Is everything okay with the Saudi Arabia-Russia oil alliance? Report Nyt
The need to keep oil prices high is helping Saudi Arabia and Russia maintain close ties. But there are signs of a weakening of Moscow's commitments. The New York Times article
For most of the past six years, the leaders of Russia and Saudi Arabia have worked together to control the global oil market in times of war, pandemics and spiraling price swings.
But their alliance appears to be straining in ways that could help the Biden administration, eager to avoid another significant jump in energy prices ahead of Secretary of State Antony J. Blinken's visit to Saudi Arabia this week.
At last weekend's meeting of OPEC Plus , the oil cartel that the two countries lead, Saudi Arabia and Russia quietly parted ways. Saudi Arabia has said it will cut its exports by one million barrels of oil a day in a bid to shore up falling prices. But Russia has not pledged to cut its exports.
This is the second time the partners have recently diverged on oil policy. Just two months earlier, Russia and Saudi Arabia, which together sell more than 20% of the world's used oil, had agreed to cut production. But while Saudi Arabia followed through and sold less oil to other countries, Russia does not appear to have done the same. Russia recently stopped disclosing information about its oil industry, but analysts estimate that Moscow has ramped up exports, undoing the earlier deal.
WHAT HAPPENS TO THE OIL ALLIANCE BETWEEN SAUDI ARABIA AND RUSSIA
The Saudi-Russian oil alliance has always had a common goal of supporting oil prices and maximizing export revenues. But Russia's war in Ukraine has changed the dynamics of the relationship. Russia is increasingly willing to accept lower prices to sell more oil, much of it destined for China and India, because it needs the cash to finance its war effort.
Russia's pressing needs, coupled with weak global oil demand, helped drive prices down. This has helped bring down energy prices around the world, including in the United States, where President Biden made reducing gasoline costs a central policy goal after the war in Ukraine began last year.
The US oil benchmark price was below $72 a barrel on Tuesday afternoon, about the same as before the weekend's OPEC Plus meeting and down from $120 last summer.
"The goals of Russia and the cartel are diverging," said Mikhail Krutikhin, a Russian oil expert now based in Oslo. "There is no trust in Russia's data and there is no trust in Russia's actions."
Saudi officials have not publicly criticized Moscow, appearing to help President Vladimir V. Putin get out of the corner in an effort to preserve a partnership that began in 2016 and is generally profitable for both sides.
Are the Saudis walking away from America?
Bruce Riedel, a former Middle East analyst at the Central Intelligence Agency, disagrees with the notion that relations between Saudi Arabia and Russia are strained. He said that by unilaterally cutting oil production, Saudi Arabia was distancing itself from the United States and the Biden administration in particular .
“The Saudis have moved decisively towards Russia by cutting oil production to raise prices,” said Riedel, now at the Brookings Institution. "The moment, on the eve of Blinken's visit, reinforced the message."
While the Saudi move to cut production and raise global prices is unnerving for Washington, Riyadh appears to be hedging its bets between its longtime ally, the United States, and Russia, its newest partner on oil policy.
Both the Saudis and the United States have reasons to stabilize their relations, said Robert Jordan, former US ambassador to Saudi Arabia.
“The Saudis want fighter jets, nuclear technology and security guarantees,” Jordan said. "The United States wants them to recognize Israel and continue producing oil."
The relationship with Saudi Arabia has helped Russia during the grueling war with Ukraine. While Western countries began withdrawing investment from Russia last year, Saudi Arabia's Kingdom Holding Company has invested hundreds of millions of dollars in Russian energy companies. Then Saudi Arabia increased imports of Russian fuel oil for its power plants, while other countries limited or ended purchases of Russian energy.
AN UNSTABLE PARTNERSHIP
In September, the two countries led OPEC Plus to cut oil production, much to the disappointment of the Biden administration. The move was seen as a rebuke to Biden, who had traveled to Saudi Arabia in July and exchanged a handful of flies with Crown Prince Mohammed bin Salman after criticizing him during his presidential campaign. The president, who has been criticized by Republicans for rising inflation, hoped the Saudis would increase oil production or at least not cut it.
But the Russian-Saudi oil partnership has often been volatile. In 2020, as the Covid pandemic took its toll on the global economy and oil prices, Russia refused to work with Saudi officials to make deep production cuts to stabilize prices. In response, Saudi Arabia has flooded the market with oil, causing the price of crude to plummet and severely hurting Russian oil companies.
In a recent television interview, Prince Abdulaziz bin Salman, Saudi energy minister and Prince Mohammed's half-brother, recalled the brief breakup in grandiose terms. “It wasn't a question of prices, profits or revenues,” he said. "It was a matter of 'to be or not to be': Who runs this industry?".
However, the alliance persists and energy analysts expect it to continue even as the various OPEC Plus members show increasing independence.
"I see tensions emerging, but it's still an alliance because they still need each other," said Bill Richardson, former US secretary of energy and ambassador to the United Nations.
As the producer group extended collective supply cuts, the UAE was allowed to increase its production quota for next year. On balance, according to oil analysts, the latest OPEC Plus decision could reduce global oil supplies by a modest 1 million bpd for at least a month, on a global market just above 100 million bpd. .
The two countries still have a lot in common, including how they view some US policies. When the United States and European countries capped Russian oil export prices last year, Saudi Arabia and other Middle Eastern energy-producing countries saw the action as a potential threat, a policy that could be used to reduce their profits in the future.
"It would make no sense for either country to abandon this key alliance at a time when energy security is at risk around the world and oil and gas markets are in turmoil," said Sadad Ibrahim Al Husseini, a former executive of the Saudi Arabia's national oil company, Aramco.
In the first five months of this year, revenues from Russia's oil and gas, the largest contributor to the country's budget, were half as much as in the same period in 2022, according to the Finance Ministry.
Ariel Ahram, a Middle East expert at Virginia Tech, said Middle Eastern producers had hoped for increased demand from China, which has emerged from the Covid lockdown, but were disappointed. As oil prices have fallen below what they were when Russia invaded Ukraine, Saudi Arabia and its allies must keep Russia in the fold.
“Orienting towards Russia is a way of buying time,” Ahram said.
But some Middle Eastern officials are already complaining about Russia's reliability as a partner. A moot point is that Russia has not disclosed energy production data since April. According to many analysts, Russian oil exports by sea appear to have increased, thus compensating for the loss of oil sold to Europe via pipelines.
"To be effective, the Alliance must publish its data," said Marcel Salikhov, director of the Moscow Institute of Energy and Finance. “Russia has closed its data and this creates contradictions.”
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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/tutto-ok-allalleanza-arabia-saudita-russia-sul-petrolio/ on Sun, 11 Jun 2023 05:09:29 +0000.