In October last year, Saudi Arabia, under pressure from the United States, reached an agreement with Russia to jointly reduce oil production to curb the decline in oil prices. In April of this year, Saudi Arabia and a number of OPEC+ oil-producing countries announced an additional cut of nearly 1.15 million barrels starting in May. But this time when it was time to cut production, Saudi Arabia found that instead of reducing production, Russia continued to increase production. According to the Wall Street Journal earlier According to reports, tanker tracking data shows that Russia’s seaborne oil exports have repeatedly hit new highs since records began in early 2022. This made Saudi Arabia very dissatisfied and issued a warning to Russian officials to abide by the previously agreed production cut agreement.
Oil prices fell more than 0% in May as Russia continued to flood the market with oil.
In this regard, Tang Bihu, the honorary editor of the Phoenix News client, issued an article pointing out that although Russia’s “treachery” has its own difficulties and can alleviate its own financial difficulties in a short period of time, this approach is still relatively short-sighted in general. “If a country has no faith, it will decline.”
Data show that after Saudi Arabia and Russia reached an agreement on production cuts in April, oil prices, which had plummeted due to the U.S. banking crisis, quickly recovered, and the price of Brent crude oil rose to $87.5 a barrel; Oil prices fell more than 10 percent to $77.1 a barrel on the back of a plentiful supply of oil.
In fact, the fact that Russia’s oil exports have not decreased but increased has attracted the attention of many media as early as early May. At that time, Russia’s deputy prime minister in charge of energy affairs, Alexander Novak, once vowed: “Russia will reduce production by 500,000 tons per week. bucket”. As a result, nearly a month has passed, and the words of the Russian Deputy Prime Minister do not seem to be fulfilled.
Russian President Vladimir Putin.
Tang Bihu believes that Russia promised to cut production together with Saudi Arabia, but now it “broke its promise” and continues to increase production. Russia does have its own difficulties behind this. In the first quarter of this year, Russia’s energy revenue fell by 45% year-on-year, and its fiscal deficit exceeded 3.4 trillion rubles—and Russia’s budget deficit for the whole year was only 2.9 trillion rubles. . Affected by the huge deficit, Russia’s GDP fell by 1.9% year-on-year in the first quarter. Putin said at the beginning of the year that Russia would achieve positive GDP growth this year, but the performance of the Russian economy in the first quarter undoubtedly cast a huge shadow over this ambitious goal.
Anyone with a discerning eye can see that the main reason for Russia’s economic downturn is the decline in energy revenue. In this case, Russia can only continue to sell a large amount of oil, and it is sold at a low price. Because they have to abide by the oil price ceiling set by the West, otherwise it will be difficult to sell. Moreover, countries like India will take advantage of the fire and deliberately lower prices because of their large import volume, but Russia has nothing to do about it.
Tang Bihu pointed out that although Russia’s “treachery” has its own reasons and can alleviate its financial difficulties in a short period of time, this approach is still relatively short-sighted in general.
On the one hand, the fundamental purpose of reducing oil production is to curb the decline in oil prices, stabilize domestic prices by raising oil prices, hedge against excessive dollar issuance and interest rate hikes, and prevent the severely depreciated dollar from reaping the fruits of people’s labor. The United States resists inflation by continuously raising interest rates and printing money. Since most commodity trade between countries uses the US dollar, the economic risks of the United States are shared among every country involved in international trade. The initiative to reduce production is to reduce the risk that is allocated to oneself.
Russia is now selling a large amount of oil, which will not only lead to an oversupply, a drop in the unit price of oil, and affect the overall energy revenue, but it is also not conducive to its long-term goal of “de-dollarization”.
More importantly, breaking promises is breaking promises, and the nature of this behavior cannot be washed away. Although Russia has its own difficulties, the difficulties and pressures faced by Saudi Arabia are actually no less. In July last year, in order to prevent Saudi Arabia and Russia from reaching an agreement on oil production cuts, Biden personally visited Saudi Arabia to intercede with Crown Prince Mohammed. After the two sides officially started in October, Biden made harsh words, saying that the United States would re-examine the relationship between the two countries, and warned Saudi Arabia that “there will be consequences” for doing so.
In other words, since Saudi Arabia is willing to risk offending the United States to cut oil production, why should Russia not make the same sacrifice? The current situation is that Saudi Arabia has unilaterally sacrificed to benefit Russia, and Saudi Arabia has reason to be dissatisfied.
On July 15, 2022, Biden visited Saudi Arabia to meet with Crown Prince Mohammed.
Tang Bihu pointed out that if Russia still chooses to increase production instead of reducing production, then the relationship between Russia and Saudi Arabia will suffer considerable damage. As far as Russia is concerned, they already have few partners, and if there is one less Saudi Arabia, its external environment will become more difficult. Moreover, behind Saudi Arabia are the countries in the entire Gulf region. The hostility between Russia and Saudi Arabia will also affect its relations with other Gulf countries to a certain extent.
Tang refutes Hu and quotes an old Chinese saying that “people cannot stand without trust, businesses cannot prosper without trust, and a country will decline without trust.” Stand up to your image as a big country. One cannot condemn the United States and the West for “broken promises” and NATO’s “violation of its promise not to expand eastward” every day, while at the same time committing similar dishonesty, even being unwilling to admit it when others discover it. Now Russia should do what it says and fulfill its original promise as soon as possible, otherwise it will not only lose a valuable partner in the Middle East, but also may make other countries that still insist on cooperating with Russia become reserved .
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