How Saudi Arabia could trigger a crisis for the Russian economy

Saudi Arabia could create a crisis for the economy of Russia a country that has already developed its military invasion of Ukraine .

This, with the aim of regain control of prices on the market oil according to what analysts have said in media such as Business Insider .

From Riyadh, they have suggested that crude oil could fall to $50 a barrel. if the Organization of the Petroleum Exporting Countries (OPEC) does not commit to reducing its production .

The above, according to different specialists, translates into a hint that they could flood the market with oil supplies .

This measure would reduce prices and penalize OPEC members who did not cooperate in the reduction flows.

The latter also would include the country presided over by Vladimir Putin .

Luke Cooper, a researcher at the London School Of Economics, wrote an academic article for IPS log in which he stated: “While Russia already sells its oil at discounted prices and with higher production costs, a low price environment in oil markets could affect its ability to finance its aggression in Ukraine. » .

According to the rescue Insider, Saudi Arabia tries to keep oil above $100 a barrel .

However, international crude oil It’s under 80 dollars .

For Riyadh’s objectives, It is essential that OPEC members reduce their production .

Sources consulted by Financial Times They stated that, It is likely that the Saudi authorities will opt for this strategy in December of 2024.

Director of the Bernstein Program on Energy and Gulf Policy at The Washington Institute for Middle East Policy Simon Henderson, was categorical in saying Insider that “Saudi Arabia is fed up” .

For his part, Russia is one of the OPEC+ oil overproducers as reflected in company data S&P Global Ratings .

In fact, the latest available figures correspond to July and reflect that the country produced 122,000 barrels above its daily quota .

Oil is an important source of resources for Russia, even despite the sanctions western which were imposed on the Kremlin for its invasion of Ukrainian territory.

Oil revenues represent, for Moscow, particularly relevant in a war context .

It is estimated that by 2025, areas of Defense and security will represent – ​​in total – 40% of all federal spending in the country chaired by Putin.

However, regarding crude oil, Russian Finance Minister Anton Siluanov said in an interview with pro-Kremlin media in early October: “In general, at present, we try to minimize the influence of oil prices on the budget “.

“If a few years ago this indicator was 35 to 40%, in 2025 it will fall to 27% and in 2027 to 23% “, promised the portfolio holder.

Then, he added in statements saved by the international news agency Reuters : “We are moving towards a reduction in the share of volatile income and reducing Russia’s dependence on oil and gas in favor of stimulating our national economy “.

In early 2024, it was reported that Russia becomes China’s main crude oil supplier in 2023 .

Information collected by Deutsche Welle They claim it was this is the first time since 2018 that they have sold more oil to the Asian country than to Saudi Arabia .

The political analyst at the Washington Institute for Near East told Insider that, If Saudi Arabia floods the market with oil, a scenario similar to that of 2020 could occur. .

During the said year there were disagreements over production cuts both countries therefore published the offer.

This way, The so-called “oil price war” was sparked between Russia and Saudi Arabia, leading the two countries to compete with each other. to see which one might last longer with lower prices.

Nevertheless, In 2024, there is one crucial difference: The Kremlin finds itself in the midst of a military invasion that has lasted for more than two years. since February 24, 2022.

Such an armed operation, among other economic repercussions, led to the disappearance of the country’s insurance against low oil prices and a reduction by almost half of the national wealth fund at the start of the year.

To this is added that Russia can no longer obtain Western currencies to vary its foreign exchange reserves experts added to the aforementioned business media.

Henderson nevertheless emphasized that It is complex to predict the strategic actions that the Kremlin could undertake .

Despite the above, Cooper, a researcher at the London School of Economics, suggested in his article for the IPS Log that a new price war against Saudi Arabia could have significant repercussions on the Kremlin and its ambitions in Ukraine .

“Unlike Saudi Arabia, Its oil is not cheap to extract, making it ill-equipped to deal with low prices. “.

“This promotes a logic of short-term escalation in Russia’s war against Ukraine which requires rapid successes on the battlefield before low-price oil market conditions emerge,” Cooper added.

According to information collected by Reuters, OPEC+ is scheduled to hold its biannual summit on December 1, 2024. decide on future production policy.