Saudi Arabia’s attempt to force US shale companies into bankruptcy has failed, so far. However, oil prices need to be stabilized and, as a result, both Saudi Arabia and Russia will find that they have mutual interests. That is the premise of an article journalist Salman Rafi wrote for the website Asia Times.
Though the best option for Saudi Arabia to impact current oil market trends is by establishing an alliance with Russia, but several political matters will need to be addressed first. The idea of an oil alliance has been confirmed by Igor Sechin, CEO of Russia’s state-owned Rosneft, in an interview with the Financial Times.
However, several political issues on which Russia and Saudi Arabia disagree will have to be settled first though. From the Houthi rebels in Yemen over support for Bashar al-Assad’s regime in Syria to the Iranian nuclear issue, a lot will depend on how Russia and Saudi Arabia will settle those geopolitical differences. But as Rafi mentions in the article “Saudi Arabia’s offers are, in fact, also an indication of Russia’s strong position.”
While the weak oil prices have damaged Russia’s economy, production costs have also been reduced. According to Sechin in the same interview with the Financial Times, there is confidence that Rosneft will be able to handle its debt loads. Then there is the economic reality that at current oil prices Saudi Arabia cannot push Russia out of the market.
An alliance would allow both countries to counter US oil firms and agree on output level to support the price of oil. Saudi Arabia has failed in establishing its hegemony in the global oil market, and this is the reason it is seeking out better relations with non-OPEC members, Russia in particular. This may even lead to Saudi Arabia offering OPEC membership to Russia. China would play a major role in this as it buys energy from both Russia and Saudi Arabia and is the biggest buyer of Saudi oil. It could help both countries settle quotas and distribution. It would also give Saudi Arabia the benefit of access to the Sino-Russia alliance and China’s One Belt Silk Road projects.
The article concludes that “the political map of the world, dominated as it was by the US since the end of the Second World War, could transform to a great extent.”