Earlier this month, the OPEC countries and Russia failed to reach an agreement to cut production, leading Riyadh to launch an all-out price war with Moscow as both ramp up their drilling. Con Coughlin analyzes some of the geopolitical ramifications:
The primary motivation behind the Saudis’ move is to protect their own share of the global oil market, which is under threat from a combination of softening demand and the renewed strength of the American oil industry. Because the Saudis enjoy low oil-production costs, . . . they are able to cope with lower oil prices, while countries like Russia, which have much higher extraction costs, need global prices to be at least $50 a barrel to make a profit. Thus the Saudi price cut, which saw oil prices fall to around $31 a barrel, will hit the Russian economy hard.
The other important consideration for the Saudis, though, is that, by undermining the strength of the Russian economy, they will force the Kremlin to rethink its ambitions on the world stage, especially its involvement in the Middle East, where Moscow’s main allies are [Riyadh’s greatest foes]: Iran and the Bashar al-Assad regime in Syria.
The Saudi calculation now . . . is that with the Russian economy suffering as a result of the oil-price war, the Kremlin will no longer be able to afford costly military interventions in countries such as Syria.
Since Moscow has aligned itself with Israel’s enemies in Syria, Saudi success in the endeavor would bode well for Jerusalem
Read more on Gatestone: https://www.gatestoneinstitute.org/15707/oil-price-russia