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Why Russia Won’t Abandon OPEC Just Yet

October 24, 2019

Russian President Vladimir Putin pried loose a couple of energy investment deals from Saudi Arabia on his latest visit to the region, on October 14 and 15 (TASS, Kommersant, October 14), but their total value reached only hundreds of millions of dollars, not the billions Russia had hoped for. He also picked up an investment from the United Arab Emirates (UAE) during his Middle East trip (Kremlin.ru, October 15). Although overall, the results were modest, every such economic agreement lays the groundwork for more in the future.

 

Moscow has been trying to strengthen its partnerships with the cash-rich Gulf states since striking a deal three years ago with the Organization for the Petroleum Exporting Countries (OPEC) (Opec.org, December 10, 2016), which would ultimately transform into the “OPEC+” coalition to raise global oil prices (see EDM, April 2, 2018 and October 31, 2018). Russia also wants stronger ties with the Middle East to boost its stature in the region and obtain energy-project financing that Western sanctions have blocked (see Jamestown.org, December 20, 2017 and March 8, 2018). Saudi Arabia, however, has been dragging its feet on investments because Russia is an oil and natural gas competitor.

 

The Saudis had originally instigated the OPEC+ deal. But Russia embraced the overture because it wanted to see falling oil prices stabilize and thought it could obtain geopolitical and investment benefits from the arrangement. Now, Riyadh hopes to extend OPEC+ for a decade or more, but Moscow refuses to commit to such a timeframe. The Russian side wants to be able to pull out of the agreement if shifting geopolitical and economic circumstances mean that it would be better off on its own again. Another important factor in why Moscow balks at a long-term OPEC+ deal is opposition from Russia’s energy-sector oligarchs, who want no limits on their ability to pump more oil.

 

FULL REPORT

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