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Mixed messages over Saudi-Russia oil agreement

April 19, 2018 at 1:42 am

King Salman bin Abdulaziz Al Saud of Saudi Arabia shakes hands with Russian Prime Minister Dmitriy Medvedev (L) during their meeting in Moscow, Russia on 6 October 2017 [Bandar Algaloud / Saudi Royal Council/Anadolu Agency]

Last week, Saudi Crown Prince Mohammed bin Salman told reporters in New York that Saudi Arabia is considering extending its agreement with Russia to reducing oil production for 10 to 20 years.

Dmitry Peskov, the press secretary for President Vladimir Putin, did not address this agreement specifically when asked about relations between Russia and Saudi Arabia. Though he said that the two countries would continue to work together on energy issues. Saudi Arabia and Russia have cooperated since late 2016 to curb global production and raise oil prices, the basis of both of their economies.

The Saudi Crown Prince’s mentioning of Saudi-Russian oil relations during his two-week visit to the United States, Saudi Arabia’ ally, is indicative of a new foreign policy of hedging bets with global and regional acting countries rather than staying in a single camp.

Growing relationships

So far, Saudi Arabia’s growing ties with Russia have been bolstered by Saudi Arabia’s need to maintain high oil prices worldwide. However, these recent statements suggest that their relations may expand. This will more likely raise the United States’ concerns.

Russia and Saudi Arabia signed a $ 3 billion energy contract after King Salman’s visit to Russia last year, according to Russian Minister of Energy Alexander Novak.

It was the first official visit by a Saudi king to Russia. The agreements included a memorandum of understanding on the construction of a $ 1.1 billion petrochemical plant in Saudi Arabia by Russian company SIBUR, a $ 1 billion joint venture investment fund for energy and technology development, as well as an agreement between the Saudi-owned National Oil Company and Russian company Gazprom on a cooperative drilling technology.

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Russia is also seeking a long-term agreement to supply liquefied natural gas to Saudi Arabia. Saudi Arabian Minister of Energy, Khalid Al-Falih, was one of the dignitaries attending a ceremony, on December 8, 2017, of the first ever liquefied natural gas shipload from the Yamal LNG project in Russia in the North Pole.

Putin’s message to the Saudis was clear: “Buy our gas and you will save your oil.”

In this case, the two countries’ interests would be complementary. Saudi Arabia is seeking to reduce the domestic energy sector’s dependence on crude oil, while Russia is looking for markets for liquefied natural gas.