Oil made its biggest move up in a month (2.2% at USD 45.43 a barrel for the WTI) following announcement by Russia and Saudi Arabia that they agreed to start working on stabilizing the oil market after two years of an unprecedented sharp drop in prices. WTI was at USD 112 a barrel in June 2014 before dropping 44% by December 2014 at USD 64 that was minus USD 49 per barrel in just six months. After meeting on the sidelines of the G20 summit in Hangzhou (China), both countries’ Energy Ministers Alexander Novak and Khalid Al-Falih “recognized the need to restrain an excessive volatility of the oil market.”
A first meeting of the Russia-Saudi task force on oil and natural gas scheduled for this October should tell more about solutions. Russia would prefer a production freeze while Saudi Arabia counts it as “one of the favorable options” without elaborating on other solutions. This is significant from a diplomatic standpoint too. Despite their differences on the geopolitical stage, Russia and Saudi Arabia have a real interest in supporting the oil market on which a large portion of their public spending depends. While defending Iran’s interests by saying this close ally of Russia should be allowed to reach its ante-sanction oil market share, President Vladimir Putin simultaneously advanced Russia’s Grand strategy in the Middle East.
Russia’s State Atomic Energy Corporation (Rosatom) has offered to build 16 nuclear power units worth a total USD 100 billion in Saudi Arabia within the framework of the intergovernmental cooperation agreement between Rosatom and King Abdulaziz City for Science and Technology (KACST) signed in June 2015. If these developments showed willingness from both sides to build trust and increase bilateral relations, it seems Russia has been at their initiative while Saudi Arabia has paid close attention to them. Summing up, saying like Saudi Arabia you’re willing to take part doesn’t necessarily mean you’ll do something concrete.