Russia is doing what it can in the clandestine war waged by the United States and Saudi Arabia. Dalan McEndree of WorldPress.org reports on how Russia is attacking the OPEC oil alliance:
Putin’s moves also are strengthening Russia’s influence with OPEC. Russia already has extensive and close ties with Iran and Venezuela, and is now laying the basis for such ties with Iraq. Putin has aligned Russia with OPEC’s have-nots—the members lacking the financial resources to withstand low crude prices for an extended period and that have objected to Saudi policies (Iran, Iraq, Angola, Nigeria, Libya, Algeria, Ecuador and Venezuela)—against the haves (Saudi Arabia, Kuwait, the UAE and Qatar). He has continually supported Venezuelan President Nicolás Maduro’s calls for an emergency OPEC meeting on prices and his efforts to persuade Saudi Arabia to reverse its policy. At the beginning of September, Putin told Maduro that the two countries “must team up to shore up oil prices.”
In addition, Russia’s deputy prime minister in charge of energy policy, Arkady Dvorkovich, made comments that mocked Saudi policy, saying that “OPEC producers are suffering the ricochet effects of their attempt to flush out rivals by flooding the world with excess output,” expressing doubt that OPEC members “really want to live with low oil prices for a long time,” and implying that Saudi policy is irrational.
Indeed, Russia can be seen as maneuvering to split OPEC into two blocs, with Russia, although not a member, persuading the “Russian bloc” to isolate Saudi Arabia and the Gulf Arab OPEC members within OPEC. This might persuade the Saudis to seek a compromise with the have-nots.
A strategic alliance with Iran and Iraq offers Putin two more potential avenues by which to pressure the Saudis. They can test Saudi determination to defend their market share at any price and its financial wherewithal to do so. Iran claims it can raise crude output by 1 million barrels within six or so months of the lifting of sanctions. The Saudis may be calculating that Iran must first rehabilitate its oil fields and that Iran, cash poor, cannot do so quickly. If this is the case, Russia could step in, offer Iran financing, and force the Saudis to contemplate prices staying lower longer than they anticipated and therefore continuing pressure on their economy.
He also addresses the Chinese market:
Russia also could cooperate with Iran and Iraq to take market share from Saudi Arabia in the vital Chinese market. As a recent Bloomberg article pointed out, Saudi Arabia, Iran, Russia, Iraq and other countries are vying intensely for sales to China, the second-largest import market and the major source of demand growth in coming years. Coordinating their pricing and consistently offering the Chinese prices below the Saudi price, they could seek to win market share. Such a price war would pressure the competitors’ currencies.
I feel less certainty about China being a major source of demand for fossil fuel. In the case of coal, the rulers of China are beginning to demonstrate that, once a decision has been taken, they can follow through. If this holds true – a large IF – and were to be extended to oil in concert with a growing renewables or nuclear-based energy grid, then the entire context changes.
Suppositions like this may render the Saudi Arabian strategy and associated goals moot – as well as the Russian export strategy. The entire renewables movement, as much as it’s denounced and ignored by the American right-wing fringe, actually serves to further their purported goals – just not with bayonets and mustard gas. (Appropriately enough, I’ll place in parenthesis the obligatory reference to covert goals, much of which is motivated by the oil industry, and thus the low oil prices are not desirable.) Of course, there are other uses for oil, so it’ll not go completely out of style – unless someone comes up with a replacement for plastics.
