US, WASHINGTON (ORDO NEWS) — OPEC + almost immediately blamed Russia for breaking the deal. However, the reality is that the constructive position of our side, which urged us not to make sudden movements and limit ourselves to extending the agreement on current conditions, came across an ultimatum from Saudi Arabia, which required a multiple reduction in production, the program director of the Valdai international discussion club writes in a Forbes.ru column * Oleg Barabanov.
Despite the fact that Russia is now fashionable to blame absolutely everything, it is necessary first of all to ask the question of who benefits from this gap. And here, in our opinion, it is worth paying attention to the Saudi-American bunch of political interests.
The reasons for the close connection of Saudi Arabia and the United States are understandable. Their traditional allied relationship took decades to form. The support of the royal dynasty in Riyadh from Washington in exchange for oil supplies was violated, perhaps, only once: during the 1973 Arab-Israeli war. But both parties quickly learned this lesson, and since then there have been no serious disagreements between them. The United States regularly shut its eyes to human rights violations in Saudi Arabia, to the oppression of Shiite religious minorities, and to the almost complete absence of democracy they love so much. For some reason, oil has always been more important.
In recent years, US-Saudi ties have further strengthened, while at the same time enriched with additional nuances. First of all, symbolically, one of the very first large-scale visits by Donald Trump as president of the United States was precisely to Saudi Arabia. Moreover, it was precisely during this visit that the Saudi-Qatari split finally took shape, and at least President Trump’s benevolent non-interference in this conflict played a key role in his escalation.
It should be noted here that Qatar in the last decade began to pursue an independent and active policy in the Arab world and in the global Muslim community as a whole. This caused growing jealousy on the part of the Saudi monarchy, since it was the Saudis who considered themselves the main patron and donor of the Sunni world. In addition, the Qatar leadership was by no means afraid to interact with many movements of political Islam, including with various segments of the Muslim Brotherhood movement. And since many representatives of this particular movement, as well as political Islam as a whole, often accused the Saudi monarchy of having obscured everything else for them, such a Qatar policy was perceived not only as a challenge, but as a direct and extremely dangerous threat to the Saudis.
As a result, the split was brewing, but the final “go-ahead” for its implementation was obtained precisely through Trump. At the same time, as you know, American military bases are located in Qatar, and the Pentagon leadership tried its best to convince Trump not to take such a step and not complicate relations. But unsuccessfully. Naturally, for such support on a key issue, the States have the right to expect the same response from Saudi Arabia.
Finally, Trump’s son-in-law Jared Kushner’s vibrant activity to push through the so-called Israeli-Palestinian settlement of the century deal also relies heavily on Saudi Arabia.
As a result, relations between the Saudis and the United States in recent years have transformed so that it is not just a traditional partnership, but that Washington is now firmly holding the Saudis on the hook, and therefore the independence of the actions of Saudi Arabia raises serious doubts.
It should also be noted that it is naive to think that the global oil trade is a purely economic event. Oil has always been an absolutely political commodity. The influence through the oil and its prices on the stability of political systems in other countries is an old tried-and-true method that has long been found in the arsenal of global dominance of the United States. Moreover, which is significant, often precisely in conjunction with the Saudis. Earlier, in 1986 and 2014, the Saudis were already dropping oil prices, and it was the United States that became the main political beneficiary in their confrontation with Russia. The growing wave of problems that led to the collapse of the Soviet Union was largely caused by the fall in oil prices in 1986 and the associated undermining of the stability of the Soviet budget. The same logic was observed in 2014,
It is this logic that is able to explain the events that led to the current breakdown of the OPEC + deal. Back to the question: who benefits? Over the period of the OPEC + agreement, global oil demand has shown steady growth dynamics: in January 2020, it grew by more than 3 million barrels per day compared to January 2017, when a deal with the cartel was concluded. However, the volumes withdrawn from the market by the OPEC + member countries were instantly compensated by American oil companies. During the term of the agreement, US oil exports grew five times (2019 compared to 2016), and the share in world production increased from 13% to 17%.
Today, US production is at a historic high of 13 million barrels per day, which exceeds the production of all other producers and is 15% higher than Russia’s production. Thanks to the OPEC + deal, America was able to confirm its export potential by moving the “shale” into the stable profit zone, complete the creation of export infrastructure and enter new large sales markets. Thus, US oil exports to India grew 10 times to 13 million tons, LNG exports grew 4 times to 2.5 billion cubic meters. m. The same thing is happening in Europe: oil exports from the United States to Europe in 2019 increased by 64% to 45 million tons.
What happened to the market share of OPEC countries? She was contracting. Over the entire period of the agreement on limiting production, OPEC countries lost about 4% of the world market. Russia’s share also declined.
But Saudi Arabia, thanks to the OPEC + agreement, was able to launch a large-scale reform program (Vision 2030), which requires significant budgetary expenditures, as well as successfully carry out a strategic deal on the public offering of Saudi Aramco shares. It turns out that the United States and Saudi Arabia were the main beneficiaries of the OPEC + transaction. Oddly enough, they also became the main beneficiaries of breaking the agreement.
Oil sagging in price is a decrease in gas prices. For the United States, in absolute terms, this is an additional 0.3-0.4% of GDP, since America is the largest oil consumer. An added bonus is Trump’s approval of voters, which is so important to him in the year of the election of the President of the United States. It is no accident that the president could not resist publicly welcoming the break in the deal.
For Crown Prince Muhammad, the collapse of the world oil market was also an opportune moment: against the backdrop of the illness of the old king and the upcoming change of head of state, the prince rapidly losing popularity was able to conduct a series of arrests of members of the royal family who were objectionable to him, thus eliminating political opponents. In addition, after the fall of drone attacks on Saudi Aramco’s oil facilities, key Saudi oil consumers – India and China – actively talked about the unreliability of Riyadh and diversification of supply sources. In Arabia, this caused a real panic, and, apparently, the Saudis, long before the Vienna talks, relied on dumping, deciding to fill the markets with cheap oil in order to deter traditional buyers.
The coincidence of interests of the two countries, which are also long-standing allies, cannot but suggest the coordination of actions. It should be assumed that the constructive position of our country was deliberately ignored by the Saudis, and their impulsive demands to reduce production were nothing more than blackmail tactics. However, Moscow made it clear that it is impossible to speak with it in the language of ultimatums. Price is a variable, it depends on too many factors and can change unpredictably. Sooner or later, the market will adjust. Things are more complicated with market share: having lost its position on the world energy scene, it will not be so easy for Russia to regain its leading role.
Despite the fact that the United States and Saudi Arabia were playing for a fall, hoping to destabilize the situation in Russia, it is possible that low prices will become a real curse for American and Saudi oil workers, and our country will be able to increase its share in the global hydrocarbon market.
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