For most of the past six years, Russian and Saudi leaders have worked together to control global oil markets during times of war, pandemics and volatile prices.
But the alliance between the two countries appears to be straining in a way that will help the Biden administration, which wanted to prevent a further sharp rise in energy prices ahead of Secretary of State Anthony J. Brinken’s visit to Saudi Arabia this week. is.
At last weekend’s OPEC+ (oil cartel led by both countries) meetings, Saudi Arabia and Russia quietly parted ways. Saudi Arabia has announced it will cut crude oil exports by 1 million barrels per day to support falling prices. But Russia made no new promises to cut exports.
This is the second time that the two countries have disagreed over oil policy recently. Just two months ago, Russia and Saudi Arabia, which together sell more than 20% of the world’s oil, agreed to cut production. But while Saudi Arabia has followed suit, selling less oil to other countries, Russia appears not to have done so. Russia recently stopped disclosing information about its oil industry, but analysts estimate that Russia has increased exports, undermining previous agreements.
The Saudi-Russian oil alliance has always had a common goal of supporting oil prices and maximizing export earnings. But Russia’s war with Ukraine changed the dynamics of the relationship. Needing money to finance its war, Russia is increasingly willing to cut prices to sell more oil, much of it to China and India.
Imminent demand from Russia and weak global demand for oil have contributed to the price drop. This has helped drive down energy prices around the world, including in the United States, where President Biden made lower gasoline prices a central policy goal after the Ukraine war began last year.
U.S. benchmark oil prices were below $72 a barrel on Tuesday afternoon, about the same as they were before the OPEC+ meetings over the weekend, down from $120 a barrel last summer.
“The goals of Russia and the cartels are diverging,” said Mikhail Krutykhin, a veteran Russian oil expert now based in Oslo. “Russian data is not trusted, and Russian actions are not trusted.”
Saudi officials have not publicly criticized Moscow and appear to be trying to get President Vladimir Putin out of the woods to maintain a partnership that began in 2016 and has largely benefited both sides. is.
Former Central Intelligence Agency Middle East analyst Bruce Riedel objected to the idea that relations between Saudi Arabia and Russia were strained. He said Saudi Arabia has distanced itself from the United States, especially the Biden administration, by unilaterally cutting oil production.
Riedel, now of the Brookings Institution, said, “Saudi Arabia has decidedly leaned toward Russia by cutting oil production to raise prices.” “The timing of Mr Blinken’s visit on the eve of his visit further strengthened the message.”
Riyadh appears to be hedging risks between its longtime ally the United States and its new partner in oil policy, Russia, even if Saudi Arabia’s production cuts and rising global prices have been troubling for Washington. is.
Former US Ambassador to Saudi Arabia Robert Jordan said Saudi Arabia and the US have reasons to stabilize their relationship.
“Saudi Arabia wants American fighter planes, nuclear technology and security,” Jordan said. “The US wants to recognize Israel and continue oil production.”
Relations with Saudi Arabia helped Russia during its brutal war with Ukraine. While the West began to pull out of Russia last year, Saudi Arabia’s Kingdom Holding Company invested hundreds of millions of dollars in a Russian energy company. Saudi Arabia has since increased imports of Russian fuel oil for its own power plants, while other countries have restricted or halted purchases of Russian energy.
In September, the two countries instructed OPEC+ to cut oil production, much to the disappointment of the Biden administration. The move is seen as a rebuke to Biden, who visited Saudi Arabia in July and exchanged fist pumps with Crown Prince Mohammed bin Salman after criticizing him during the presidential election. The president, who has been criticized by Republicans for skyrocketing inflation, had hoped Saudi Arabia would increase oil production, or at least not cut it.
But the Russian-Saudi oil partnership is often rocky. In 2020, as the coronavirus pandemic hit the global economy and oil prices, Russia refused to cooperate with Saudi authorities on sharp production cuts to stabilize prices. In response, Saudi Arabia flooded the market with oil, causing oil prices to crash and hurting Russian oil companies.
Saudi Arabia’s energy minister and Crown Prince Mohammed’s half-brother, Crown Prince Abdulaziz bin Salman, recalled the brief farewell in a recent television interview. “It wasn’t about price, profit or income,” he says. “It was a ‘will or won’t’ question. Who rules the field?”
Yet the alliance has survived, and energy analysts predict it will continue despite the growing independence of various OPEC+ members.
Former U.S. Energy Secretary and United Nations Ambassador Bill Richardson said: “Even though tensions appear to be on the rise, the two countries still need each other, so it’s still an alliance.”
The United Arab Emirates was allowed to increase production quotas for next year while producers’ associations extended collective supply cuts. In the final tally, oil analysts said OPEC+’s latest decision put global oil supplies at around 1 million barrels per day for at least a month out of a global market of just over 100 million barrels per day. said to be likely to decrease.
The two countries still have much in common, including their views on some US policies. When the United States and European countries imposed price caps on Russian oil exports last year, Saudi Arabia and other Middle Eastern energy producers said the measures were a potential threat and could be used to squeeze future profits. considered to be a policy with the potential to
“At a time when energy security is in jeopardy and oil and gas markets are in turmoil around the world, it makes no sense for either country to withdraw from this vital alliance,” said former senior official Sadad Ibrahim. Al-Husseini said. Saudi Arabia’s national oil company Aramco.
Statistics show that Russia’s oil and gas revenues, the largest contributor to the budget, have halved in the first five months of this year compared to the same period in 2022. national treasury.
Virginia Tech Middle East expert Ariel Arum said producers in the Middle East had been hoping for increased demand from China, which has recovered from the coronavirus lockdown, but were disappointed. Oil prices are lower than they were when Russia invaded Ukraine, so Saudi Arabia and its allies must keep Russia at bay.
“Tilting Russia is a way of waiting for time,” Mr Earlam said.
But some Middle Eastern officials are already complaining about Russia’s credibility as a partner. One point of contention is that Russia has not released its energy production data since April. Many analysts say Russia’s offshore oil exports are rising and appear to be making up for losses in oil sold to Europe by pipeline.
“To be effective, the alliance must make the data public,” said Marcel Salikhov, head of the Institute of Energy and Finance in Moscow. “Russia has closed the data and this has led to discrepancies.”
Vivian Nellaim Contributed to the report.