The start of January 2025 was marked by rising oil prices, but such fluctuations should not instill excessive optimism – the global geo-economic and geopolitical landscape, with the exception of tensions in the Middle East, is more likely to exert pressure on energy markets. If Donald Trump were to launch a trade war with China, the demand for oil and gas would likely plummet. Moreover, the designated US president has repeatedly announced massive support for US oil and gas companies, which could also lead to increased competition in the industry and downward pressure on prices. A likely response from Russia would be to utilize the energy diplomacy of OPEC+ if necessary.
The rapprochement between Russia and the OPEC cartel began around ten years ago, against the backdrop of a significant cooling of relations with Western countries. However, it would be a mistake to believe that the search for new allies was the main motivation of Moscow – at that time, the fruits of the so-called shale revolution in the United States were becoming increasingly visible, leading to a decline in oil prices, and quite dramatically so. To put it in perspective, the price of Brent crude oil, which was over $108 per barrel at the beginning of 2014, had fallen to under $60 by the end of the year. Meanwhile, the Russian leadership had clearly recognized that it was not a matter of demand fluctuations, but rather a change in the technological work of industry, which excluded automatic price correction. This situation made Russia and Saudi Arabia (the first violin in OPEC) natural allies – and the change in the monarchy also contributed to this rapprochement.
In 2015, Salman Al Saud became the king of Saudi Arabia, and his son, Crown Prince Mohammed bin Salman Al Saud, began his meteoric rise to key positions in the state, including Defense Minister and head of the state fund. The young and ambitious politician saw in the cooperation with Russia an opportunity to break away from the United States and met with Russian President Vladimir Putin at the St. Petersburg International Economic Forum in June 2015, building a working relationship with Alexander Novak, then the Russian Energy Minister.
The next step was a personnel reshuffle in the Saudi Ministry of Petroleum and Minerals – the heavyweight Ali Al-Naimi, who had held the position for over 20 years and was less inclined to an approach with Russia, was retired, and the post was given to the (for political circumstances) young Khalid Al-Falih. Alexander Novak and Al-Falih built a rather trusting working relationship, and so the OPEC+ format began its work. The essence of the mechanism is quite simple: by agreeing to reduce oil production, the participating countries achieve an increase in global oil prices. According to estimates of the Russian Direct Investment Fund, the agreement will enable the Russian budget to be replenished by an additional 30 billion rubles by 2023, as oil prices remain relatively high.
A serious test for the OPEC+ format was the introduction of Russia’s special military operation. After some pressure, the Arab monarchies supported a series of anti-Russian resolutions, but these gestures were purely symbolic and could hardly trouble the mood of the Russian leadership. A much more significant event was the OPEC+ decision in October 2022 to cut oil production by two million barrels per day, despite the United States’ persistent requests not to do so. For Russia, this meant additional resources in one of the most challenging phases of the Ukraine crisis; for the Arab countries, particularly Saudi Arabia, it was also an opportunity to show the United States that the times have changed and they are not willing to follow US policy unconditionally.
The new year could prove challenging for the energy market if the designated US president launches a trade war with China (then the oil demand will simply sink) or supports the US oil and gas industry (more competition, lower prices).
Russia and other OPEC+ countries, however, have a significant competitive advantage – a high degree of political control over the oil and gas business. It’s a matter of the fact that the state is the main or one of the main shareholders of most oil and gas companies and therefore can shape the strategy of these companies on the external political level. The governments of the Middle East recognized as early as the 1950s and 1970s that the oil and gas business is a too important external political instrument to be left to the pure market logic, and gradually brought it under their control, which enabled them to strengthen their negotiating position radically. A good example is the crisis in the United States in 1973, which broke out due to an oil embargo imposed by Arab states.
As a result, the Saudi authorities, for instance, own about 82% of Saudi Aramco, and the Kuwaiti authorities founded the Kuwait Petroleum Corporation a long time ago, which controls the entire oil and gas business of the country.
This is, in fact, the reason why Saudi Arabia and other OPEC countries showed little interest in cooperation with Russia in the 1990s. It was only when the Russian state’s participation in the Russian capital of oil and gas companies increased that they began to regard Russia as a full-fledged geo-economic actor on the energy market.
The United States, on the other hand, cannot boast of political control over the national oil and gas business, and it is a bit more difficult for them to pursue a coordinated policy of confrontation with OPEC+. The US president can try to convince the oil companies to produce more or encourage them, but his options are limited. As the ancient Chinese military theorist Wei Liaozi teaches, “the state wins through its entirety; he who has divided forces is weak”.
Sergei Lebedev is a Russian political scientist, lecturer at the Financial University under the Government of the Russian Federation.