Putin and MbS ‘satisfied’ with oil cuts despite US fury

“The conversation proceeded in a friendly manner, was constructive and informative. With this in mind, it was agreed to build up contacts in specific areas of cooperation,” the Kremlin said.

The call comes weeks after Riyadh corralled members of the Organization of Petroleum Exporting Countries (Opec) to enact a “voluntary” cut in crude production of nearly 1.2 million barrels a day.

The surprise move blindsided both Washington and market speculators who had bet on oil prices falling amid concerns about the health of global economy. The International Energy Agency warned that the cut would worsen a global oil deficit, driving inflation higher.

The price of benchmark West Texas Intermediate is at just below $79, down from over $118 last May.

Saudi Arabia’s decision to restrict supply has also been described by analysts as a win for Putin, who needs strong oil prices to support his war in Ukraine. Saudi Arabia, like Turkey and the United Arab Emirates, has rebuffed Washington’s pleas to isolate the Kremlin, offering Moscow a financial and diplomatic lifeline.

Coordination between Saudi Arabia and Moscow on oil prices is all the more remarkable considering the two countries engaged in a bitter price war just a few years ago that saw crude prices briefly touch below $0 per barrel.

In March 2020, with crude prices already under pressure as result of the coronavirus pandemic, Putin held a phone call with MbS to discuss production.

“The conversation was very personal. They shouted at each other. Putin refused the ultimatum and the call ended badly,” a Saudi official, speaking on condition of anonymity, told MEE at the time.

Following the spat, Riyadh decided to flood the market with oil. The move prompted then US President Donald Trump to intervene, along with western countries, to eventually convince Saudi Arabia and Russia to slash production and support prices.

More recently, oil production has emerged as one of the many fault lines in the Joe Biden administration’s ties to Riyadh.

In addition to working with Russia on the global oil market, bin Salman has agreed to reestablish relations with Iran in a deal brokered by China and is seeking to rehabilitate Syrian President Bashar al-Assad.

While Russia may benefit from some of these initiatives, Damascus is a key Russian ally in the region and the Kremlin is close to Tehran and Beijing, the global oil market highlights how Riyadh’s own self-interest is propelling ties. Some analysts also see potential pitfalls ahead in the relationship.

Persian Gulf states have traded places with Russia in the global energy trade, with Riyadh redirecting sales to Europe, while Moscow muscles in on their traditional customers in Asia with cut-rate prices.

“Europe is yesterday’s oil market. It’s rushing to get off fossil fuels as quickly as possible,” Jim Krane, an energy expert and fellow at Rice University’s Baker Institute, told MEE last year.

“Saudi Arabia doesn’t want to be losing market share in the big growth markets of Asia and trading them for stagnant to declining European markets,” Krane added.

But production cuts keep both Riyadh and the Kremlin happy.

Saudi Arabia is using its windfall in oil revenues to pursue mega-projects like the futuristic city of Neom and a new airline, which are designed to diversify its economy away from a reliance on fossil fuels. Meanwhile, higher prices help to boost Russia’s war chest.