For much of the past six years, the leaders of Russia and Saudi Arabia worked with each other to control the global oil market during a time of war, pandemic and dizzying prices.
But their alliance appears to be straining ways that could help the Biden administration, which Secretary of State Antony J. Energy prices were poised for another significant jump just before Blinken’s trip to Saudi Arabia.
At last weekend’s meeting of OPEC Plus, the oil cartel led by the two countries, Saudi Arabia and Russia quietly split. Saudi Arabia said it would reduce its exports by one million barrels of oil per day in an effort to support falling prices. But Russia made no fresh commitments to reduce its exports.
It was the second time the partners recently diverged on oil policy. Just two months ago, Russia and Saudi Arabia, which sell more than 20 percent of the oil the world uses, agreed to cut production. But while Saudi Arabia produced and sold less oil to other countries, Russia has not done the same. Russia recently stopped disclosing information about its oil industry, but analysts speculate that Moscow has increased exports by undermining earlier deals.
The Saudi-Russian oil nexus has always been about the shared goal of driving up oil prices and maximizing export revenue. But Russia’s war in Ukraine has changed the dynamics of the relationship. Russia is increasingly willing to accept lower prices in order to sell more oil, much of it going to China and India, as it needs the money to fund its war effort.
Russia’s pressing needs – combined with weak global demand for oil – have helped propel prices lower. This has helped lower energy prices around the world, including in the United States, where President Biden made lowering gasoline prices a central policy goal after the war in Ukraine broke out last year.
On Wednesday afternoon, US benchmark oil was trading at less than $73 a barrel, well below $120 a barrel before the weekend OPEC Plus meeting and last summer.
“The goals of Russia and the cartel are diverging,” said Mikhail Krutykhin, a veteran Russian oil expert 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 in an effort to maintain a partnership that began in 2016 and has generally been beneficial to both sides.
Bruce Riddell, a former Middle East analyst at the Central Intelligence Agency, disagreed with the view that Saudi-Russian relations were strained. He said that by unilaterally cutting oil production, Saudi Arabia is distancing itself from the US and especially the Biden administration.
“The Saudis have leaned decisively toward Russia by cutting oil production to prop up prices,” said Mr. Riedel at the Brookings Institution. “Time on the eve of Blinken’s visit, added to the message.”
Even though reducing Saudi production and raising global prices is troublesome for Washington, Riyadh appears to be hedging its bets between its longtime ally, the United States, and Russia, its new partner on oil policy. .
Robert Jordan, the former US ambassador to Saudi Arabia, said that both Saudi Arabia and the United States have reasons to stabilize their relationship.
“The Saudis want US fighter jets, nuclear technology and security guarantees,” Mr Jordan said. “The US wants them to recognize Israel and continue producing oil.”
Relations with Saudi Arabia have helped Russia during its fierce war with Ukraine. While Western countries began withdrawing investment from Russia last year, Saudi Arabia’s Kingdom Holding Company pumped hundreds of millions of dollars into Russian energy companies. Saudi Arabia then increased imports of Russian fuel oil for its power plants, while other countries restricted or eliminated Russian energy purchases.
In September, the two countries directed OPEC Plus to reduce oil production, frustrating the Biden administration. The move was seen as a rebuke to Mr Biden, who traveled to Saudi Arabia in July and exchanged fists with Crown Prince Mohammed bin Salman after criticizing him during his presidential campaign . The president, who is being chastised by Republicans for rising inflation, was hoping the Saudis would increase oil production or at least not cut it.
But the Russian-Saudi oil partnership has often been volatile. In 2020, when the COVID pandemic brought down the global economy and oil prices, Russia refused to cooperate with Saudi authorities to drastically cut production to stabilize prices. In response, Saudi Arabia flooded the market with oil, crashing the price of crude and hurting Russian oil companies badly.
In a recent TV interview, Prince Abdulaziz bin Salman, the Saudi energy minister and half-brother of Prince Mohammed, recalled the brief split in grand terms. “It was not a matter of pricing, profit or income,” he said. “It was a case of ‘to be or not to be’: who rules the region?”
Nevertheless, the alliance persisted, and energy analysts predict it will continue even as the various members of OPEC Plus show increasing independence.
“I see tensions emerging, but it’s still an alliance because they still need each other,” said Bill Richardson, former US energy secretary and ambassador to the United Nations.
While producer groups collectively cut supplies, the United Arab Emirates was allowed to increase its production quota for the following year. In the final tally, oil analysts say, the latest decision by OPEC Plus could squeeze global oil supply by more than 100 million barrels per day for at least a month from the global market.
The two countries still have a lot in common, including how they view certain US policies. When the United States and European countries imposed price limits on Russian oil exports last year, Saudi Arabia and other Middle Eastern energy-producing states saw the action as a potential threat, a policy that could be used to reduce their profits in the future. could be done for
“When energy security is at risk around the world, and oil and gas markets are in turmoil, it makes no sense for any country to walk away from this pivotal alliance,” said Sadd Ibrahim Al Husseini, a former senior executive. Will not done.” Saudi Arabia’s national oil company Aramco.
In the first five months of this year, Russia’s oil and gas revenue, the biggest contributor to its budget, was half that of the same period in 2022, the report said. country’s finance ministry,
Ariel Ahram, a Middle East expert at Virginia Tech, said Middle East producers had expected demand from China to pick up as it emerged from its Covid lockdown, but they have been disappointed. Since oil prices have plummeted since Russia invaded Ukraine, Saudi Arabia and its allies will have to keep Russia in the fold.
“Leaning towards Russia is a way to bide the time,” Mr. Ahram said.
But some Middle East officials are already complaining about Russia’s credibility as a partner. One point of contention is that Russia has not disclosed its energy production figures since April. Many analysts have said that Russian marine oil exports appear to be on the rise, which has more than offset the loss of oil sold by pipeline to Europe.
“To be effective, the alliance must publish its data,” said Marcel Salikhov, director of the Energy and Finance Institute in Moscow. “Russia has closed its data, and that creates a paradox.”
Vivian Nerem Contributed reporting.
