Trump’s Mideast Diplomacy

Guests

Helima Croft

Managing Director and Global Head of Commodity Strategy, RBC Capital Markets

Distinguished Visiting Fellows

Joe McMonigle

CGEP Distinguished Visiting Fellow; Former Secretary...

Experts

Karen E. Young

Senior Research Scholar

Energy Markets Geopolitics Oil

Transcript

Joe McMonigle: It is a big change — stratospheric change — in US foreign policy to be coming here first, and I think it’s going to really leave lasting imprints for US foreign policy regardless of Trump versus other presidencies.

Helima Croft: If we can off ramp the major sum of all fears about the trade war with China, the Iran situation becomes really important. I think it’s the most important geopolitical wild card for the oil market.

Karen Young: The longer term motivation, particularly for Saudi Arabia, is more about the market share and the control issue. And shale at some point was going to plateau and start to decline anyway.

Jason Bordoff: President Trump’s recent visit to the Gulf region marked a dramatic shift from the previous administration’s Middle East diplomacy in his visit to Saudi Arabia, the UAE and Qatar. Trump focused on securing significant investment commitments and commercial partnerships to support the region’s AI and other ambitions. The trip showcased Trump’s transactional approach to foreign policy, one focused on bilateral deals rather than regional frameworks and economic partnerships over military interventions. It also raised important questions about oil markets, geopolitical competition with China, nuclear agreements, and the future of energy prices. So what are the likely impacts of massive investment pledges from these Gulf nations and do low oil prices limit their ability to make good on them? What’s the outlook for oil prices with uncertainty over OPEC plus policy, a possible Iran deal, and possible new sanctions on Russia? And what does Trump’s transactional diplomacy mean for traditional alliances and for regional stability?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show, Karen Young, Helima Croft and Joe McMonigle. Karen is a senior research scholar here at the Center on Global Energy Policy and a senior fellow at the Middle East Institute where she focuses on the political economy of the Gulf States and energy policy. Helima is managing director and global head of commodity strategy at RBC Capital Markets where she leads the coverage of energy markets and geopolitical risk. She previously served as a senior analyst at the CIA. Joe is a distinguished visiting fellow here at the Center on Global Energy Policy. He is a senior energy policy advisor and the founder and president of the Global Center for Energy Analysis, an independent research and analysis firm. He is the former Secretary General of the International Energy Forum. We explored the significance of Trump’s Gulf visit from the purple carpet reception in Riyadh to the massive investment commitments. Our conversation covered the administration’s approach to Iran sanctions, OPEC’s oil market strategy, the emerging AI arms race in the Gulf, and what these developments mean for America’s energy dominance, competition with China, and the future of Middle East geopolitics. I hope you enjoy the conversation.

Karen Young, Helima Croft, Joe McMonigle. So good to have this group together for this very timely podcast. Thanks so much for being with us on Columbia Energy Exchange.

Karen Young: Thank you.

Helima Croft: Thank you for having us.

Joe McMonigle: Great to be here.

Jason Bordoff: What a phenomenal group to talk about what is happening in the Middle East and particularly timely given President Trump’s visit to the Gulf region. And let’s start with the big picture. I think people have probably read at least a decent amount of coverage already and unless you have particularly important insights into planes from Qatar and stuff, I mean, I think people note they’ve seen the headlines and what I want to talk about is how you understand what was really consequential about that trip, what happened. That’s not to diminish whatever concerns people have with that gift from the government of Qatar, but I particularly want to focus it on energy as well. And let me just start with you, Joe. You were in the room and so give listeners a flavor of what was going on there or what Riyadh felt like, what it meant to roll out the red carpet. There were a bunch of tech executives there, a bunch of US CEOs, quite a different tone from a couple of years ago and how both the administration and the business community was engaging, or not engaging, with Riyadh. So just give people a kind of taste of what you saw on the ground.

Joe McMonigle: Well, thanks and it’s great to be with everyone here. I’m big fans of both of my co-panelists here. First of all, it’s a purple carpet. It’s not a red carpet. The Saudis do a royal purple.

Jason Bordoff: Correct. Correct.

Joe McMonigle: So you’ll see that everywhere in the footage. Look, I had a front row seat for both the Biden visit here in Saudi Arabia and also the second Trump visit. And I think there were contrasts on two levels. Number one, there’s a contrast between Trump’s two trips. I mean, first of all, it’s important to state his first state visit, first foreign visit, although he went to the Pope’s funeral, but I think we could say it’s the first state visit. He went to Saudi Arabia both times, which is a very, very big deal. But in the first term, the contrast was that the Saudis were trying to impress him and really put on a big sort of show and welcome and really get into Trump’s psyche. On this trip, it was the opposite. Trump was really courting the Saudis and as he did in the rest of the region too, which is a big change.

I mean, yes, it’s Trump and everything, but it’s a big change, a stratospheric change in US foreign policy to be coming here first. And I think it’s going to really leave lasting imprints for US foreign policy regardless of Trump versus other presidencies. The other contrast I would say is, look, I was on CNN Live during the Biden arrival. It wasn’t planned this way, but I was there when the plane was landing and they kept trying to say, you got to keep talking longer. So as the plane was taxiing, I did this extended interview for that trip. I mean, you all remember, I’m sure a lot of the listeners remember that whole trip was about is there going to be a handshake or a fist bump. On Trump’s trip this time he ended his remarks by saying quote, “we’re with you all the way.” The contrast could not be greater, I think between the two administrations.

And yes, it’s a Trump phenomenon and there’s a lot of emphasis on courting the Gulf and his focus here on the Middle East. We know with the Iran talks, but I do think it’s very meaningful and there’s a lot of other things that happened. I mean, the Saudis had been looking for security guarantees. There was nothing very explicit about that. But Trump said several times in his remarks, which I thought were really, that went way too long. It should have been about 30 minutes, but he basically said, I want peace, but if you come after us or our allies we’re coming after you. He said it like three times I think during his remarks. And it made a huge impression on his audience in Riyadh. And I think everyone saw the footage of the Crown Prince. He was beaming basically from those remarks. I think the interests are very aligned between the administration and the Saudis. I would just say finally, the other stops, I think the Saudi trip was really more about policymaking and peacemaking, if you will. The Syria thing was a huge deal. I was so surprised. I mean, I thought it was big, but to hear the response in the room from the Saudis, it was really remarkable. So I think the Saudi trip…

Jason Bordoff: And for people listening, you’re talking about lifting the sanctions on Syria with change of leadership there…

Joe McMonigle: Yeah and meeting the next day with the current president of Syria. So I think the Saudi trip, and he met with the GCC leaders on the second day. And so I think it was more policymaking and peacemaking, if you will, whereas the Qatar and the UAE stops were more about dealmaking. Certainly there were commercial transactions done in the Saudi stop, but it was really more, I think, substantive than on the other stops.

Jason Bordoff: Really, really helpful overview. Thanks Joe. Karen, you’ve been studying this region for a long time, so let me just let you respond to what Joe said, what you agree with might disagree with and what it means for US relations with the Gulf, for relations within the Gulf or Saudi’s role in the Gulf.

Karen Young: Yeah, so I guess I take a little bit of a different view than Joe does on sort of the policymaking commitment that President Trump made while in Saudi Arabia. Yes, he said all these very nice things and it’s a bit of a 180 from what is still very much very vivid in the minds of Saudi citizens and policymakers. What happened in 2019 when the Trump administration did not come to the defense of Saudi Arabia when they were attacked directly by missiles that came from the direction of Iran. He’s signaling because that’s what Saudi Arabia cares about and does want a defense agreement with the United States, but they have not yet gotten that. And so the language is nice, but what we’ve seen in this administration, even in the first four months the president’s tolerance for a wide US military commitment within the Red Sea has been quite limited. So we have already sort of made this truce with the Houthis. The president did not like the continuation of having such a large force presence and frankly, the performance from the US Navy was not really stellar and he sort of backed down. So I don’t know that when push comes to shove, hopefully that this doesn’t happen. But if there were to be an attack similar to 2019 or a renewal of Houthi aggression towards Saudi Arabia, what would the United States do despite the president’s assurances? I’m not sure that there would be a follow through.

Jason Bordoff: And just to be clear, is that what you heard in Trump’s speech as well? Sort of this policy shift criticizing past military interventions, moving away from nation building efforts and military engagement more toward economic diplomacy and deal making is what you were just saying. You heard that in his speech.

Karen Young: There’s absolutely this transactional nature and the emphasis on bilateral relationships rather than a regional policy focus. And that we saw throughout the trip and the Gulf States wanted that as well. They did not want to complicate the president’s visit with the regional files. So I agree. The announcement to try and pull back US sanctions on Syria was a surprise. I think it was the president’s decision. This is not something that the Treasury Department had been preparing to do. The president kind of surprised everyone and said, yes, sure. We’ll do this as a favor to you Crown Prince Mohammed bin Salman and how that works out will be certainly very interesting and is positive for the new Syrian government, but it was not necessarily something that came through the interagency or policy process of the US government.

Jason Bordoff: Let me come to you Helima, to just reflect on everything you’ve heard and then we’ll kind of maybe use that as a pivot to get into some of the energy related topics too.

Helima Croft: Well, first of all, thank you so much for having me on. I like you too much to all my fellow panelists. I think what is really interesting about this visit is that though the Saudis didn’t get that firm security guarantee that they were seeking as part of the US-Saudi grand bargain, they also seemingly got a number of action items that had been in that deal that was really looking like it was ready to launch before October 7th. So I look at the MOU on the Saudi-US partnership for civilian nuclear program. We have to see what that entails in terms of the monitoring arrangements. It should have a 123 agreement, but it looks like it will have Saudi domestic enrichment that had been a key action item that they had wanted. That’s a deliverable. I also look at the lifting — I was in Dubai the week before the visit and the news was starting to break on the lifting of the AI diffusion rule. And so I think that is really important for Saudi Arabia for UAE access to the most advanced chips for their AI build out. Everyone is very focused, and I can’t wait to hear more from Karen on the whole AI arms race in the region. But getting those chips…

Jason Bordoff: Again, just for people listening, the rule, you’re referring to restrictions the Biden administration had on the most advanced chips being exported…

Helima Croft: Right. That’s right. And so now it’s going to be bilateral arrangements. As Karen talked about, it’s much more bilateral. So now there are bilateral relationships in terms of allowing the export of these chips. That’s a big deliverable for those countries. And so I look at also potentially access to the advanced air defense systems. They’re being able to at least acquire a number of things that they wanted as part of that deal. But it doesn’t include Saudi entry into the Abraham Accords at this point. Something that the Biden administration had been really pressing for. And so I think from the standpoint of just sort of the key deliverables or important action items, if we take out the guarantees on defense, but a lot of other key action items were achieved. So I think it was a very good visit from the standpoint of if you were looking for key deliverables on nuclear, on AI, this was a very good trip for the Saudis. Now we can talk about the budgetary environment that these countries are facing right now as President Trump is really pressing for investment into US companies and buying Boeing. But again, they wanted these purchases, they wanted these deliverables, and they’re getting them.

Jason Bordoff: I want to come to that because again, this could be a five hour conversation. We’re going to run out of time. But just quickly, Joe, if you have any response to Karen raised this question of what happened with Abqaiq in 2019, defense guarantee, normalization. Is there a sense that on the security front, the Saudis may not feel they can depend on the US or may not have gotten what they wanted? And what are the implications of that?

Joe McMonigle: Well, yeah, I mean, I would agree there was a lot of disappointment after Abqaiq, but I can tell you in the room there was basically acknowledgement that something big had changed. And I think from the Saudi perspective, I think they actually trust what the president was saying. I mean, he repeated it I think three times. I mean, I was sort of astonished that he was going as far as he was going on that. So I mean, look, I think it’s fair to say to be skeptical about it, but I think at least from the Saudi perspective, I think they were very comforted by his remarks. I mean, if he had said nothing, obviously that would be a different story. But he repeated it several times and he’s standing very firm. I think we can get into this later on Iran, and that’s also a big issue.

Jason Bordoff: And just a quick follow up, Karen, to you. You mentioned kind of Syria. Again, you’ve been watching this region for a long time and you talked about this being Trump’s decision, maybe not an inter-agency process. It was also supported by a broad number of people, including Ben Rhodes, president Obama’s national security advisor. I’m just curious what you thought of that decision.

Karen Young: So I think it’s certainly in the interest of the region and the Gulf states have sort of rallied behind each other in a very consensus way, which is somewhat surprising. We don’t see Qatar, the UAE and Saudi Arabia really coming at odds with each other inside of Syria yet, which is a good sign. And they wanted the US to basically give the green light for foreign investment for reconstruction in Syria. I heard very directly from senior Emirati policymakers: This is an opportunity for the Syrian diaspora, many of whom live in the UAE to go back and rebuild. These are successful business people, so it opens the legal doors for that to happen. So yes, it’s good. It’s positive for a country that has seen too much death and destruction over almost two decades now. So it’s great. But this is also an interim government in Syria that does not have full control over the territory of Syria. There still remain active terrorist groups that control parts of the country. There’s enormous tension between different sectarian groups in the country. So it’s an enormous challenge. It’s not settled. But yes, this is, I think at least from a Gulf State point of view, a very positive development.

Jason Bordoff: And Helima teed up, Karen, the question of investment and some of the AI deals. And just curious to get your take on that. And then Joe and Helima, you as well, the White House had Trump secured more than $2 trillion in investment agreements in the region. I was wondering if you could help us understand how much of those are real actual commitments. And then it’s even, go ahead. Sorry.

Karen Young: So it’s even bigger than that, but yeah, go ahead. Sorry.

Jason Bordoff: No, no, I was just going to come to the AI thing. I was going to combine two questions into one, but you can answer them in turn. But then I was also curious what you thought of what Helima just said about AI being a really important strategic sector. How important were those announcements for the Gulf regions and what implications do you think they have for the future of this technology competition with China moving forward?

Karen Young: It’s huge, and it is absolutely a sector that is prioritized by both the Saudi and UAE governments. This is seen as part of economic diversification, but also being energy giants, right? Because they have the ability, especially to deploy domestic electricity generation, they are well suited for the siting and kind of the infrastructure necessary to create these big AI centers. They’re basically creating campuses like large, I mean, I think of it even in comparison to sort of a free zone type of structure. So yeah, it matters a lot. It also is a very savvy way to integrate themselves into what’s turning into very much a more global south driven economy and positions them neatly to be at the center between the relationship of the United States and China such that neither can really force them out. They’re useful to both now, and that’s very, very smart.

On the investment side, so yeah, the numbers are huge. It’s like $2 trillion in company commitments, $4.2 trillion in government commitments. But what has struck me from these announcements is like we should have been nicer to Japan. The Japanese are much more important government and as a country, but not necessarily government sovereign wealth driven investors, but bigger investors in terms of portfolio investment and foreign direct investment in the United States. And Japan also upped its commitment. So Japan currently 2024 level is about $3.2 trillion of holdings, mostly in portfolio investment in the United States. And they committed up that to another trillion dollars in addition. So they’re on par with some of the commitments like the UAE commitments, $1.4 trillion. Saudi Arabia is still in the $600 billion range, and the Qataris proposed a $1.2 trillion over a decade. But when you kind of look at the annualized rate, Japan, its 10 year average of sort of annualized investment into the United States, both FDI and portfolio investment is about $58 billion.

The UAE, Saudi Arabia and Qatar have all been in the kind of $4 billion range on an annualized basis. So much, much smaller. And you kind of have to wonder about the capacity to deploy, as Helima said in this moment of very, very low oil prices, particularly for the kingdom of more kind of limitations on how they can spend and where they allocate. So I think it raises some interesting questions about how you treat allies and friends and where you engage in the pageantry and where you’re just like, oh, thanks, that was nice. It’s not the same and maybe it’s a little unfair.

Jason Bordoff: I’d love to hear Helima and then Joe sort of comment also on how you see the longer term geopolitical implications of how countries particularly Saudi are positioning themselves with regard to investments and agreements in the AI space. And then I really am going to move to energy next.

Helima Croft: Do you want me to pick that one up, Jason?

Jason Bordoff: Yeah, please, please.

Helima Croft: I think what’s so interesting, and we talked about Saudi in terms of AI, UAE in terms of AI, even a country like Kuwait is getting in on the sort of AI play in terms of talking about their partnerships with companies like Google and Microsoft and everything. And the link to energy is, as Karen mentioned, is what is their value proposition? Their value proposition is the low cost energy feedstock for the data centers. And AI is seen as so central to future proofing their economies. And I think what’s interesting, they’re not spending without a calculator. I think they’re making real choices on if we have less money to deploy, if we have to borrow now to make the math work we’re going to spend on core sectors. And so that’s why I think what was so important about the Saudi visit is they were getting what they actually wanted. They weren’t basically saying, we’re going to go for these big white elephant projects.

No, we’re going to build up the industries that we think are going to be lasting as part of our diversification agenda. Now, it doesn’t mean it’s not an economically challenging backdrop. And I think what’s interesting, and you talk about a country like Kuwait that’s pushing through, now, subsidy reform, they’re borrowing now. The changes that have happened with the Parliament have enabled them to do that. It’s not like it’s an easy price environment to do so, but I think they also believe that there’s some opportunities in terms of getting it done now because it’s a lower cost environment. But I would also, I just want to pick up on one more thing that Karen said it was so brilliant, is just how they are positioning themselves as the place to be in the multipolar world. I mean, you can see them hosting the fact that you’ve had multiple rounds of diplomatic negotiations over the Russia, Ukraine war taking place in Riyadh.

The fact that you have this big future minerals forum event that takes place in January in the kingdom where the kingdom says, we’re going to be the Silicon Valley of critical minerals and we’re going to be a key destination for processing of these minerals, basically putting ourselves at a central place in the whole chain for critical minerals and the electrification of everything agenda. So I think it really speaks to this big sort of agenda and ambition of Riyadh in terms of how it’s positioning itself as they can basically do business and maintain relations with all sides.

Jason Bordoff: And it is striking, Joe, that we’ve been talking about this in the US for a while now. Hyperscalers are telling us they need massive amounts of energy really quickly. We’ve written, I think several times, Karen, right here at the center, they will find that energy somewhere. It’s existential for these companies. If they can’t build it in the US, they’ll build it somewhere else where there’s a lot of energy and it’s low cost and there’s a lot of capital to invest. And it does feel like you see what’s happening in Washington where we’re talking about permitting reform or creating uncertainty to invest in renewables or in the last administration to invest in oil and gas and maybe pulling support for various, some forms of energy that are in favor or disfavored and the rest of the world’s just moving ahead. I mean, is that overreading what we saw with the trip to the Gulf?

Joe McMonigle: No, not at all. Yeah, I mean, I think probably all of us have gone to Silicon Valley and talked to these AI executives and they’re not really concerned about a shortage of chips. They’re really concerned about a shortage of energy. And so that’s why these Gulf countries are so well strategically positioned. They do have excess energy. They have capabilities to increase peak energy supplies to be able to create these centers for AI development. So I mean, I would say the UAE seems to be a little bit ahead of Saudi Arabia, but Saudi’s announced this humane AI platform during the trip. It was sort of overshadowed by a lot of other things, but these countries would be doing this anyway. I think the US has just bolstered what they’re already trying to do from their own strategic and priority standpoints. And for the US I think this is strategic vis-a-vis China. As Karen pointed out, if the US did not come here, you potentially leave a void that China could come in. And so I think on AI, it was kind of a win-win situation for everybody involved.

Jason Bordoff: So Helima, the Gulf region is well positioned in many respects that we just talked about. One of those is there’s a lot of wealth in the region, a lot of money to deploy for the kind of investments Trump went there to secure. All of that takes a high oil price. And at the same time we’re having this conversation, OPEC countries, particularly the kingdom, are moving to bring oil supply back to the market faster and push the price down. Why are they doing that?

Helima Croft: Well, so I think what’s so interesting is we literally had the announcement of the multi-month phase in of barrels the day after tariff liberation day. And that let…

Jason Bordoff: And just remind people listening like what happened? There was a plan over, there was…

Helima Croft: Plan a year and a half, a year ago. The eight countries, we have the collective OPEC cut, OPEC plus cut, that’s a little over 3 million, but there were these individual voluntary pledges made by eight OPEC plus countries to essentially give additional barrels outside of the framework of everybody. And they made an announcement last June that they would start returning those barrels, the taper of the voluntary cut. And initially there was a big sell off when the taper was announced because people thought, oh my gosh, it’s back to the 2015 price war all over again or March, 2020 when the Russians and Saudis got into it, but they announced this very staggered plan to bring back barrels and they said right away, we can pause it, we can pull it back. We’re only going to put them on if the market can take them. And we’d had several pauses of a phase in. And then you had a situation where they surprised the market by announcing a quicker than anticipated addition. So people thought it might be a one month addition, a little over a hundred thousand barrels, and they announced in April that they would be doing this 411,000 barrel increase. Again coming the day after Trump announces tariff liberation day. It sparked a lot of concern…

Jason Bordoff: Which itself helped to push oil prices down.

Helima Croft: Of concern. It helped, helped to push oil prices down. I would say what has been the real sentiment drag on the oil market has been the trade war because of the concern about demand growth in China, and so that had already been exerting a downward pull on prices and then all of a sudden you had surprise more OPEC barrels coming on the market. Now what we have been telling people is it’s not really 411,000 per month because a number of countries are already sort of overproducing. So we’re only talking really about a Saudi Arabia, a little bit of UAE and Kuwait, but really it’s not the full 411, but from the standpoint of market participants, they still have post-traumatic stress disorder from these price wars and think, oh my gosh, the floodgates are about to open. I would say that when we talk about reasons for this, I do think the primary reason really was the issue of compliance.

And even last summer, you had concerns expressed by countries like Saudi Arabia about the fact that certain countries weren’t pulling their weight in terms of their production commitments. It has become more serious over the issue of Kazakhstan. And we can talk about Kazakhstan, this OPEC plus country that joined in 2016. They have been able to boost production because of investments at several fields, most readily the Tengiz field, which Chevron is playing a big role in boosting production there. And Kazakhstan has not been reaching its target. And the other issues are there with Iraq and Russia to a lesser degree, but I do think they wanted a sort of disciplinary effect on Kazakhstan and some of the other laggard producers. Now we can also have a conversation about are there adjacent benefits for having put more barrels on the market with the Trump visit, they would deny this was a pump for Trump play.

But certainly if you are President Trump, and you have talked about wanting low oil prices and low oil prices is your main good news story on Sunday morning talk shows, the timing was a good backdrop for the visit in terms of the bilateral relationship. Now, shale executives are obviously concerned and we’ve started to have a trickle of shale executives coming out and talking about the fact that they’re going to have to pull rigs that basically we are going to see lower shale production on the back of this. So shale is beginning to sweat in this environment. But what’s interesting is it’s not having the effect that it did on President Trump in March, April of 2020. He is not basically saying, okay, shale, I hear you, US oil industry, I understand this puts a dominance agenda at risk. I’m going to pull back on my calls for low oil prices. He’s continuing to make those calls and I think he’s privileging lower inflation, hoping to get a rate cut over abundant US production.

Jason Bordoff: Joe, I’m curious how you see this. I mean, it’s hard to divine intent and read OPEC or the Saudi’s minds. The reason I think it might be important among other reasons is it may tell us something about where things are headed from here. If this was about putting the best possible face forward for Trump’s trip, the trip is over. Now, if this is really about, is Kazakhstan complying? I don’t think Kazakhstan is in compliance yet. So pump for Trump, market share concerns. Kazakhstan. Curious how you read the Saudi strategy when it comes to oil markets and what does that tell you about where things go from here? Are we going to see a continued acceleration of bringing barrels back to market month after month after month?

Joe McMonigle: Yeah, no, I think I agree with everything that Helima just said. I would just say that really a lot of our colleagues who I respect a lot have been in the press talking about this is about an attempt to do under US shale and to Helima’s point, it’s more about sending a message to OPEC+ than it is about US shale. So I agree with her completely on that. I don’t know how long this is going to continue, the tapering, there’s this latest press announcement leaks to the press that it’s going to continue in July. That would seem normal to me, but I, I’m not sure how much longer these tapers will go, but I do think they want to show that they’re serious about this, especially to the countries that are in noncompliance. My view of oil markets is we’ve probably seen the lowest price for the year already.

I don’t see prices going lower than they’ve already been this year because I do see the tapering easing, the tapering tapering. And also I do see a lot of trouble on the horizon here vis-a-vis Iran and the Iran deal. I don’t see that happening at all. The Iranians are not going to agree to anything on enrichment. Trump does not have a lot of room to maneuver here. So I think by September you’re going to see, I mean, I don’t want to say new sanctions because they’re already sanctions in place. Sanctions are going to start being enforced. And I think by the end of the year we could see a million barrels come off the market from Iran.

Jason Bordoff: I’m going to come to Iran and Russia in a minute. Those are both policy variables that could affect oil markets. But just Helima, quickly give listeners a sense of where I gave a bunch of reasons why what people might be thinking pump for Trump, Kazakhstan, presumably at least some of this, if not a lot of it is informed by the fundamentals of the oil market. And today, what is the oil price? How do inventories look and how should people think about whether the market, how people in OPEC might be thinking about what it means to supply additional barrels to the market in the months ahead?

Helima Croft: Well, the setup for the oil market this year was not spectacular. I think Chinese demand was underwhelming last year, and non-OPEC growth was expected to be relatively robust for this year. And so when people started off the year, they were thinking, okay, are we talking about Brent prices in the seventies? Are we thinking WTI in the sixties? There are all these other geopolitical variables to factor, but I don’t think there was a sense that it was going to be a spectacularly good year for oil prices. And this is where the trade war, I think was really exerting additional downward sentiment because all of a sudden you had to think about are we really looking at a even deeper contraction in Chinese demand in a sense that non-OPEC was going to continue. Regardless, we talk about shale being short cycle that they can lay down rigs, but you have these other projects in places like Guyana that are going to be pumping regardless of the short-term oil price.

And so I think there was a lot of bearish sentiment. And what I do think is interesting about the additional barrels, I do agree with Joe. I mean I don’t think the taper can go on forever because essentially we’ll be out of the taper pretty soon. I mean, we’ve already added back about half of the barrels of the taper. And again, the actual incremental add that we’re getting is not as big as a headline number, and it’s also being absorbed in part by there’s a seasonal swing for demand. And so they’re doing it at a time where there’s a domestic seasonal swing. And so it’s not like they’re flooding the market. I think that’s also really important when people think it’s a war against shale, they raised their official selling prices into Asia, they have not fully turned the taps. And so I think this is a controlled sweating of certain oil producers that are in OPEC+.

But I do think it’s going to be really important if you tell me, ask me how this story ends for the year, if we can off ramp the major sum of all fears about the trade war with China, and you get to something that looks like an off-ramp, the Iran situation becomes really important. I think it’s the most important geopolitical wild card for the oil markets. And I think there’s a view in the oil markets now. A lot of participants believe you just cannot enforce sanctions on Iran because all the barrels are going to China. I don’t think that’s necessarily the case, but I think the bigger short term issue is, is we’re going into the final stages of these talks, and whether the US demands zero enrichment from Iran or not, I think determines whether we get a deal or not. And if you don’t get a deal, does that lead to a higher risk of military action?

And the Israelis do seem to want to push this issue on a military strike. And Karen invoked Abqaiq, what happened in 2019? I don’t think we know for sure. I think there’s a view that Iran is so weak with the air defenses being damaged, Hezbollah being hurt with the weapons highway through Syria closed for now that this is the best time for the Israelis to do something in conjunction with the United States or maybe alone, but we don’t know what would happen in the region in the event that you had some type of military strike on the Natanz or Fordow. So I think that is a wild uncertainty. I think it could be something we see over the summer, and I think that will be potentially, if you ask me what’s your catalyst for higher oil prices, I would look to the Iran story.

Jason Bordoff: Karen, let me come to you to talk a little bit more about Iran, an important variable, not just for oil markets, but obviously for security in the region much more broadly. And from an oil standpoint, it sounds like we heard could lead to more barrels on the market. I don’t know if it goes as high as a million, we can come back to that. As Joe said, I mean Iran is already exporting quite a lot and selling a lot to China or in the other direction barrels come off the market through tighter sanctions enforcement or some military strike. But it does seem like the Trump administration, Iran, even now, the Saudis, which is a different variable than in the past, want to see some sort of deal happen. Is that your read of the situation and what’s the likelihood of that?

Karen Young: Yeah, the sort of intra GCC Iran relationship is in a very different place than it was six years ago. It’s remarkable the amount of diplomacy, of rapprochement. Basically from a US perspective, this is something that the American government has wanted for the Gulf States to take more responsibility and interest in their own security and in their own regional kind of relationship or as Obama said, to share the region. So that is happening, but there’s a certain cost to that. And I think the cost is that there is not necessarily increased trust with Iran or of leadership particularly within the revolutionary guards, but there is an effort to at least engage. And my fear is that that engagement will include some sort of payoffs for security and willingness to trade in the activities that happen in other countries. So in some ways I think creates potentially more instability that can play out in all kinds of ways.

We don’t have the same proxy forces that Iran controlled that we did in the past. So that is on the plus side, I suppose, in terms of the security situation, but it still leaves a lot of room for violence to happen. So the Gulf states are wary of that, but trying their best to at least have a conversation that is ongoing. Israel is the wild card and Helima is exactly right in terms of how we think about risk. I think it’s between now and October what that looks like. And we just don’t know. And we also don’t know what the US support or reaction will be.

And the president seems to be changing his policy or the way that he has supported the Netanyahu government, at least that it seems on the surface is changing a little bit. So those are the hotspots, those are the worries. There is not necessarily, I mean, what the Iranians would like to see would be sanctions relief and the opening up of some investment opportunity. And they too look to the Gulf and the Gulf sovereign funds for financial intervention. I don’t think that is forthcoming. We have not, there’s a lot of nice talk and we see visits from ministers from the Gulf to Iran talking about potential, but I don’t think that’s possible or very, very likely, particularly in the Iranian oil industry. Maybe a little bit more in the gas, but very much tentative and remains to be seen on the enforcement of secondary sanctions and how we might see a change in US posture.

I mean the sanctions are really there. It’s always been about enforcement and how would you reduce by a million barrels a day, what Iran is selling to Asia, to China. This I think in some ways right now is working a little bit in synergy with what the Chinese government wants. So the Iranian oil that has been going to these independent refineries, I think the Chinese government long-term would actually like to see a consolidation of these refineries and to put them into more next-gen operations. So that means more into petrochemicals rather than doing what they do now. So they’re not really sad if some of them stop refining Iranian crude. So that is maybe a policy opportunity and hopefully we would see more US-China cooperation, but it’s not necessarily a favor to the US or a real Chinese aggressive stance towards Iran.

Jason Bordoff: Joe, I’m curious. Any comments?

Joe McMonigle: Yeah, I’m just going to say to close the conversation on the oil, because I get this a lot too. You talk about Iran and oil coming off the market. Well, what about China? China’s going to keep on, well, first of all, Iran is probably producing max out now. So even if there was a deal, there’s not that much of a change and of additional barrels to the market. So that’s first. Secondly, and this has been reported in the press, so I’m not saying anything news breaking here, at least I don’t think I’ve had discussions with people at DOE and also at Treasury. And this buying of Iranian oil is part of the China trade talks. And you remember from the first term, China did buy a lot of US hydrocarbons as part of the trade discussion. So it’s not really costing them anything. They need the oil anyway, they can buy it from the US and score points with Trump vis-a-vis oil or LNG. And so this is part of the discussion already. So I mean, look, when secondary sanctions went into effect the last time you had 700,000 barrels go off market within three months. And so I see at least that if sanctions are starting to be enforced, and from what I’m told people are preparing for very aggressive enforcement of sanctions within the administration.

Jason Bordoff: You’re talking about Iran?

Joe McMonigle: Yes.

Jason Bordoff: And just whether it’s Iran or there’s also obviously discussion about enforcement or new sanctions on Russia, and there are bills in Congress that would take a lot of Russian oil off the market. All of that points in the other direction of the low oil prices. President Trump seems to give your sense of how you think the current Trump administration would think about tighter sanctions enforcement on Iran or Russia, given the potential impact on price.

Helima Croft: Who do you want to go to on that one? Jason?

Joe McMonigle: Is this for me?

Jason Bordoff: Well, I was following up with Joe since he commented on conversations he had been having with folks in Washington and then would love to hear your take as well. Helima.

Joe McMonigle: I think on Iran, they’re willing to accept the consequences. I mean, I think there’s a belief that US shale prices will rise and US shale production will increase as a result. It’s good for OPEC, it solves a lot of OPEC problems. If this happens, it’s good for US shale, if this happens on the Russia thing, I have not really explored that. I mean, I don’t know exactly. I mean, first of all, they don’t seem to be focused on it at all. They’re really focused on the Iran part of it. Certainly there are people in Congress that are focused on Russia, the Lindsey Graham legislation that you’re probably referring to. So I think on Iran, they’re willing to accept the circumstances, the results of that, and they want to see Iran’s revenues decreased. And so I wouldn’t be looking for any kind of price cap mechanism vis-a-vis Iran from this administration.

Jason Bordoff: Helima, you’re just back from DC. Is that your sense? And can OPEC or shale make up the difference?

Helima Croft: Well, I think that the challenge for shale right now is this is not a price environment that is conducive to strong American production growth. And so I think they need probably, signals on where this is going in terms of an upward trajectory. Before they’d be like, okay, let’s deploy more rigs. And the Republican party, there does seem to be viewpoint diversity over how the White House should approach Iran. There’s a more hawkish wing in Congress. I would put the Lindsey Grahams, the Ted Cruzs, Tom Cottons who were like, no, zero enrichment. And if they don’t agree to zero enrichment sanctions and military action, and then you have a wing of the Republican party more the America first wing that is like, this isn’t our fight. Cut a deal, make it like 2015. Let them have low level enrichment, call it a day and pull off the sanctions.

So I do think that that was my big takeaway when I came back from Washington is the inter-Republican discussion, what America’s priorities should be in the Middle East. Seems to be a live issue right now. But I do think Congress is where you should look both on tighter sanctions and on where there could be pushback on sanctions. You’ll leave again, a lot of people in the market think it’s a light switch, a deal’s done, Iran gets all the sanctions removed. The problem is a lot of the sanctions on Iran were put in place by Congress and any new deal is going to have to go to Congress if it involves waiving or trying to basically revoke the sanctions on energy. The most punitive Iran sanctions on energy in the US were done by Congress. And so this deal is going to have to be sent to Congress.

And this is where things could become challenging for the Trump administration if it is viewed as just JCPOA 2.0. So again, I would say there’s more of a process to a sanctions unwind than I think many people really realize. And also they designated a number of the sanctions terrorism sanctions as opposed to nuclear sanctions. And so again, you can say that Iran has agreed to this deal on the nuclear program potentially. We don’t even know if they’ll agree, but can you say that they have pulled back support for proxy groups? I think that’s going to be a pretty tall hill to climb for the Trump administration if they want to get the entire sanctions architecture removed. And I think that’s what the Iranians are going to push for as well, because they argued themselves. Remember the discussions with the former foreign minister Zarif whenever he comes to New York and Washington doing the rounds, he’d say, we thought we were getting much more fulsome sanctions relief. We thought we’d be able to do business with Western banks. They thought the 2015 deal would yield much bigger economic dividends. So I do think they may push for a more fulsome sanction relief package than the Trump administration will have an easy time executing on. Because again, in the role of Congress.

Jason Bordoff: We’ve talked about a number of supply variables for oil markets, OPEC tapering and Iran and Russia and Helima, I want to ask you about the US. Roughly a decade ago, there was a sort of price war for compliance and people thought shale could not survive below a certain price point, and it turned out it was able to grow at a much lower price. But today at these prices, people are talking about flat or even slightly declining shale production. The CEO of Diamondback and important US independent is saying, we’ve kind of tapped out the best acreage and at these prices we can’t grow. So what’s your sense of what the outlook is?

Helima Croft: I think there’s a concern in the industry. You call Midland, Texas, call Houston, call Oklahoma. I think there’s a concern that we could be, what if Trump gets his price target? What if he gets $50? That’s not a price target that US producers want. And what I think is so interesting, Jason, I think back to the discussions we had in March, April, 2020. It was the US producers, when you had the Russia, Saudi price war, in the midst of the greatest demand collapse in history, you had those US shale executives phoning the White House saying, we need relief from this. American energy dominance dies at this price point. You get Russian and Saudi back together. And remember President Trump, you had that extraordinary OPEC+ meeting on the sidelines of the G20. President Trump had to take over at one point when Mexico didn’t want to do the larger production increase and they wanted to make, and President Trump was like, I’ll do a workaround.

He actually went from being fierce OPEC critic to being the temporary president of OPEC to help usher that deal through because US oil producers were like, we need this. And what I think is interesting is that I don’t know if US shale producers are not making the call to the White House, whether they’re going through Secretary Wright, whether the call is not being received the way it was in March of 2020 and April of 2020. But it doesn’t seem that their anxiety about what this means for American energy growth is really translating into any rethink in the West Wing about what’s the optimal price point?

Jason Bordoff: What does all that mean? Just from a broader – Karen – from a broader kind of geopolitical outlook in the region. Does this put OPEC back in the driver’s seat? If we see shale growth plateauing and I guess at a certain price it’ll continue to grow, but the kind of outlook Helima’s talking about, we’ve had this transformational in many ways, shale revolution, geopolitically economically, environmental impacts as well. Is that kind of in the rear view mirror? And what do you think that means for the region?

Karen Young: Well, I don’t think the region is upset if shale is damaged, right? But I don’t think we’re going to see a complete retreat. We’ll probably see a plateau of US production and everybody will be able to live with that. And there will be a point at which it is too low and there will be something at which we have consolidation and survival, what happened in 2020. But yeah, this debate about what has motivated the increase in production. Is it the pump for Trump or is it market share or is it the death of shale? It’s probably some mixture of those things. I think, though, the longer term motivation, particularly for Saudi Arabia is more about the market share and the control issue, particularly in thinking about the demand story in China and in Asia and its sort of larger global south growth markets and getting a handle on that is in their long-term interest.

And shale at some point was going to plateau and start to decline anyway, whether that was because of policy changes in the United States or just sort of a general decline in demand. So everything is kind of going along somewhat swimmingly. The real question is, from a fiscal perspective in the kingdom, how long can you really tolerate prices, particularly in the $50 barrel range? That is quite difficult. And it kind of leads us back to the question of then how do you make good on these other investment commitments, including the ones made to the United States and the trajectory starts to look a little different.

Jason Bordoff: Well, let me just ask you about that point about how important the oil price is to fiscal situation of countries in the region. And part of the deals that were announced, the investments, and a lot of what happened on this trip was framed in the conversation of the effort of the Gulf region to transition its economy to a more sustainable one that’s not as dependent on oil revenues. How much progress is the region actually making in that effort?

Karen Young: Well, I mean the interesting thing is that there’s been tremendous policy innovation and diffusion on economic diversification efforts across rules about social spending and subsidies, the implementation of taxes. So a lot of progress has been made. It’s just a lot harder when you have a big population and you’ve got to spread what you have over a large number of people. So that’s always going to be more challenging for Saudi Arabia than it is for Qatar, the UAE. So they’re sitting in much better positions. The UAE economy is the most diversified of the six GCC states and will continue to be so because they have invested in these other sectors and because tourism has had a bit of a two or three decade more of a head start than what we see in Saudi Arabia or even in the Qatari case. So we’ve got really differentiation within the region, which I think is exciting because that’s when you start to see more policy experimentation.

And the tremendous policy change which has happened in Saudi Arabia in the last 10 years, no one could have predicted it. So that could continues to unfold. And it’s doing I think actually very, very well. But it’s a hard business and you’re not going to replace the government revenue from oil, certainly not overnight, but probably never in the volume that it has been for the last 70 years. It’s just not going to happen that way. So people have to get used to a government that spends differently and is less generous, and they have to get used to the idea that they are also not going to work for the public sector and they’re going to have to kind of be a bit scrappier. And I think from a social and sort of social contract perspective, that actually is happening. But I want to bring up one more thing that we didn’t talk about, which is what’s changing in the way the Gulf states think about gas?

Because I think it has a lot to do also with the diversification into these high tech sectors and the way they think about their domestic electricity and energy mix. And so one of the big or series of big announcements that happened predating the president’s visit, but in the last few months, is that we’ve seen a lot of Gulf NOC interest in US gas markets in terminals in Louisiana, in Texas, and also in their ability to grow their gas production at home. So both Saudi Arabia and the UAE are doing this. And in the UAE, there’s a direct connection to the aspirations for AI. So this five gigawatt campus that is planned in Abu Dhabi is going to rely a lot on gas. I mean, the electricity generation mix in the UAE is about 20% nuclear and a bit of solar and about 72% gas and ADNOC is going to be producing more gas. And a lot of that is going to need to be directed not to market for sale, but for domestic consumption. So I think that when we think about diversification and less reliance on fossil fuels, we have to also include the calculation for how gas will be more and more important part of both the kind of external investment and production mix and what’s needed at home.

Jason Bordoff: We’re just about out of time, but I just wanted to give Joe, you and Helima, maybe a final word. Karen brought up gas. We hadn’t really talked about a lot of things. We haven’t talked about nuclear renewables, a range of other things in the region. And just is there one particular thing you want to make sure to flag that we didn’t have a chance to get to just as a final closing intervention. I’ll come to you, Joe, and then Helima.

Joe McMonigle: Yeah, no gas, certainly. I think, again, this is the UAE and Qatar obviously have been much more active on the gas side, but the Saudis are becoming a lot more active and making investments in international companies and also in terminals in the US and elsewhere. And also in trading, they’re also planning to convert all of the oil-fired power generation in the kingdom to gas-powered to be able to sell more crude to the market, but also to meet some climate goals as well. And on diversification, Saudi Arabia is making a lot of good progress here. I think they’re into the 40% mid forties non-oil economy diversification. And this is without a lot of these big giga projects and transformational things in the economy actually happening. So I’m pretty confident that they’ll get to a very diversified economy that is not as dependent, obviously it’ll be a major significant part of their revenue, but I think they’re making great strides on the diversification. And obviously the other countries are much smaller, as Karen pointed out, and are already pretty diversified. And lastly, I would just say on Trump, he hasn’t really, compared to the first term, we haven’t really seen a bully petroleum pulpit. I mean, he hasn’t really…

Jason Bordoff: No more waking up to tweets every day attacking…

Joe McMonigle: Yeah, no, it hasn’t really happened. So I mean, yeah, oil prices are lower, but I’m not sure it has anything to do with what Trump is — I mean, there’s collateral damage, I think, regarding tariffs and uncertainty about the global economy and potential recessions, but it’s not because he’s in the morning going after OPEC. And by the way, if you remember, it was all focused on OPEC. OPEC was the bully or the devil. Saudi Arabia was never — he didn’t go after country specific. So I mean, certainly the energy secretary is talking about energy prices and keeping prices low and in check, and they’re focused on gasoline prices, but there isn’t the focus that there was in the first term on a weekly basis from the social media platforms from the president himself.

Jason Bordoff: Yeah, it was a topic in one of maybe his very first speech in Davos where he said, oil prices are pretty important to inflation in the economy, and he would like to see OPEC do something about them. But…

Joe McMonigle: Yeah. Yeah, that was a little surprising. Yeah.

Jason Bordoff: Helima, final comment.

Helima Croft: I would just say that the social reforms that have been undertaken in Saudi Arabia, which are so sweeping and transformational, I think that gives the Saudi government space when it comes to doing the important economic reforms that have been talked about on this podcast. I mean, the peeling back of subsidies, the telling of young Saudis like, you’re going to have to work. Public sector is not going to be the place where you’re likely to work. And so I think he has space now to deal with some of the growing pains of a transformation. But I would also say that I think the Saudis wanted to kind of send a message as well. I think they didn’t like the idea that everyone would say, oh, you have a 90 plus or a hundred plus fiscal break even. Hence, you’re going to have to indefinitely prop up the oil market to pay for your spending.

And I think they wanted to also send a signal like, look, we’ve been engaging in reforms. We can cut back on spending. Our Sovereign Wealth Fund can focus on domestic projects as opposed to foreign projects. We can borrow. And I think that the appetite for borrowing is really important to really think about as well. They can go to the markets and get additional cash to pay for things. And so again, it’s not the perfect price environment, but I think they also wanted to signal that this is manageable and they have new ways of managing it because of the new reforms, the new bargain with their citizens.

Jason Bordoff: Thanks to all of you, we’ve taken a lot of your time and we could have talked for hours more, a really just fascinating discussion as I knew it would be bringing the three of you together to talk about a broad range of issues related to Trump’s recent visit to the Gulf. So thanks so much for all the work you do with us all the time, and thanks for this conversation today.

Joe McMonigle: Thanks for having us.

Helima Croft: Thank you, Jason.

Karen Young: Thank you. Bye-bye.

Jason Bordoff: Thank you again, Karen Young, Helima Croft and Joe McMonigle. And thanks to all of you for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University. The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Mary Catherine O’Connor from Latitude Studios. Additional support from Caroline Pitman and Kyu Lee. Sean Marquand engineered the show.

For more information about the podcast or the Center on Global Energy policy, please visit us online at energypolicy.columbia.edu or follow us on social media @ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple Podcasts, it really helps us out. Thanks again for listening. We’ll see you next week.

President Trump’s recent visit to the Gulf region marked a dramatic shift from the previous administration’s Middle East diplomacy. In his visit to Saudi Arabia, the UAE, and Qatar, Trump focused on securing significant investment commitments and commercial partnerships to support the region’s AI and other ambitions.

The trip showcased Trump’s transactional approach to foreign policy—one focused on bilateral deals rather than regional frameworks, and economic partnerships over military interventions. It also raised important questions about oil markets, geopolitical competition with China, nuclear agreements, and the future of energy prices.

So what are the likely impacts of massive investment pledges from Gulf nations? Do low oil prices limit the ability to make good on them? What is the outlook for oil prices with uncertainty over OPEC+ policy, a possible Iran deal, and possible new sanctions on Russia? And what does Trump’s transactional diplomacy mean for traditional alliances and regional stability?

This week, Jason Bordoff speaks with Helima Croft, Joe McMonigle, and Karen Young about how the Trump administration is reshaping U.S. relations with Middle East countries and the long- and short-term implications it will have on energy markets and geopolitics.

Helima is managing director and global head of commodity strategy at RBC Capital Markets, where she leads the coverage of energy markets and geopolitical risk. Joe is a distinguished visiting fellow here at the Center on Global Energy Policy and the founder and president of the Global Center for Energy Analysis, an independent research and analysis firm. Karen is a senior research scholar here at the Center on Global Energy Policy and a senior fellow at the Middle East Institute where she focuses on the political economy of the Gulf States and energy policy.

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