Russian President Vladimir Putin will discuss the production cut pact that OPEC and its Russia-led allies have been implementing for nearly three years now during his first visit in more than a decade to Saudi Arabia next week, the head of Russia’s sovereign wealth fund said on Thursday.
Russia and Saudi Arabia will sign more than ten agreements worth over US$2 billion, Kirill Dmitriev, chief executive at the Russian Direct Investment Fund (RDIF), told reporters in Russia today.
The agreements will be in different areas, including agriculture, railways, petrochemicals, and one of the investments will concern Saudi Aramco—the details of this deal cannot be disclosed yet, Dmitriev said.
“The OPEC+ deal will also be discussed during the meetings,” Dmitriev said, as carried by Reuters.
Putin will visit Saudi Arabia on October 14, and during the visit he will meet Saudi King Salman bin Abdulaziz Al Saud, with whom he will discuss cooperation, economy, trade, and investments. Putin will also hold a separate meeting with Saudi Crown Prince Mohammed bin Salman, the Kremlin said on Thursday.
Over the past few years, the meetings between Putin and the crown prince at various international events have served as a kind of pre-approval of the next moves of the OPEC+ coalition. Related: Big Oil Shareholders Look To Cash In On Renewable Boom
While they have managed to put a floor under oil prices, the allies in the OPEC+ deal have failed to materially move prices higher. With fears of demand faltering, the leaders of the pact—Saudi Arabia and Russia—face a tough test ahead.
At an energy forum in Russia earlier this month, Putin commented on the OPEC+ alliance and said that “Russia remains a responsible party to the OPEC+ deal. We are convinced that cooperation will continue to develop.”
At a meeting with OPEC Secretary-General Mohammad Barkindo on the sidelines of the forum, Putin said that “The recent attack on oil facilities in Saudi Arabia certainly triggered a hike in oil prices, but I was sure that everything would return to today’s indicators because there are no serious grounds for fundamental market fluctuations. They do not exist partly owing to our common efforts to stabilise the world market.”
By Tsvetana Paraskova for Oilprice.com
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Saudi Arabia’s alliance with the United States dates back to the meeting between Saudi King Abdul Aziz ibn Saud with US President Franklin D. Roosevelt aboard the USS Quincy in Great Bitter Lake in the Suez on the 14th of February, 1945.
Since then, Saudi Arabia has been quenching the United States thirst for oil, financing its wars and doing its bidding. Moreover, Saudi Arabia was instrumental in establishing the petrodollar in 1973 as the world's oil currency and the pivot of the global financial system. On the other hand, the United States particularly under President Trump has been blackmailing Saudi Arabia for money under the pretext of protecting it and its oil and even rudely insulting its leaders.
A point of no return in the Saudi-American relations might have been reached when Iran’s allies, the Houthis of Yemen, attacked and inflicted heavy damage on Saudi oil infrastructure. The United States rushed to accuse Iran for the attacks but failed to retaliate against it. As a result, Saudi Arabia may have reached the conclusion that the United States has been using Iran as a threat to blackmail it for money.
Saudi Arabia may have also concluded that its oil industry has become hostage to attacks by the Houthis, that Iran has strategically won the war for the Middle East without even firing one shot, and that the US will be soon withdrawing from the greater Middle East, starting with the Persian Gulf, Iraq and Syria and leaving the whole region under Iran’s influence. That explains some tentative steps taken by Saudi Arabia recently to disengage from the Yemen war and build bridges of confidence with Iran.
With a changing global geopolitical landscape, Saudi Arabia may feel the need to ally itself with the new rising order that will shape the world in the next two decades, namely Russia’s strategic alliance with China, hence the great importance of President Putin to Saudi Arabia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London