Could lower oil prices help end war in Ukraine? Expert opinion
Photo: The expert assessed whether a reduction in Russian oil prices is possible to end the war in Ukraine (Getty Image)
Former US President Donald Trump’s appeal to OPEC and Saudi Arabia to reduce the price of Russian oil could be accepted and implemented. Trump believes this will help to quickly end the war in Ukraine, said Mikhail Honchar, President of the Strategy XX Globalistics Center in a commentary to RBC-Ukraine.
"This scenario is quite realistic. Saudi Arabia might support the idea, though not directly in response to Trump’s call. They had already discussed this last year," Honchar noted.
According to him, last fall, Saudi Arabia announced the possibility of reducing the price of oil to $50 if the OPEC+ member states did not comply with the agreement to limit production. At the time, Saudi Arabia criticized Russia, Kazakhstan, and Iraq for exceeding their production quotas.
However, Honchar emphasized that Riyadh could have counter-demands.
"Crown Prince Mohammed bin Salman has a favorable opportunity to accept the offer, but to set his own conditions. The Saudis have their own interest, and it did not appear today. This is what they wanted from the Biden administration, but did not get. This refers to real security guarantees to resolve issues with Iranian-backed Houthis. Biden’s approach mainly pushed Saudi Arabia toward negotiations," he explained.
Honchar believes Trump understands Saudi interests well but is unlikely to make concessions without securing benefits for the US.
"This is why we’re hearing encouragement for Saudi investments in the US. Negotiations are likely underway or will be soon, and I believe there’s a real chance of success," he added.
Still, Honchar pointed out that high oil prices benefit both American and Saudi oil companies.
"For the Americans, given that the shale production dominates, the price of $50 is close to critical, and there is no point in dropping the price further. Meanwhile, Saudi Arabia can afford lower prices due to lower production costs," he said.
The key issue, however, is not just the price itself but how long it can be sustained.
"What matters is not just the lower price but its longevity. A prolonged low price would impact Putin's regime by reducing war-budget revenues. While it’s hard to predict, based on Trump’s promises and Saudi intentions, this trend is likely to take shape. We may see results as early as this summer," Honchar said.
He added that $50 per barrel is not a "lethal price" for Russia. At the same time, the low price of oil suits China.
"Here, the US will be very careful in managing prices to avoid harming itself or giving China an economic advantage," the expert concluded.
Trump calls for lowering the price of Russian oil
Yesterday, US President Donald Trump called on Saudi Arabia and OPEC to reduce the price of Russian oil. In his opinion, this will help to end Russia's war against Ukraine faster.
Ukraine, in turn, proposes to set a price ceiling for Russian oil at $30 per barrel. According to the Office of the President of Ukraine, this will result in a collapse of Russia's ability to finance the war.
At the same time, Saudi Minister of Economy Faisal Alibrahim, when asked whether Saudi Arabia would reduce the price of oil, said that Riyadh is focused on the long-term stability of the oil market.
