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Page added on June 1, 2017
‘Axis of love’: Saudi-Russia detente heralds new oil order
A meeting between the two men who run Russia and Saudi Arabia’s oil empires spoke volumes about the new relationship between the energy superpowers.
It was the first time that Rosneft (ROSN.MM) boss Igor Sechin and Saudi Aramco chief Amin Nasser had held a formal, scheduled meeting – going beyond the numerous times they had simply encountered each other at oil events around the world.
Their conversation also broke new ground, according to two sources familiar with the talks in the Saudi city of Dhahran last week who said the CEOs discussed possible ways of cooperating in Asia, such as Indonesia and India, as well as in other markets.
The sources did not disclose further details, but any cooperation in Asia between Russia and Saudi Arabia – the world’s two biggest oil exporters – would be unprecedented.
State oil giant Aramco confirmed the meeting took place but declined to give details of the closed-door talks, which took place on the same day as OPEC kingpin Saudi Arabia and non-OPEC Russia led a global pact to extend a crude output cut to prop up prices. Kremlin oil major Rosneft declined to comment.
The meeting – which also saw Nasser give Sechin a tour of Aramco’s HQ, according to the sources – gives an insight into the newfound, unexpected and fast-deepening partnership between the two countries. It is one that will be closely watched by big oil consumers around the world which have long relied on the hot rivalry between their top suppliers to secure better deals.
Such a detente between Moscow and Riyadh would have been almost unthinkable in the past.
Up until a year ago, the two sides had virtually no dialogue at all, even in the face of a spike in U.S. shale oil production that had led to a collapse in global prices from mid-2014. Sechin was strongly opposed to Russia cutting output in tandem with OPEC.
In a sign of their white-hot Asian rivalry, Rosneft outbid Aramco to buy India’s refiner Essar last year and boost its share in the world’s fastest growing fuel market.
Fast forward a matter of months, and Moscow and Riyadh have become the main protagonists of the pact to cut output – agreed in December and extended last week – and are even discussing possible cooperation in their core Asian markets.
“It is a new ‘axis of love’,” one senior Gulf official said of the relationship.
On Tuesday, Putin welcomed Saudi Deputy Crown Prince Mohammed bin Salman in the Kremlin and both men said they would deepen cooperation in oil and work on narrowing their differences over Syria, where Moscow and Riyadh are backing opposing sides in a civil war.
“The most important thing is that we are succeeding in building a solid foundation to stabilize oil markets and energy prices,” said Prince Mohammed.
Putin said the countries would work together to resolve a “difficult situation”.
WHY NOW?
The first attempt at cooperation between the two countries failed spectacularly with both sides unable to agree joint actions at an OPEC meeting in December 2014, six months after oil prices began tumbling from above $100 a barrel.
To add insult to injury, Sechin pledged to keep pushing output higher, even if prices fell to $20 per barrel. Saudi’s then oil minister, Ali al-Naimi, retaliated by saying the Russian oil output would collapse as a result of low prices, a prediction that turned out to be wrong.
Much has changed since then, however, economically and politically – and the unlikely partnership between Moscow and Riyadh has been born out of necessity.
When oil prices collapsed, both economies were driven into deficit after years of high spending and are only now slowly recovering. With Russia heading for a presidential election in early 2018, and Prince Mohammed having pledged to reform the Saudi economy and publicly list Aramco, neither country can afford another oil price shock.
The ousting of veteran minister Naimi and his replacement with the more pragmatic Khalid al-Falih last year also appeared to have helped, with their dialogue facilitated by OPEC’s new secretary general Mohammad Barkindo.
“If minister Falih says something, I know it will be done,” Russian Energy Minister Alexander Novak said last week in Vienna after Russia and OPEC agreed to extend output cuts.
Novak is looking to organize a trip for Falih to a Russian Arctic field, having visited Aramco’s facilities in the Empty Quarter desert himself last October. “Last year, minister Falih took us to a desert – we want to show him an ice desert,” Novak joked last week.
‘SPASIBO’
On Tuesday, Novak and Falih reiterated in Moscow they would do “whatever it takes” to stabilize oil markets, borrowing a famous phrase used by European Central Bank President Mario Draghi five years ago to defend the euro.
They also discussed the outlook for non-OPEC production including U.S. shale output, which has resumed growing over the past year as private American producers have cut costs and adapted to lower prices.
U.S. crude is now being exported all over the world and the chances of private producers agreeing to cooperate with OPEC are minimal because of tough U.S. anti-monopoly legislation.
“Both Russia and the Gulf countries are interested in some type of oil price stabilization and they hope that they can achieve this without undertaking a sort of massive cuts which they had to do back in the 1980s,” said Paul Simons, a former U.S. diplomat now serving as deputy executive director of the International Energy Agency.
Saudi Arabia and Russia say they will remain in partnership long after the current output reduction deal expires.
“It is necessary to work out new framework principles for continued cooperation between OPEC and non-OPEC even after the expiration of the Vienna agreements,” Novak said on Wednesday.
Falih, for his part, ended his speech by thanking Novak in Russian: “Spasibo.”
18 Comments on "‘Axis of love’: Saudi-Russia detente heralds new oil order"
makati1 on Thu, 1st Jun 2017 6:05 am
“An enemy of my enemy, is my friend.”
Traditional barriers are breaking down. Enemies are becoming friends. Friends are becoming enemies. We live in a very interesting world and time.
ALCIADA-MOLE on Thu, 1st Jun 2017 6:54 am
@mak if you don’t post on peakoil msg. board, is it safe to say duterte capped you for smoking a joint or that you’re abu sayaf’s hostage?
makati1 on Thu, 1st Jun 2017 7:18 am
AL, some say you are retarded. Is it true?
ALCIADA-MOLE on Thu, 1st Jun 2017 7:27 am
mak, seriously bro. toss me some Bt and I may bail you out if you’re in trouble. You think you sittin’ pretty and hatin’ on the US. But I think you’re fillet mignon to those who wants money for weapons u know.
Plus duterte is a dummy. He got the talk i can admit that. Why do you trust him anyway?
makati1 on Thu, 1st Jun 2017 7:45 am
Duterte has the balls to do what he knows is best for his people. Something U$ bought and paid for politicians don’t do or even understand. Most of the Filipino people support his actions as do I.
All you know about the situation here is what you read in the U$ MSM propaganda rags unless you actually live here. You ASSUME that they are looking for me for money. Again, more of the propaganda your own government spews out of every orifice. I am one of 100,000 retired Americans living here. Not to mention several million Whiteys who work and go to college here. Besides, they get their weapons and money from the U$ thru the Saudis. It isn’t a coincidence that IS suddenly pops up in a country where the new President refuses to kiss the imperial ass. Think about that.
You hear about the fools who sail their yachts into the center of the trouble areas and flaunt their bling and wonder why they are kidnapped. They deserve what they get. But you never hear about the thousands of Americans and Europeans who have families and businesses in the same area, yet are not bothered. Selective “reporting”? Stupid Americans!
ALCIADA-MOLE on Thu, 1st Jun 2017 7:59 am
mak, i know the phil more than you do bro. they always had problem with muslim insurgency. you’re being conspitatorial.
consider an unstable duterte. one day he will turn on you and you’re gone. better send me some Bt because it will come from all directions for you.
Duterte can’t stop bro. He already turned on cigarette smokers!
It’s a country of extreme poverty for some so I’m sure you’re a nice chump change for them. I wouldn’t be so sure bro.
ALCIADA-MOLE on Thu, 1st Jun 2017 8:25 am
mak, here we talk about long term trends and big changes. and forgive me for being a tard but isn’t a shittalker like duterte not a solution for fundamental issues with the phils? it’s more like a protest.
let’s see now. white guys love their drugs and poor phils pick up the habit. then duterte shoot them and he doesn’t blame white guys for it? Doesn’t make sense bro.
Then the muslim guys look at the drugs situation and decide sharia is the cure. And they don’t have guys like you in their minds?
Duterte is running out of money and he buys WW2 aircrafts to fight insurgency. That’s where guys like you come in when insurgents need money for rockets to knock down these slumbering toys.
Fundamentally, you are a man of experience and intellect. You think killing is philosophically sound? So it must be OK for ISIS to kill then?
Killing is easy to do and you want to make it philosophically sound? NOT good.
But hey i’m not one to live in that war zone.
ALCIADA-MOLE on Thu, 1st Jun 2017 8:42 am
mak, you’re not in stable ground as you think. i sense you’re insecure and idealistic. I know because I was a Paultard. One can’t be more idealistic than that but I’m wrong and get punished severely with my gold investment.
But you’re not in paradise bro. You keep saying i’m a tard, yes I’m happy to be a tard because there’s no struggling here and it makes me weak for good reasons.
I don’t have to watch my back for this sort of stuff.
https://www.youtube.com/watch?v=cNjA0aee07k
How many kids will get zapped? How about people having no fundamental knowledge of electricity and its danger? This stuff is highly popular in the phils bro.
joe on Thu, 1st Jun 2017 9:19 am
Saudi has one mission, genocide of the Shia and bending the knee to the Zionist state, peak oil will hopefully put the camel fucker Wahabbis in their place, they hope to use oil to strip away Irans only real protection, Russia and at the same time make the US liberals scared they might lose their wife beater husband cause ‘they love him’. Iran is like the cop that’s busting in on a domestic and gives the husband a taste of his medicine cause he’s just fucking sick of it, sure he might lose his job, but right now it’s justice.
bobinget on Thu, 1st Jun 2017 9:26 am
If your still reading.
It’s “Back to the Future” for Russia and KSA.
Dictatorships peddling a finite product with a limited, but vital future. It always gets back to
oil is power. Power is money. Political power,
best of all.
Note: When Saudi Arabia signed on for another 100 Billion in weapons, they choose the US, not Russia.
US ‘defense’ contractors, unlike Russian aren’t wracked with corruption from factory floor to head offices. IOW’s, Saudis trust Russians as much as the reverse is true.
“The death of oil is highly exaggerated”.
Before the end of this century, most if not all, of mankind will eventually rot into kerogen, then bitumen, finally in another 10 million years, crude oil.
The real power is truth, today the rarest of all commodities.
Sissyfuss on Thu, 1st Jun 2017 9:43 am
Mak, I think Amole the ahole is really Boat after suffering a massive cerebral hemorrhage.
Cloggie on Thu, 1st Jun 2017 12:09 pm
ALCIADA-MOLE is living proof that affirmative action is lowering CIA-standards to new lows.
ALCIADA-MOLE on Thu, 1st Jun 2017 12:56 pm
guys now putt putt is saying he’s not responsible for hacking. Here we have the smartest, most capable man running a modern nation and he is not responsible?
Oh let’s not forget alternative media says he’s not a dictator either. He enjoys killing political opponents usually with poisons.
His henchen threatens US and allies every other days.
His armies like holding “peace” parades.
If you recall the Taliban repeatedly denied having no connections to BIN and then the bombs started raining.
Let’s hope Orange draft dodger at least lodge a formal protest.
Guys we need to start alt-alt-media to counter Russian bought alternative media. It’s very easy.
We have a lot of people here including Mak who is a vet and somehow attracted a Russian bug.
I mean guys. You guys are top dogs and guess what? They’re targeting you.
You know why? Cuz I read “Spy Catcher” yo. These highly priviledged people turned against their native country/UK and found out they didn’t like Russian winters!
Let’s hope US won’t retaliate. Just sit back for Putin to continue with his territorial conquests and we’ll get Siberia.
Lots of oil there.
Dredd on Thu, 1st Jun 2017 1:12 pm
Only those who have never experienced love would call two mass-murderers engaging in a mass-death casing ritual ‘love.’
makati1 on Thu, 1st Jun 2017 8:37 pm
AL, “How many kids will get zapped? How about people having no fundamental knowledge of electricity and its danger? This stuff is highly popular in the phils bro.”
http://www.snopes.com/wordpress/wp-content/uploads/2016/06/causes-of-death.jpg
US Deaths in the first 6 months of 2016 —
Abortion: 501,325
Heart disease: 282,038
Cancer: 271,640
Tobacco: 160,680
Obesity: 140,939
Medical errors: 115,439
Stroke: 61,106
Lower Respiratory Disease: 65,623
Accident (unintentional): 62,460
Hospital associated infection: 45,449
Alcohol 45,908
Diabetes: 35,114
Alzheimer’s disease: 42,943
Flu/pneumonia: 25,354
Kidney failure: 19,631
Blood infection: 15,363
Drunk driving: 15,521
Accidental poisoning: 14,580
Drug abuse: 11,479
Prescription drug overdose: 6,886
Murder: 5,276
People die every day from stupid, self inflicted, illnesses or actions. To me, death by obesity is the most stupid and selfish way to commit slow suicide, but it is popular in America today, followed by smoking, alcohol and drugs.
ALCIADA-MOLE on Thu, 1st Jun 2017 9:29 pm
Internet loves lyin’ Putin who said he harbors hackers. Attack on US got Taliban ass kicked
What would coward orange do
Dooma on Fri, 2nd Jun 2017 1:11 am
Fanta man will flip flop as usual and then fire rockets. Yeehaw.
makati1 on Fri, 2nd Jun 2017 7:44 pm
AL, I think you are as Sissy says, retarded. Sorry ‘bro’, but you are NOT being rational. Perhaps it is drugs or alcohol?
Unless you have lived here, in the Ps, as an educated native, you could not possibly KNOW more about what is really happening here and what the Ps history is than I do. I have lived here for 9 years and have been studying the Ps so I know my adopted country. I do know that the sooner the U$ military is kicked out of Mindanao, the better for the Ps. Perhaps the Russians would fill the gap? We shall see.