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Senators urge response to Saudis, Russians for 'economic warfare' on oil market

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Senators urge response to Saudis, Russians for 'economic warfare' on oil market

Six Republican senators urged U.S. Secretary of State Mike Pompeo to take a strong stance against Russia and Saudi Arabia for their roles in the oil price war and the resulting impacts on U.S. shale producers.

Global oil prices fell significantly in light of the coronavirus outbreak's effects on demand, while crude supply increased amid a price war between the Russians and Saudis. Experts have said the low-pricing environment could be especially detrimental to highly leveraged producers, potentially resulting in some consolidation.

The Trump administration has weighed options to help U.S. producers and sought to purchase domestic oil to fill its reserves. Meanwhile, some experts have indicated that diplomatic negotiations with the two oil-exporting nations may prove more effective. The administration has considered negotiating with Saudi Arabia to reduce the kingdom's oil output as well as potential sanctions on Russia to relieve pressure on oil prices, The Wall Street Journal reported.

U.S. Sen. Lisa Murkowski, R-Alaska, who chairs the Senate Energy and Natural Resources Committee, called on Pompeo to address the "economic warfare" waged by the two oil nations against the U.S. Saudi Arabia has chosen to "settle scores in the oil market" amid a pandemic and global economic crisis, Murkowski and five other Republican senators wrote in a March 25 letter.

"Riyadh's motivation may be multi-faceted — to punish the Russians, to capture near-term market share, to destabilize long-term investment in America energy — but the end result is the same," the letter stated. "Our nation's energy dominance, which President Trump has carefully nurtured over the past three years, is now under direct threat from a country that professes to be our ally."

The Saudis are risking their relationship with the U.S., which shares intelligence and sells weapons to the kingdom, the senators wrote. Rather than investing in Russian energy projects, Saudi Arabia should leave the Organization of Petroleum Exporting Countries and partner with the U.S. on energy infrastructure projects across the world, becoming a "free market energy powerhouse," the letter said.

The U.S. can leverage the aid and assistance it provides to Saudi Arabia as well as tools such as tariffs, sanctions and safeguard actions if necessary, the senators wrote.

"We encourage you, as the nation's chief diplomat, to make this case to the Saudis, and to encourage both Riyadh and Moscow to stop wreaking havoc in global markets — particularly as our nation seeks to address a growing pandemic and avert an economic crisis," the letter said.

The U.S. continues to work with all energy producers to avoid increasing market volatility or threatening to worsen market turmoil, according to the State Department. The U.S. has also "consistently called out the Russian government for its use of energy as a political weapon against its neighbors," the department said March 26 in an emailed statement.

"We believe that Saudi Arabia cares deeply about the stability of the global oil market and we are in close communication with the kingdom about policies that can improve conditions for economic growth," the department said. "The United States is addressing this energy market challenge and will continue to assess, and as appropriate, implement actions that can reduce energy disruptions in a manner that supports global economic growth."