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Models of oil barrels and a pump jack are seen in front of displayed EU and Russia flags colors.

REUTERS/Dado Ruvic

What We’re Watching: Russian oil price cap woes, Iran’s morality police 'U-turn'

Capping the price of Russian oil is harder than the West thought

A long-awaited G-7 $60 per barrel price cap on Russian oil took effect Monday. Markets responded with skepticism: In early trading, the price for Brent crude, the global benchmark, went up slightly to $86 per barrel. Why? Three days after the sanctions scheme was announced, its weaknesses have started to show. First, Russia has outright refused to accept the cap and is mulling a response — perhaps refusing to sell any crude to countries that enforce the price ceiling. Second, Ukraine thinks the cap is too weak to seriously damage Russia's economy. Third, OPEC+, which includes Russia, says it's business as usual and that it's not changing its output levels. There are fundamental flaws to the measure. After all, it’s not really a price cap so much as a limitation on insurance and shipping firms, and it lets Russia continue to sell oil, just at a lower price. Also, most of Ukraine’s friends wanted it to be lower than $60, and big Asian buyers haven’t signed on. Meanwhile, two of Russia’s biggest customers, China and India, will continue to stock up on cheap Russian crude. So far, the price cap, imagined by Washington and executed by the G-7, seems somewhere between a bureaucratic irritant and a slap on the wrist for Moscow.

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People walk as they protest in Moundou, Chad.

Reuters

What We’re Watching: Chaos in Chad, Biden’s barrels of oil

Trouble in Chad

Around 50 people were killed Thursday in Chad amid clashes between security forces and protesters over the junta's decision to delay returning to civilian rule by two years. Hundreds more were injured. The anger is directed at Mahamat Idriss Déby, who took over the Central African nation in April 2021 after his strongman dad and namesake was assassinated by a rebel group. Upon assuming power, the four-star general quickly dissolved parliament to rule by decree but promised to hold a new election in 18 months (Chadians were not happy about it). Earlier this month, military leaders pushed that deadline back to October 2024. Déby, 38, was sworn in last week as "transitional” president and says he plans to run for the job. Will Chadians let him? It's unclear if the younger Déby has as firm a grip as his father, who led the country with an iron fist for 30 years and was considered a reliable Western ally against Islamic extremism. One external player in a tricky spot is former colonial power France: Paris is wary of rising anti-French sentiment there and wants to keep a low profile, but it also needs stability because French energy major Total does a lot of business in oil-rich Chad.

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Saudi Arabia’s Crown Prince Mohammed bin Salman and US President Joe Biden during a summit in Jeddah.

Balkis Press/ABACA via Reuters Connect

Laws, votes & guns: America’s options to respond to Saudi oil cuts

Following the largest cut in oil production — 2 million barrels per day — since the beginning of the pandemic by the Saudi-led OPEC+ oil cartel (which includes Russia), the Biden administration finds itself on a war footing about how to deal with Riyadh.

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Russian President Vladimir Putin and Iranian President Ebrahim Raisi meet on the sidelines of the Caspian Summit in Ashgabat, Turkmenistan.

Sputnik/Mikhail Klimentyev/Kremlin via REUTERS

Putin in Iran: Alliances, arms, and energy on agenda

Iran and Russia are considered staunch enemies of the West, paying for it with crippling sanctions and diplomatic isolation — in Tehran's case over its nuclear program and in Moscow's over its invasion of Ukraine. The two countries, consequently, have turned to one another and boosted their economic and military cooperation.

But even as the US attempts to back a new, anti-Iran order in the Middle East, Russia is making its own moves there.

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Saudi Crown Prince Mohammed bin Salman fist bumps US President Joe Biden in Jeddah.

Bandar Algaloud/Courtesy of Saudi Royal Court/Handout via REUTERS

What We're Watching: Biden-MBS fist bump, Xi in Xinjiang, Kenya-Somalia thaw

Biden’s Saudi trip fallout

Engagement with would-be pariahs may cost you politically, but it's necessary for the national interest. Over the weekend, US President Joe Biden got panned — mostly by fellow Democrats — for fist-bumping with Crown Prince Mohammed bin Salman, aka MBS, during Biden's controversial Middle East trip. (The CIA believes MBS ordered the 2018 murder of journalist Jamal Kashoggi.) Still, the White House said the president returned from the region with some important agreements, such as progress on ending the war in Yemen or making a joint pledge with Israel to stop Iran from getting nukes. But did he really achieve much else? Riyadh announced that it'll increase oil production, but not enough to tame rising gas prices and inflation in America before the November midterms. The Saudis are also nowhere near joining the Abraham Accords, and peace between Israel and the Palestinians remains as elusive as it was under Biden's predecessors. So, why go at all then? The short answer is: as long as the US wants to continue being a player in the Middle East, you simply can't afford to ignore the Saudis, or MBS himself.

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Luisa Vieira

Crow on the menu during Biden’s trip to Saudi Arabia

US President Joe Biden is currently en route to the Middle East for the first time since taking office, and he’ll be making stops in Israel and the West Bank before making a more controversial swing through Saudi Arabia.

Yes, the same Saudi Arabia that, as a presidential candidate, Biden promised to treat like a “global pariah” because of the kingdom’s grim human rights record, its brutal war in Yemen, and the alleged involvement of the powerful Crown Prince Mohammed bin Salman in the 2018 murder of journalist Jamal Khashoggi.

But that was then, and this is now. With inflation soaring, midterm elections approaching, and prospects for a new Iran nuclear deal receding, Joe Biden is hopping on a jet to Riyadh with a few key issues in mind.

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An oil pump is seen at sunset near Reims, France.

REUTERS/Pascal Rossignol

Does the world really need more oil right now?

We’ve heard dire warnings in recent weeks from oil industry analysts and professionals about how already-high oil prices could rise to record levels in the coming months. Goldman Sachs has increased its price forecast for the second half of the year to $135 per barrel. Trading giant Trafigura predicted that prices could rise even higher to over $150 per barrel.

Underpinning these alarms are fears that the war in Ukraine will lead to a big fall in Russian crude production and exports. Ever since Russia invaded its western neighbor, markets have been on alert for signs of acute disruptions that would squeeze crude supplies.

But what if they are looking in the wrong direction? What if the fixation on the risk of a supply shock (losing Russian barrels) is diverting attention from a very real weakening of global demand for oil?

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Luisa Vieira

The Graphic Truth: What do Americans pay for in a gallon of gas?

US gas prices are hitting record levels due to a combination of Russia's war in Ukraine, supply chain snarls linked to China’s zero-COVID policy, and high demand coupled with low supply. Americans are not amused, and some are directing their anger at President Joe Biden, who's pulling every trick in the book to try to bring down oil prices. The thing is, crude is not the only thing you pay for at the pump. We take a look at the breakdown.

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