Russo-Saudi Oil Bromance. Will it last?
In recent weeks and months, one of the oddest alliance in the global oil markets has been solidifying and strengthening, this is between Russia and OPEC, or more to the point, between Moscow and Saudi Arabia, the top leader of the oil exporting countries organisation, which will undoubtedly will have important geopolitical consequences and implications in the medium and long term for global oil and gas markets and the international landscape.
In this sense, according to diverse views, analyses and opinions, this renewed kind of relationship between competitors in oil markets, Moscow and Riyadh, has one specific target, which is and has been in the last recent years the U.S. shale oil and gas production, proved to be resilient and resistant up until now, and which caused a redesign of the OPEC strategy, trying to involve as many non OPEC countries in order to counter the shale production and keep its business safe along with acceptable prices for the bloc's exports of oil, to which Russia seems to have accepted at least so far, now that the Kremlin has been one of the main players in the Middle East and the Gulf.
Following the recent dynamics between Russia and Saudi Arabia in the oil and gas arena, it could be seen that both actors have been moving towards a complimentary and reciprocal relationship, knowing for example that saudis have a deficit on its LNG and natural gas production which Russia could deliver and help, and also on the nuclear field of which Moscow could be an important supplier to Saudi Arabia. not to mention that saudis are trying to leverage on the close russo-iranian links in order to defuse the longstanding sunni-shiite rivalry between Riyadh and Tehran, expanding to the whole Middle East region, and where Moscow has been extending its influence. All in all, it remains to be seen if geopolitical imperatives and colliding interests will at the end trump the ongoing romance, sweet talks and cooperation between russians and saudis in the context of the OPEC. Russia and Saudi Arabia deals involve oil and gas
In this regard, even if its known that Russia has never belonged to the OPEC as full member since former soviet times (either for national interests and pride, technical or commercial reasons), times might be different now, and Moscow could reap benefits from its rekindled cooperation with the saudis and the rest of the oil organisation as much as the other way around, for example, Russia could leverage on Riyadh in reducing overall competition from natural gas competitors such as Qatar, Egypt, Algeria, in their efforts to expand their exports to the european markets through diverse mechanisms of influence by the House Al Saud, meanwhile saudis could expand its natural gas imports and knowledge through participation in projects such as Yamal, and at the same time both russians and saudis would ramp up their market shares and exports to asian markets. Russia to sell gas from Yamal field
Henceforth, this is what could be a beneficial double way relationship of cooperation, and especially after a recently announced plan to create an expanded oil organisation by the OPEC involving the non OPEC countries, which is mainly a signal to Russia in order to involve this leader of non OPECs to become a more active player along with the OPEC in the potential new bloc of oil exporting countries. The New Super OPEC?
Then after all this, it remains to be seen simultaneously the results of this russo saudi tailored strategy against the shale oil production from the U.S. (already becoming an exporter of oil and LNG to the Caribbean, Europe and Asia), and if they can sustain the ongoing oil cut deal during the whole 2018 without harming their respective market shares, production and other technicalities, always having in mind the differences between Russia and Saudi Arabia regarding break-even prices, costs, type of oil, etc and if the diverse geopolitical objectives between Moscow and Riyadh especially regarding Iran and Syria and the complexities of the region and in the end the volatility and high fluctuations of the global oil markets.