Saudi Arabia and Russia consider 10 to 20 year oil alliance

Russia and OPEC member Saudi Arabia are seeking to extend oil market cooperation for decades to stabilise crude prices.

    A 10 to 20 year deal between Russia and Saudi Arabia would be unprecedented [Pavel Golovkin/Reuters]
    A 10 to 20 year deal between Russia and Saudi Arabia would be unprecedented [Pavel Golovkin/Reuters]

    Saudi Arabia and Russia are working on a long-term deal to extend their alliance on oil curbs that began in January 2017, after a crash in crude prices.

    "We are working to shift from a year-to-year agreement to a 10-20 year agreement," Saudi Crown Prince Mohammed bin Salman told Reuters news agency. "We have an agreement on the big picture but not yet on the details."

    Saudi Arabia has led the Organisation of the Petroleum Exporting Countries (OPEC) and allies outside the cartel to join forces to stabilise oil prices.

    In 2014, oil prices plunged from over $100 a barrel to below $30 a barrel, shaking the economies of oil-producing nations.

    Crude prices have since recovered to $70 a barrel, but the fast-rising output from US shale producers has capped prices.

    Russia is not a member of OPEC but has worked alongside the 14-member group during previous oil surpluses. Moscow's involvement until now has been considered unique, but a 10 to 20 year deal between the two would be unprecedented.

    Cementing Saudi-Russian relations

    News of the potential oil alliance came at a time when the two countries have been working to cement an economic relationship, despite their differences over the conflict in Syria, where they back opposing sides.

    Saudi Arabia has long sought to raise prices to fund economic and social reforms at home, the main goal being to eventually reduce the kingdom’s reliance on oil-related income.

    {articleGUID}

    It also needs higher oil prices so its state energy giant, Aramco, can achieve the $2 trillion valuation it is aiming for to support a successful stock market listing. Time is running out for an initial public offering this year, but the crown prince said it could still take place at the end of 2018 or early 2019.

    Oil price stability would also allow greater investment into oil and gas to meet future demand, according to Saudi Arabia.

    Last October, Saudi King Salman became the first Saudi monarch to visit Russia, providing investment and political support for Russian economy battered by Western sanctions.

    A meeting between the Saudi crown prince and Russian President Vladimir Putin on the sidelines of a G20 meeting in China in 2016 was instrumental in bringing Russia on board to support OPEC and non-OPEC oil curbs.

    SOURCE: News agencies


    YOU MIGHT ALSO LIKE

    'We scoured for days without sleeping, just clothes on our backs'

    'We scoured for days without sleeping, just clothes on our backs'

    The Philippines’ Typhoon Haiyan was the strongest storm ever to make landfall. Five years on, we revisit this story.

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    Daughters of al-Shabab

    Daughters of al-Shabab

    What draws Kenyan women to join al-Shabab and what challenges are they facing when they return to their communities?