MOSCOW-RIYADH’S RISING CLOUT
Qatar's Opec exit highlights growing sway of Saudi Arabia-Russia axis
WHEN Qatar shocked the oil world on Monday by announcing plans to quit the Organisation of the Petroleum Exporting Countries (Opec) cartel after 57 years, its energy minister said the decision was taken for “technical” reasons.
That story didn’t last long. A few hours later, a leading member of the country’s ruling family used Twitter to blast Opec, a group where Qatar was once a diplomatic force despite being a relative minnow in oil production terms, accounting for less than two per cent of total output.
“The withdrawal of Qatar from Opec is a wise decision, as this organisation has become useless and does not bring us anything,” said former prime minister Hamad Jassim Jaber Al Thani.
“It is just being used for purposes that harm our national interest.”
His real target was Saudi Arabia, by the far the biggest producer inside Opec. For decades the kingdom’s power was cloaked in a desire for consensus that saw the group through wars, sanctions and revolutions.
But the more aggressive foreign policy pursued since the rise to power of Crown Prince Mohammed Salman drove Qatar out.
The prince’s decision last year to isolate his Gulf neighbour politically and financially meant there was very little upside to Qatar remaining in the group.
There’s little expectation other countries will follow soon, but the kingdom’s willingness to drive a fellow Opec member towards the exit is more evidence the oil relationship that really matters is between Riyadh and Moscow.
“The longstanding Saudi-led economic and political boycott of Qatar is bound to have played a large part in the decision,” said Ashley Kelty, an oil and gas analyst at Cantor Fitzgerald Europe.
As Qatar was finishing up plans to leave, Russian and Saudi officials were meeting in Moscow to hammer out a bilateral deal to extend the so-called Opec+ agreement first struck in 2016.
That pact turned around the oil market, but depended so heavily on the world’s two largest exporters that others felt like bystanders.
“There is a sense of frustration prevailing, especially among small producers,” said Hossein Kazempour, Iran’s Opec governor, who has represented Teheran’s interests at the cartel for decades and been a consistent critic of Saudi oil policy.
Even the larger Opec members can do little to influence decisions. Iran’s production is constrained by United States sanctions. Venezuela, a founder member and once a major force, has been undone by years of economic crisis and collapsing output. Libya’s oil industry has experienced prolonged turbulence since the fall of Muammar Qaddafi’s regime in 2011.
Though not part of Opec, Russia has given Saudi Arabia a partner with equal weight in the oil market and the political will to deliver on its promised cuts.
But there’s still plenty of work to do. Energy officials from both countries haven’t yet agreed how to share the burden of cuts.
Both Russia and Saudi Arabia are producing near record levels above 11 million barrels a day, but Moscow proposed reducing its output by no more than 150,000 barrels.
With the market expecting a total cut among the Opec+ group of more than one million barrels a day, the Saudis want Russia to shoulder a greater share of the burden, according to sources.