It was an additional time recently that the partners had disagreed on energy strategy. Russia and Saudi Arabia, who together supply more than 20% of the world’s oil consumption, had agreed to reduce output just two months ago. Russia seems not to have followed through with selling less oil to other nations, in contrast to Saudi Arabia.
The leaders of Saudi Arabia and Russia have collaborated for the majority of the last six years to maintain control over the world oil market amid times of conflict, pandemics, and wild price swings.
The Biden administration, which was hoping to prevent a big increase in oil costs shortly before Secretary of State Antony Blinken’s visit to Saudi Arabia this week, may benefit from the manner that their alliance looks to be strained.
Saudi Arabia and Russia discreetly broke apart from one another during the OPEC+ summit last weekend, the oil cartel that the two nations head. In an effort to support declining oil prices, Saudi Arabia said that it will decrease its daily oil shipments by one million barrels. But Russia didn’t make any fresh promises to cut back on shipments.
It was the second time recently that the partners had disagreed on energy strategy. Russia and Saudi Arabia, who together supply more than 20% of the world’s oil consumption, had agreed to reduce output just two months ago. Russia seems not to have followed through with selling less oil to other nations, in contrast to Saudi Arabia. Analysts believe that Moscow has expanded shipments, undermining the prior agreement, despite the fact that Russia has ceased sharing details on its oil business.
The Saudi-Russian energy cooperation has always been focused on boosting export earnings and maintaining oil prices. However, the nature of the partnership has altered as a result of Russia’s conflict in Ukraine. Because it needs the money to pay for its war effort, Russia is becoming more and more ready to embrace lower prices in order to export more oil, much of which goes to China and India.
Prices have decreased as a result of weaker worldwide demand for oil and Russia’s urgent requirements. As a result, energy prices have decreased everywhere, including in the United States, where President Joe Biden declared lowering petrol prices a top priority at the start of the Ukrainian conflict last year.
The benchmark oil price in the United States was less than $72 a barrel on Tuesday afternoon, down from $120 last summer and roughly where it was before the weekend OPEC+ summit.
“The goals of Russia and the cartel are diverging,” said Mikhail Krutikhin, a seasoned Russian oil specialist who is currently based in Oslo, Norway. “Neither the data from Russia nor the actions from Russia are to be trusted.”
Saudi authorities appear to be helping President Vladimir Putin out of a tight spot in an effort to maintain a collaboration that began in 2016 and has typically been advantageous for both parties by refraining from openly criticizing Moscow.
Former CIA Middle East expert Bruce Riedel disputed the notion that ties between Saudi Arabia and Russia were tense. Saudi Arabia, he claimed, was isolating itself from the United States and more especially the Biden administration by unilaterally reducing oil output.
In order to drive up oil prices, the Saudis have made a clear lean towards Russia, according to Riedel, who is currently at the Brookings Institution. On the eve of Blinken’s arrival, the timing “added to the message.”
Even while Saudi Arabia’s decision to cut output and drive up prices globally is problematic for Washington, it appears that Saudi Arabia is gambling its bets between Russia and the United States, its more recent partner in oil policy, and its longtime ally, the United States.
According to Robert Jordan, a former American ambassador to Saudi Arabia, there are good reasons for both the Saudis and the United States to mend their frayed relations.
Jordan said that the Saudis wanted American fighter jets, nuclear technology, and security assurances. “The United States wants them to acknowledge Israel and continue oil production.”
Russia has benefited from its alliance with Saudi Arabia during its arduous conflict with Ukraine. Last year, when Western nations started to reduce their investments in Russia, Saudi Arabia’s Kingdom Holding Co. made hundreds of millions of dollars in investments in Russian energy firms. Then, while other nations curtailed or stopped their purchases of Russian energy, Saudi Arabia increased its imports of Russian fuel oil for its power plants.
To the surprise of the Biden administration, the two nations instructed OPEC+ to cut back on oil production in September. The action was interpreted as a jab at Biden, who had visited Saudi Arabia in July and bumped fists with Crown Prince Mohammed bin Salman following criticism of him during his presidential campaign. The president hoped that the Saudis would raise oil output or at the very least not decrease it since he was being criticized by Republicans for the skyrocketing inflation.
However, the Saudi-Russian oil alliance hasn’t always been stable. As the COVID epidemic threatened the world economy and oil prices in 2020, Russia refused to work with Saudi authorities to implement significant production cutbacks to maintain prices. Saudi Arabia’s response was to flood the market with oil, which caused the price of petroleum to plummet and seriously harmed Russian oil businesses.
Prince Abdulaziz bin Salman, the Saudi energy minister, and Crown Prince Mohammed’s half-brother, spoke eloquently about the temporary rift in a recent television appearance. “It wasn’t an issue of pricing, profit, or income,” he stated. Who controls this industry? was the question at hand?
Even still, the partnership persisted, and according to energy specialists, it will remain even as individual OPEC+ members become more independent.
Former U.S. energy secretary and ambassador to the UN Bill Richardson stated, “I see emerging tension, but it’s still an alliance, as they still need each other.”
The United Arab Emirates was permitted to increase its production quota for the next year, even though the producer group prolonged their collective supply cuts. According to oil analysts, the most recent OPEC+ agreement may ultimately result in a slight reduction in global oil supply of 1 million barrels per day for at least one month, out of a market that is currently just above 100 million barrels per day.
MUST READ – Fears Over Demand Cause Oil Prices To Drop, Setting Up A Second Weekly Loss.
There are still many things that the two nations agree on, like how they feel about various American policies. Saudi Arabia and other Middle Eastern energy-producing governments saw the price ceiling placed on Russian oil shipments by the United governments and European nations last year as a possible threat and a strategy that may be used to cut their revenues in the future.
As the world’s energy security is in jeopardy and the oil and gas markets are in disarray, Sadad Ibrahim Al Husseini, a former top official at Saudi Arabia’s national oil firm, Aramco, stated, “It makes no sense for either nation to walk out of this pivotal alliance.”
According to the country’s finance ministry, Russia’s oil and gas revenues, which make up the majority of its budget, were only half as high in the first five months of this year as they were in the same time in 2022.
Middle Eastern manufacturers had hoped that interest in their products from China would rise as it came out of its COVID lockdowns, yet they have been let down, according to Ariel Ahram, a Middle East researcher at Virginia Tech. Saudi Arabia and its allies must maintain Russia’s cooperation since oil prices have fallen below the level at which Russia invaded Ukraine.
Ahram remarked, “Tilting towards Russia is a means to buy time.
However, several Middle Eastern leaders have already voiced their displeasure with Russia’s partner reliability. One issue is that Russia hasn’t released information about its energy production since April. According to several observers, it appears that Russian oil shipments by sea have been rising, which has made up for the decline in oil shipped by pipeline to Europe.
The head of the Institute of Energy and Finances in Moscow, Marcel Salikhov, stated that the alliance must reveal its statistics in order to be effective. Because Russia has locked down its data, there are inconsistencies.
