

In a follow-up interview Wednesday, Reuters asked the president point blank if he verbalized directly to MbS that US forces might be pulled from the kingdom, to which Trump responded, “I didn’t have to tell him.”

But the potential consequences for not coming to heel were made unmistakably clear, according to Reuters

On the April 2 call with Prince Mohammed, Trump told the Saudi ruler he was going to “cut them off” the next time Congress pushed a proposal to end Washington’s defense of the kingdom, according the source with knowledge of the call. Trump also publicly threatened in early April to impose tariffs on oil imports from Saudi Arabia and Russia.

After the conversation with the Saudi crown prince, and another the same day with Putin, Trump tweeted that he expected Saudi Arabia and Russia to cut output by about 10 million barrels, which “will be GREAT for the oil & gas industry!” 

Add to this the intense pressure coming simultaneously from Republican senators led by Kevin Cramer and Dan Sullivan and other Congressional leaders, who had introduced legislation threatening to cut defense ties. 

Image via AFP

A “brutal” pressure campaign waged on the kingdom's energy decision-makers laid the groundwork for Trump's ultimatum subsequently relayed directly to MbS:

On March 16, Cramer was among 13 Republican senators who sent a letter to Crown Prince Mohammed reminding him of Saudi Arabia’s strategic reliance on Washington. The group also urged Commerce Secretary Wilbur Ross to investigate whether Saudi Arabia and Russia were breaking international trade laws by flooding the U.S. market with oil.

On March 18, the senators – a group that included Sullivan of Alaska and Ted Cruz of Texas – held a rare call with Princess Reema bint Bandar bin Sultan, the Saudi ambassador to the United States. Cramer called the conversations “brutal” as each senator detailed the damage to their states’ oil industries.

“She heard it from every senator; there was nobody that held back,” Cramer told Reuters.

And in a parallel mid-March initiative, North Dakota Republican Senator Kevin Cramer wrote a letter to Trump declaring “We will not be bullied” while urging a position of strength against “Foreign nations... now using the environment of the worldwide spread of COVID-19 to flood the market and cripple our domestic energy producers.”

Indeed it looks like the Trump presidency has given us a rare if not completely unprecedented instance wherein Washington finally reminded the Saudis who's boss after the better part of a century of 'blank check' protection, not just through empty posturing, but actually getting them to "bend the knee" at a crucial moment.