For the past six years, leaders of Russia and Saudi Arabia have largely worked together to control the global oil market in times of war, pandemic and dizzying price swings.
But their alliance seems strained in a way that could help the Biden administration, which was trying to prevent another significant hike in energy prices ahead of Secretary of State Antony J. Blinken’s visit to Saudi Arabia this week.
At last weekend’s meeting of OPEC Plus, the oil cartel led by the two countries, Saudi Arabia and Russia quietly parted ways. Saudi Arabia announced it would cut its exports by a million barrels a day to counteract falling prices. But Russia has not made a new commitment to reduce its exports.
It was the second time that the partners on oil policy have recently disagreed. Just two months earlier, Russia and Saudi Arabia, which together sell more than 20 percent of the world’s oil consumed, agreed to cut production. But while Saudi Arabia followed suit and sold less oil to other countries, Russia appears not to have done so. Russia recently stopped disclosing information about its oil industry, but analysts estimate Moscow has increased exports, undermining the earlier deal.
The Saudi-Russian oil alliance has always been about the common goal of supporting oil prices and maximizing export earnings. But Russia’s war in Ukraine has changed the dynamic of relations. Russia is increasingly willing to accept lower prices in order to sell more oil, much of which goes to China and India because it needs the money to fund its war effort.
Russia’s urgent needs – coupled with weak global demand for oil – have helped push prices down. This has helped bring down energy prices around the world, including in the United States, where President Biden made cutting gas prices a key policy goal after the war in Ukraine began last year.
As of Tuesday afternoon, the US reference oil price was less than $72 a barrel, around the level before the weekend’s OPEC Plus meeting and below $120 last summer.
“The goals of Russia and the cartel diverge,” said Mikhail Krutikhin, a veteran Russian oil expert now based in Oslo. “There is no trust in Russia’s data and there is no trust in Russia’s actions.”
Saudi officials have not publicly criticized Moscow and appeared to bail out President Vladimir V. Putin to maintain a partnership that began in 2016 and has generally been mutually beneficial.
Bruce Riedel, a former Middle East analyst at the Central Intelligence Agency, disagreed with the notion that Saudi-Russian relations are strained. He said that by unilaterally cutting oil production, Saudi Arabia is distancing itself from the United States and the Biden administration in particular.
“The Saudis have decisively turned to Russia by cutting oil production to raise prices,” said Mr. Riedel, now at the Brookings Institution. “The timing on the eve of Blinken’s visit helped convey the message.”
Even if the Saudi move to reduce production and raise world prices is problematic for Washington, Riyadh appears to be hedging its bets between its long-time ally, the United States, and Russia, its newer partner on oil policy.
The Saudis and the United States both have reasons to stabilize their ties, said Robert Jordan, a former US ambassador to Saudi Arabia.
“The Saudis want US warplanes, nuclear technology and security guarantees,” Jordan said. “The US wants them to recognize Israel and keep oil production going.”
Relations with Saudi Arabia have aided Russia in its grueling war with Ukraine. Last year, while western countries began withdrawing investment from Russia, Saudi Arabia’s Kingdom Holding Company invested hundreds of millions of dollars in Russian energy companies. Then Saudi Arabia increased imports of Russian heating oil for its power plants, while other countries restricted or stopped buying Russian energy.
In September, the two countries asked OPEC Plus to cut oil production, which dismayed the Biden administration. The move was taken as a rebuke for Mr Biden, who traveled to Saudi Arabia in July and traded a punch with Crown Prince Mohammed bin Salman – after criticizing him during his presidential campaign. The president, who has been scolded by Republicans for rising inflation, hoped the Saudis would increase oil production, or at least not cut it.
But the Russian-Saudi oil partnership has often been unstable. In 2020, as the Covid pandemic eroded the global economy and oil prices, Russia refused to work with Saudi officials to implement deep production cuts to stabilize prices. In response, Saudi Arabia flooded the market with oil, causing crude oil prices to plummet and wreaking havoc on Russian oil companies.
In a recent television interview, Prince Abdulaziz bin Salman, the Saudi energy minister and Prince Mohammed’s half-brother, eloquently recalled the brief separation. “It wasn’t about price, profit or income,” he said. “It was about ‘to be or not to be’: who governs this sector?”
Still, the alliance endured, and energy analysts expect it will continue, even as various OPEC Plus members show increasing independence.
“I see tensions emerging, but it’s still an alliance as they still need each other,” said Bill Richardson, a former US Secretary of Energy and ambassador to the United Nations.
While the producer group extended collective supply cuts, the UAE was allowed to increase its production quota for next year. Oil analysts say the latest OPEC Plus decision could ultimately see global oil supplies fall by a modest one million barrels per day for at least a month while the global market is just over 100 million barrels per day.
The two countries still have a lot in common, including in the way they view some US politics. When the United States and European countries imposed a price cap on Russian oil exports last year, Saudi Arabia and other energy-producing countries in the Middle East viewed the move as a potential threat, a policy that could be used to slash their profits in the future .
“It would not make sense for either country to step out of this central alliance while energy security is at risk around the world and oil and gas markets are in turmoil,” said Sadad Ibrahim Al Husseini, a former senior official at Saudi Arabia. Arabia’s state oil company Aramco.
According to the country’s Treasury Ministry, Russia’s oil and gas revenues, which are the largest contributor to Russia’s budget, for the first five months of this year were half what they were in the same period of 2022.
Ariel Ahram, a Middle East expert at Virginia Tech, said Middle East producers had hoped demand from China would pick up as the country emerges from its Covid lockdowns, but have been disappointed. With oil prices falling below levels seen when Russia invaded Ukraine, Saudi Arabia and its allies must rein in Russia.
“Turning to Russia is a way of biding time,” Ahram said.
But some representatives of the Middle East are already complaining about Russia’s reliability as a partner. One point of contention is that Russia has not disclosed its energy production data since April. Many analysts said it appeared that Russian seaborne oil exports had increased, offsetting the loss of oil sold by pipeline to Europe.
“To be effective, the alliance needs to publish its data,” said Marcel Salikhov, director of the Institute of Energy and Finance in Moscow. “Russia has blocked its data and this leads to contradictions.”
Vivian Nerim contributed to the reporting.