Saudi Arabia could undermine Russian economy by increasing oil production - Politico
Illustrative photo (UNIAN)
Russia risks facing a cash shortfall for its war economy if Saudi Arabia increases oil production. Riyadh is dissatisfied with the lack of coordination among countries to cut supply in order to raise prices from the current $70 to $100 per barrel, according to Politico.
Saudi Arabia plans to increase exports to capture a market share, even at the cost of lower prices.
Experts warn that such a strategy would hit Russia's economy, which heavily relies on oil revenues.
Mikhail Krutikhin, a Russian energy analyst, believes this move poses a "huge risk" to Russia's budget. According to economist Alexandra Prokopenko, if prices drop by $20, this could reduce Russia’s revenues by 1.8 trillion rubles, which equals 1% of GDP.
With weak oil demand and Russia's breaches of production quotas, Saudi Arabia is considering changing its tactics to strengthen its market dominance.
Saudi Arabia is prepared to increase oil production, warning that it will aim for market share rather than high prices. Russia and other countries like Kazakhstan and Iraq are being accused of exceeding the quotas agreed upon with OPEC+. Moscow continues to produce oil above its quota, despite promises to reduce output.
Russia's fuel revenues increased by 41% in the first half of the year despite sanctions. The Kremlin uses a "shadow fleet" to bypass restrictions, earning billions and sustaining its war against Ukraine. Even if Saudi Arabia lowers prices, Russia is unlikely to cease its military actions.
Background
Saudi Arabia plans to abandon its target price of $100 per barrel and increase production to regain market share, even if it leads to lower prices.
Energy Minister Abdulaziz bin Salman warned that if OPEC+ countries do not adhere to the production cut agreement, prices could drop to $50 per barrel.
