Jan, 2021
2. OPEC+ Ministerial Meeting: Saudi-Russian discrepancy due to the disruption of hotline between MbS and President Putin
In early 2020, price of North Sea Brent crude
oil was $ 64 per barrel, which was enjoyed by oil-producing countries so far.
However, the coronavirus (COVID-19) pandemic hit the world economy. Oil demand became
unforeseeable. Russia, the largest non-OPEC oil-producing country, sought to
ease cooperative production cuts and to increase production. In response, Saudi
Arabia insisted on strengthening production cuts to meet further decline on
demand. Two countries did not compromise each other. Saudi Arabia eventually
increased production. The market deployed a chicken race.
As a result, Brent crude oil prices plummeted
to $ 18 in April. There was no pick-up of the future trading of WTI crude oil
for the month of May. The seller was forced to settle with loss, causing an
abnormal situation in which the price temporarily became negative. On April 12,
the OPEC and Non-OPEC Extraordinary Ministerial Meeting (ONOMM) was held. It
was on TV conference due to COVID-19. They agreed to continue cooperative
production cuts. The production level was cut to 9.7 million B / D from May to
June, 7.7 million B / D from July to December, and 5.5 million B / D from
January 2021 to April 2022 respectively. This soared Brent prices to $ 50 at
the end of the year[1].
Nevertheless, most of OPEC and non-OPEC
oil-producing countries other than Saudi Arabia suffered from revenue shortages.
They called for mitigation of production cuts after 2021. Russia took
initiatives, which again confronted Saudi Arabia. At the OPEC and non-OPEC
Ministerial Meetings (ONOMMs) held in December and January, the production
level was eased from 7.7 million B / D to 7.2 million B / D, and the production
level of each country was raised. It was also decided to hold an ONOMM meeting
every month to inspect the result of production cuts[2].
The TV conference has made a big change in
decision making of ONOMM. ONOMM’s monthly meeting has brought close
communication between members. On the other hand, it became difficult to get
consensus of the participants due to no preparatory meeting by key members nor mediation
by a fixer (an important person behind the curtain), which are sometime
inevitable for the success of the meeting.
In the past, Saudi Arabian Petroleum Minister
Abdulaziz bin Salman and Russian Deputy Prime Minister and Petroleum Minister Alexander
Novak, co-chairmen of ONOMM, used to come to Vienna the day before the plenary
session and held a bilateral meeting to coordinate the agenda. Then, Saudi Petroleum
Minister persuaded OPEC member countries and Russian Minister persuaded
non-OPEC member countries to run the plenary session smoothly.
Furthermore, Prince Muhammad bin Salman (MbS) used
to communicate directly with Russian President Vladimir Putin from time to time
through direct call or indirect means. MbS, on behalf of King Salman, conferred
Putin about the important agenda, such as fundamental policies to increase or
decrease of oil production. MbS has built a trustworthy relationship with Putin.
It is common that the dictator negotiates with
foreign rulers by a personal relationship based on trustworthiness. But once
trustworthiness was broken, the hotline would be disconnected. Recent media
reports tell that hotline between MbS and President Putin seems not to be at
work. It seems that President Putin is keeping MbS away. The reason might be
that the international reputation of MbS has been lowered by the murder of Khashoggi
and that Saudi Arabia has been lost Russian credibility about the interest both
in Middle East and oil.
It seems that the role of MbS’s in OPEC policy
decisions was over. The presence of MbS is obscure not only in the OPEC+, but
also in the G20 and GCC summit[3].
MbS has been aggressive in the past, but recently it is suspected that there will
be a gap between he and his father.
End of Part2
By Areha Kazuya
E-mail: Arehakazuya1@gmail.com
[2] OPEC+ (plus) solidarity is threatened into collapse
[3] Saudi Diplomacy Fallen to the Ground Part1: Unconditionally
Reconciled GCC Summit
http://ocininitiative.maeda1.jp/202101SaudiDiplomacy1English.pdf
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