Experts noted that OPEC members, dissatisfied with the actions and statements of US President Donald Trump, decided to take Vladimir Putin’s side.
Earlier, the cartel’s members expressed concerns over Russia’s robust activity in the global oil market. However, they had to admit that Moscow could help OPEC to boost oil price growth. Lately, Donald Trump has been exerting pressure on the organization.
In fact, the American leader puts a great strain on OPEC and its founder member Saudi Arabia. He demands that the organization ramps up production in order to lower oil prices. Donald Trump pays special attention to the oil issue. It plays a significant role in the US domestic policy ahead of the presidential election of 2020.
Recently, OPEC has held a scheduled meeting. Before it started, Russian President Vladimir Putin said that the deal between OPEC and non-OPEC members would be extended. Iran’s oil minister Bijan Zangeneh expressed indignation over such a statement. He said that Putin’s comment about prolongation of the deal was premature, but later on, he changed his opinion.
Experts believe that Russia and OPEC became partners unexpectedly, having formed the OPEC+ alliance. Doing so, they aimed to cut global oil production amid a slowdown in the global economy and increasing output in the United States. Experts are sure that both sides can benefit from this deal. High oil prices are advantageous for the petroleum exporting countries. Besides, the alliance can bolster the position of OPEC and help it to resist Donald Trump’s pressure.
The cartel sees Russia as a big player on the global oil market and stands ready to keep terms with this country. Separately, Iran, Iraq, and Saudi Arabia also consider the increasing significance of Russia to be a positive factor.
A unanimous positive attitude towards Russia is a sign of a profound shift in OPEC-Russia relations that have long been rather tense. It was contributed to a number of factors. In particular, Russia agreed to cut output along with OPEC in 2001, but then it broke the agreement and ramped up production instead. Naturally, other OPEC+ members expressed discontent with such behavior. However, the situation is different nowadays.
At the G20 summit in Osaka, Russian President Vladimir Putin agreed with Crown Prince of Saudi Arabia Mohammed bin Salman to extend the output cuts deal between the OPEC and non-OPEC states. Obviously, this deal is beneficial to both sides.
Experts draw attention to the fact that the leaders of two superpowers – the United States and Russia – are pursuing different goals. Gary Ross, chief executive of Black Gold Investors, said: “Trump has one interest – low oil prices. Putin wants higher prices.”
Analysts believe that cooperation with OPEC meets the needs of Russia as the energy sector revenue accounts for about 50% of the country’s budget. The oil prices at 45-50 dollars per barrel would be beneficial for Moscow as they can help to offset the budget deficit. Presently, the financial conditions in Russia are far from good due to the American sanctions. As for Saudi Arabia, it needs even higher prices of at least 80 dollars per barrel. The current price of the Brent crude benchmark is about 65 dollars per barrel.
What is more, the OPEC-Russia alliance can be favorable for the global economy and for all the participants of the deal. Russia managed to extend its influence in the Middle East thanks to friendly relations with Riyadh, an ally of Washington. In future, this cooperation may help Russia to restore a diplomatic dialogue with the United States. Further on, Iran seeks support from Russia, one of the few countries that offered assistance in opposing the American sanctions. In fact, the renewed sanction delivered a severe blow on the Iranian economy as the exports of crude oil from the country plunged to record-low 0.3 million barrels per day last month. In turn, Russia used its own resources in order to support the economy of Iran and at the same time strengthen its position in the global oil market.