Oil blackmail: Kremlin’s refusal to make concessions in the oil war with the Saudis

US, WASHINGTON (ORDO NEWS) — Russia is confident that Saudi Arabia will be the first to ask for a truce in the oil price war, Bloomberg writes. According to the agency, Vladimir Putin never gives in to pressure and does not intend to give up due to the “oil blackmail” of Riyadh now. The Kremlin realized that oil prices would drop sharply, and was ready for this, sources say.

Vladimir Putin and the government are confident that Russia will be able to last longer in a price war in the oil market than its main opponent, Saudi Arabia, writes Bloomberg, citing sources that, according to the agency, are familiar with the position of the Cabinet. The agency does not disclose their names.

“Moscow will not ask for a truce first”

“Vladimir Putin will refuse to comply with what the Kremlin considers to be“ oil blackmail ”by Saudi Arabia, which means the continuation of a price war that is shaking world markets. <…> Moscow will not blink and will not ask for a ceasefire first, ”the agency writes. It pointed out that a “unprecedented clash” between the two export giants and former OPEC + allies threatens to drop fuel prices below $ 20 per barrel (according to some forecasts , even to $ 5-10). The Russian government spent several years preparing reserves for such a crisis, but the Kremlin did not expect Riyadh to go to a price war, the agency said.

Putin’s entourage understood that the collapse of the OPEC + deal would lower oil prices, two Bloomberg sources say. The Russian leadership was ready for the fall in price up to $ 20 per barrel and faces economic consequences with a cold head, one of the interlocutors claims. The Kremlin is ready to cooperate with OPEC +, but on its own terms: its proposal to maintain an existing deal to reduce production until the end of June remains valid, two sources said. After 20 years in the top positions in power, the president has enough experience to survive the crisis, according to three sources of Bloomberg. Putin is not one of those who give up, even if the fight brings significant losses, one of the agency’s interlocutors noted.

Now the entire oil market is watching and waiting for Russia or Saudi Arabia to retreat due to a “painful” fall in prices and ask for a truce, Bloomberg said. The price of Brent fuel fell from $ 50 per barrel in early March to a low of $ 24.52 on March 18. This was led by the decision of Saudi Arabia, “the Kremlin’s angry decision to veto a new reduction in OPEC + production,” to begin a “historic” sharp increase in production at a time when the coronavirus pandemic destroyed demand, the agency added. According to him, if the actions of Riyadh were aimed at “persuading Putin”, so far they have not brought results.

“Putin does not give in to pressure”

Losses from falling oil prices are already noticeable in Russia: the ruble has weakened, the economy has been on the path to recession, and the budget, calculated with an oil price of $ 40, may be in short supply this year, Bloomberg said. In his view, this could force the government to start spending stocks from the National Welfare Reserve Fund. US President Donald Trump called the price war “devastating for Russia” and noted that “at the right time, I will intervene.” As reported The Wall Street Journal, Washington is considering new sanctions against Russia to influence Moscow. The price of oil has since risen markedly. The Kremlin used to refuse to change its position under the threat of such restrictions, Bloomberg said. The press secretary of the Russian President Dmitry Peskov called the threat of new sanctions a manifestation of “Russophobia” and noted that the country is not waging price wars with anyone and is ready for dialogue, “especially in such difficult times,” Bloomberg quotes.

“Putin is known for not giving in to pressure,” said Alexander Dynkin, president of the Institute of World Economy and International Relations, Bloomberg. He added that Putin proved his readiness for a tough fight “to protect national interests and preserve his political image as a strong man.” But, given the loss of the economy, Russia “has enough pragmatism and common sense not to refuse to negotiate,” the expert said. Before starting a dialogue, both countries will have to take steps to save face: this will require a “complicated PR dance,” said Elina Rybakova, deputy chief economist at the Institute of International Finance. She believes that Russia’s current position is unlikely to reach agreement. “It does not seem that Saudi Arabia will now turn around and agree to Russia’s proposal. It will mean,

“The Russian president has made refusing to succumb to pressure one of the hallmarks of his reign. From the harsh persecution of Islamists in Chechnya to the recent conflict with Turkey over the Syrian civil war, Putin has shown that he is ready to confront his opponents with the prospect of both military and economic pressure, ”concluded Bloomberg.


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