Could the Decision to Ban Russian Oil & Gas Doom the Biden Presidency?
11:49 GMT 11.03.2022 (Updated: 14:20 GMT 15.11.2022)
Amid the US banning imports of Russian oil and gas, reports have emerged suggesting that Washington is considering relaxing sanctions against Venezuela in exchange for oil supplies. The White House, however, said there has been no conversation about importing oil from Caracas "at this moment".
Announcing the American ban on Russian oil and gas, US President Joe Biden said that this decision will mark the moment "the American people deal another powerful blow to Putin's war machine".
Yet, according to many energy experts, the American people might have to deal with the harsh consequences of the move first - and so might the Biden administration.
Dr Gal Luft, co-director of the US-based Institute for the Analysis of Global Security, believes that the crackdown on Russian oil could "mark the beginning of the end of the Biden presidency". Since it does not seem like the administration has a clear plan on how to replace the imports from Russia
- a country that provides 10 percent of the world's oil supply - the bold decision has caused a spike in fuel prices just before the summer driving season.
The ban is likely to hurt all Americans, who are highly dependent on driving and long commutes - and the pain that awaits them at the gas pump may be reflected in the midterm elections.
"Americans will soon realise that their leaders effectively imposed on them a 'Ukraine tax'", explains Luft. "They will not be happy about it and will do what they always do - punish their leaders in the voting booth. [...] With the Democratic Party doing poorly in the pre-midterm election polls, the current crisis could catalyse a Red Wave in November".
He points out that, if Republicans hold a majority in either one or both houses of Congress, Biden will not be able to implement the remainder of his domestic agenda and 2023-2024 will be years of legislative paralysis, possibly paving the way for a GOP candidate to return to the White House.
To hold back the rising fuel prices, Biden could give up the environmental regulations hampering domestic oil supply, such as opening more public lands for exploration and production, approving pipeline construction, suspending the Renewable Fuel Standard, and reducing the gasoline tax. That, however, would be a blow to his climate agenda - an agenda that now appears to be rattling the oil industry and with this sink the American economy, which has already weathered a major health crisis in the form of the coronavirus pandemic.
Venezuela to the Rescue...or Not?
There have been speculations about Washington being ready to bury the hatchet with Venezuela
amid the growing tensions between the US and Russia that led to Biden's import ban.
Caracas is, as acknowledged by the White House, "a large, very large producer of oil". Yet, due to the American sanctions from 2014 to 2020, Venezuela lost 98.6% of all foreign exchange earnings, with the allocations of PdVSA (Venezuela's state-owned oil company Petroleos de Venezuela) to the country's central bank plummeting more than 99%.
Now, according to reports by Bloomberg, Washington appears ready to relax the economic restrictions on Venezuela amid the Russian oil ban. This intention was not confirmed by the White House, with press secretary Jen Psaki assuring reporters that "currently" there are no discussions underway about imports of Venezuelan oil.
Many observers, however, refuse to rule out this possibility.
"As I understand it, Russian oil is classified as heavy oil. The impact on the US is limited to the few US refineries that can refine heavy oil", ponders Dr Paul Craig Roberts, former US assistant treasury secretary under Ronald Reagan. "In the absence of the Russian oil, these refineries would have less business and a lowered revenue stream. This, I think, is the reason Washington is exploring with Venezuela, a producer of heavy oil, to renew the purchase of Venezuelan oil".
Gal Luft calls America's reported turn to Venezuela and Iran for oil "a spectacle" and "no less than a national humiliation", given the eagerness that Washington displayed for years to "punish, starve and isolate those countries".
"Those countries have not forgotten recent history and they may ultimately agree to sell some oil, but it will come at a heavy political and economic price, which Washington may be very uncomfortable paying", Luft warns.
How Will the Russian Oil Ban Affect the Global Picture?
With the global economy (and oil industry in particular) hardly out of the crisis caused by the coronavirus pandemic, Biden's decision to ban Russian oil and gas seems even more risky
"The global economy is just beginning to recover from a heart attack and is not robust enough to sustain another one", warns Luft.
A capacity hike by oil producers would be something that the United States could wish for, but it is unlikely that OPEC+ exporters would go for it, he continues.
"Most OPEC+ countries are not happy with the developments in Eastern Europe and feel the war was avoidable. The rich oil producers in the Persian Gulf know that an energy crisis breeds food crisis and that bread riots in the Middle East and North and Sub-Saharan Africa could lead to an Arab Spring II - regional instability, refugee crisis, and civil wars", the analyst explains.
He also predicts that the energy crisis will lead to a competition between Europe and Asia over energy resources - a contest that Asia will win because Asian countries will agree to pay more in the bidding war.
"Over the coming weeks, the West will begin to feel the economic pain of the war. It will be felt by every household. It could affect the outcome of the French elections, and disrupt the social and economic fabric of the rest of Europe. Russia's energy is irreplaceable, certainly not in the near term. Politicians who say otherwise are charlatans", Luft concludes.