Opec, Russia consider 10-20 year oil alliance
Saudi Arabia and Russia are working on a historic longterm pact that could extend controls over world crude supplies by major exporters for many years to come.
Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering a longer deal to extend a shortterm alliance on oil curbs that began in January 2017 after a crash in crude prices. “We are working to shift from a year-to-year agreement to a 10-20 year agreement,” the crown prince told Reuters in an interview in New York late on Monday. “We have agreement on the big picture, but not yet on the detail.” Russia, never a member of the Organization of Petroleum Exporting Countries (Opec), has worked alongside the 14member cartel during previous oil gluts, but a 10-20 year deal between the two would be unprecedented. Top Opec producer Saudi Arabia recruited Russia and other non- Opec countries to help drain a glut when oil prices collapsed from over $100 a barrel in 2014 to below $30 in 2016. Crude has since recovered to $70 but fastrising output from US shale producers has capped prices.
“This is all about whether the arrangement is a shortterm expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil,” said oil historian Daniel Yergin, vice-chairman at consultancy IHS Markit.
“Opec countries want to find a way to institutionalise this relationship rather than to have it be a one-shot deal.”
News of the potential oil alliance comes at a time when Riyadh and Moscow have worked to cement an economic relationship despite being at odds over the conflict in Syria, where they back opposing sides.
Riyadh supports rebels fighting Syrian President Bashar al-Assad’s army, while Russian and Iranian forces have backed Assad — meaning that Russia effectively sides with Iran, Riyadh’s regional arch-foe.
Last October, Saudi King Salman became the first sitting Saudi monarch ever to visit Russia. He led a delegation to Moscow that agreed joint investment deals worth several billion dollars, providing much-needed investment for a Russian economy battered by low oil prices and Western sanctions.
Despite their differences in the West Asia, Russia and Saudi Arabia have been drawn together by a common interest in propping up flagging world oil prices, and by the fact that Moscow, since its military intervention in Syria, has clout in the West Asia that other countries in the region cannot ignore.