Oil jihad: Arabs no longer believe Putin’s words

Moscow and Riyadh juggle the global economy

Oilproducing countries are frantically trying to agree on maintaining oil prices amid the collapse of the global economy. However, immediately after the announcement of new negotiations within OPEC +, the states began to exchange mutual reproaches: Moscow accused Riyadh of breaking the previous deal, and Riyadh, in turn, accused Moscow of inaccurate information.

Apparently, the negotiations are going so hard that the announced summit was urgently decided to postpone for at least three days, from April 6 to April 9. As you can see, the contradictions between the oil-producing countries are so deep that it is immediately impossible to solve them. The world leaders, each of whom defends his position, do not seem to give a damn that every day of delay in negotiations threatens the global economy with ever greater problems.

What will happen to the oil market in the coming days? How will prices change? For these and other questions, the Free Press asked Sergei Zhavoronkov, a senior fellow at the Institute for Economic Policy, a member of the board of the Liberal Mission Foundation.

“SP”: - Sergey Vladimirovich, on the eve of the new OPEC + summit, the Saudis and Russia began to exchange mutual attacks. Find out who is to blame. Is there really no more important occupation today? We need not quarrel, but develop a common position.

- Even if we take on faith the version that Russia agreed to continue the deal, and Saudi Arabia demanded to further reduce production (we don’t know exactly what was behind closed doors, but the head of Rosneft Igor Sechin previously spoke out against deals), then Russia had to meet these requirements.
Indeed, with similar foreign exchange reserves ($ 501 billion in Saudi Arabia, $ 551 billion in the Russian Federation on March 20, this is the last available date) Russia needs to feed 145 million people, and Saudi Arabia - 33 million. The strength of the Saudi regime is much higher.

"SP": - And what is the position of the United States in this matter? Why did Trump suddenly want to mediate between Russia and Saudi Arabia?

- Although the United States is already a net exporter of oil and oil products, it is still a net importer of crude oil, so lower prices are more likely to be beneficial for them. This may not be very beneficial for the current administration, which will face difficult re-elections in November, but not for the country.

However, Trump has already given a virtually negative answer to Putin’s proposals to create a certain OPEC + Russia + USA cartel. Rather, we can expect the appearance of the OPEC + US cartel, without Russia. The level of political trust between these countries is much higher, and Russia's ability to increase production is much less than that of OPEC countries.

“SP”: - The Saudi Arabian Foreign Ministry actually accused Putin not only of disrupting the deal, but also of false information: supposedly, Moscow tried to shift the responsibility for the disruption to Riyadh? Do you believe whom?

- Out of habit, I believe that our authorities are cunning. As was the case with the increase in the retirement age, the increase in taxes, and the lifting of the restriction on two presidential terms.

The Saudi regime is quite brutal, but at the same time conservative. For example, they, due to subsidies during the last decline in oil prices in 2014, kept the real exchange rate against the dollar and now they are. It is important for them that citizens live in approximately the same way as always. I do not believe that they organized this experiment with the collapse of OPEC +.

Their regime survived both wars and palace coups, maintaining the general vector of its policy. And, by the way, this regime leads soft liberalization, starting with alternative local elections.

“SP”: - But after such accusations, when Moscow and Riyadh actually turned to individuals, can we believe that they will agree?

- I do not believe that they will agree. Putin, apparently, simply decided to repeat the experience of Donald Trump: they say he tweeted and the price of oil went up. But Putin with an economy of $ 1.6 trillion, and Trump with an economy of $ 21.5 trillion.

Johannes Röll

Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer

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