Saudi Arabia’s Kingdom Holding Company has quietly invested more than $600 million in three of Russia’s dominant energy companies as Russia massed its forces on its border with Ukraine and invaded the country earlier this year.
Then, over the summer, as the United States, Canada, and several European countries cut their oil imports from Russia, Saudi Arabia suddenly doubled the amount of fuel oil it was buying from Russia for its power plants, leaving its own crude oil has been released for export.
And this month, Russia and Saudi Arabia directed the Organization of Petroleum Exporting Countries and its allies to cut production targets to support falling global oil prices. .
Taken together, these moves show the Saudis leaning toward Moscow and away from the United States, which they normally associate with. Saudi Arabia’s position falls short of a full political alliance between Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir V. Putin, but the two leaders have established a deal that benefits both sides.
“Clearly, Saudi-Russian ties are deepening,” said former US Energy Secretary and United Nations Ambassador Bill Richardson.
By working more closely with Russia, Saudi Arabia is effectively making it harder for the US and the European Union to isolate Mr. Putin. As Europe prepares to slash its oil imports from Russia, countries such as Saudi Arabia, China and India are stepping in as a last resort.
Saudi Arabia and the Soviet Union were bitter enemies during the Cold War. Saudi leaders helped fund rebels against the Soviet occupation of Afghanistan. However, in recent years, the two countries have made each other a valuable partner as fracking of shale fields has led to a boom in U.S. oil and gas production that has weakened other major oil producers such as OPEC and Russia. I’m starting to see have similar interests. It probably helps that Saudi Arabia is an autocratic kingdom and that Mr. Putin has suppressed or eliminated most of his political opponents in the country.
After oil prices crashed in late 2014 and into 2015, Moscow and Riyadh worked together to prevent US companies from dominating global energy markets. In 2016, Russia and Saudi Arabia agreed to expand their oil cartel, creating OPEC Plus. The partnership between the two countries has proven lasting, with the exception of a brief collapse in early 2020 when the onset of the coronavirus pandemic led to a collapse in oil prices and the two countries disagreed on what to do. I got
Former Central Intelligence Agency Middle East analyst on “Kings and Presidents: Saudi Arabia and the United States after FDR”
Saudi officials have found Russia to be a useful partner in managing OPEC Plus, an often-challenging group of oil producers with differing ideas on how to control oil supplies and prices.
The group works closely with Russia’s former energy minister and current deputy prime minister, Alexander Novak. Analysts describe him as willing to sit with ministers from other oil-producing countries for hours to hear their plans, concerns and grievances.
OPEC Plus signaled its independence from President Biden, who visited Saudi Arabia in July and shook fists with Prince Mohammed, by announcing a small amount of production cuts earlier this month. It was widely interpreted as an effort by Biden to mend US-Saudi relations after he criticized Saudi Arabia for the murder of Washington Post columnist Jamal Khashoggi during the US presidential election.
For months, the president has been lobbying Saudi Arabia to produce more oil. The cartel’s production cuts reversed the policy of gradually increasing production.
Saudi Arabia is often allied with the United States, including quietly backing efforts to improve relations between Israel and its Arab neighbors. Despite seeking to isolate and punish Putin for aggression, the kingdom appears to be more focused on economic interests by working closely with Russia.
Jim Crane, a Middle East expert at Rice University, said it was “very remarkable that Russia was able to get Saudi Arabia on its side.” “Putin’s goal is to get between the US and its allies, and in the case of US relations with Saudi Arabia, Putin has made some progress.”
Persian Gulf oil officials say Saudi Arabia and other Gulf countries are simply doing what’s best for them.
Saddad Ibrahim Al-Husseini, a former Saudi Aramco executive, said: “These decisions protect Saudi Arabia’s own commercial interests and make a lot of sense from Saudi Arabia’s own economic perspective.
Some Middle East energy executives said the United States and other Western countries were not reliable partners for oil exporters. The main reason is that they tried to pull the world away from fossil fuels to deal with climate change.
Badr H. Jafar, President of Crescent Petroleum, a UAE oil company, said: “And the energy chessboard is likely to continue to shift in the coming months and years.”
Many of Saudi Arabia’s moves against Russia can also be interpreted as opportunistic decisions to make easy money.
When the shares of Russia’s three largest energy companies, Gazprom, Rosneft and Lukoil, plunged earlier this year due to Western sanctions, Kingdom Holding Company, run by Saudi Prince Alwaleed bin Talal, swooped in to sell about 6 billion dollars. billion dollars invested. Among them, according to regulatory filings.
Saudi Arabia’s Sovereign Wealth Fund, led by Crown Prince Mohammed, holds a sizeable minority stake in Kingdom Holding.
The investment accounted for nearly half of the company’s new global equity investments in the first half of the year, and came at a time when many Western companies had announced their exit from Russia. It was one of Saudi Arabia’s biggest investments since the Sovereign Wealth Fund announced a $10 billion fund to invest in Russia in 2015, but whether Saudi Arabia actually invested all that money remains to be seen. Unknown.
Gregory Gauss, an expert on Middle East politics at Texas A&M University, said: “This massive Saudi investment in Russia’s energy sector is an effort to further align Saudi and Russian interests to keep prices down. It is.”
In April, Saudi Arabia and its closest ally, the United Arab Emirates, began importing Russian refined fuel oil for use in power plants at heavily discounted prices. A lot of crude oil can be sold to other countries at a high price.
Direct supplies from Russia to Saudi Arabia hit 76,000 barrels a day in July, the second highest total on record after September 2018, according to commodity research and data firm Kpler. According to Kpler analyst Viktor Katona, more Russian fuel oil is flowing indirectly into Saudi Arabia, possibly via Estonia, Egypt and Latvia.
Much of that fuel oil was once sent to the United States where it was processed into gasoline, diesel and other fuels in Gulf refineries. But as the United States banned oil imports from Russia in his March, Russian exporters struggled to find other buyers, offering the fuel at relatively low prices.
“This is a bargain,” said Ariel Ahram, a Middle East expert at Virginia Tech.
Other countries such as China and India also bought Russian oil, often at discounts of 30% or more. Saudi purchases of Russian fuel oil have declined as the summer ends, but could rise again next year.
Relations between Saudi Arabia and Russia have historically been multifaceted and rarely come together perfectly. Both countries have supported Libyan factions seeking to take control of the violence-torn country. But Russia has long maintained close ties with Saudi Arabia’s arch-rival Iran, including in the Syrian civil war.
Prince Mohammed has not said much about Russia’s war in Ukraine. But at the United Nations in March, Saudi Arabia joined an overwhelming majority of countries in voting in favor of a resolution condemning the aggression. The kingdom also increased oil sales to Europe, replacing some of the oil it once purchased from Russia.
“From the Saudi standpoint, they certainly don’t want to get involved in a conflict between the West and Russia,” said Helima Croft, head of global commodities strategy at RBC Capital Markets.
But that reluctance should not be mistaken for neutrality, other experts said.
“MBS wants to play in the big leagues. Told. “If there is a way to help Putin, so be it, and by the way, being able to show that he is independent of American influence is not bad either.”