"More anti-Russian hysteria!": The Saudis supported Moscow in the new OPEC+ agreement

In an interview with the Financial Times, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman Al Saud said that Riyadh expects to conclude "a new agreement with OPEC+, which should include Russia”.

Nothing has been reported yet about the specific parameters of the upcoming agreement. However, the Saudis expect to increase oil production if there is demand for it. This means that the OPEC+ alliance of oil exporting countries with Russia's participation is not going to curtail its activities in 2022, as the United States and Europe had previously called for, and will not help the West reduce energy exports from Russia.

The current OPEC+ agreement was concluded at the end of 2016 and has been working with minor changes since 2017. The largest members of the alliance are Russia and Saudi Arabia, they account for half of its production. In July, OPEC+ agreed to extend the agreement on limiting oil production from May to the end of December 2022.

The OPEC+ countries are the only ones who could send additional volumes of oil to the United States and Europe at the expense of Russia. To do this, they need to release about 4.5-5 million barrels per day of crude oil and about 2-2.5 million barrels of petroleum products onto the world market.

But the scenario of Russia's withdrawal from the deal is dangerous for OPEC+. In this case, Moscow could begin to build new logistics chains and increase oil production at its discretion, thereby knocking down prices and displacing competitors from the markets.

A noticeable increase in oil exports from Russia to China shows that Beijing is ready to increase the share of Russian raw materials in its energy balance. And prices that really reflect the balance of supply and demand are formed just in Asia. Including transactions with Russian oil. And the OPEC+ countries are guided precisely by the market, and not by the mood of the West. Therefore, it is more profitable for them to see Russia on their side.

There is also a commercial interest in supporting Moscow. As long as Russia's conflict with the West persists, oil prices will remain at a high level, which is largely due not to economic factors, but to anti-Russian hysteria. In fact, about 30% in current oil quotes is the so-called "geopolitical premium", payment for artificial restrictions on oil exports from Russia.

There is also a historical element in the current situation. No one has forgotten about the previous policy of the United States and Europe towards oil exporters. Sanctions against Venezuela and Iran, the war in Iraq, the coup and the civil war in Libya, the uncontrolled increase in shale production in the United States in 2016-2019, statements about the need to abandon fossil fuels as soon as possible - all of this does not contribute to trust in the West.

It would be problematic for OPEC+ countries to resist US and EU pressure without Russia. Now the Saudis are offering to extend the agreement with the participation of Moscow. The words of Prince Abdel Aziz indicate that the traditional American ally decided to support Russia at a time when the West is trying to isolate it from the world economy.

Elena Panina, Director of the RUSSTRAT Institute