Can Trump Drive A Wedge Between Saudi-Russian Alliance?

Tyler Durden's picture

Authored by Zainab Calcuttawala via OilPrice.com,

Together, Russia and Saudi Arabia produce a fourth of the world’s oil. The laws of competitive international commodity trading have pit the two petrostates on opposite poles of the U.S.-Russia geopolitical rivalry. But a new era of American oil exports and ailing national budgets is pulling Moscow and Riyadh together in trying financial times.

President Barack Obama’s administration maintained a cold distance from Saudi Arabia in its final years. As the United States and its European allies began a war against the Islamic State in 2014, Saudi Arabia focused its military might on Yemen—a country on the Arabian Peninsula facing the brutal consequences of an extended Arab Spring. Iranian arms and funding reached the pockets of the Shiite Houthi rebels, who hoped to build a new regime in Yemen, to the chagrin of Wahabbi Saudi Arabia. 

President Donald Trump’s White House has extended an olive branch towards Riyadh as the new State Department lays out its foreign policy agenda.

But this new diplomatic program runs contrary to the KSA’s economic goals. American oil exports, reinstated back in December 2015, counter the effects of OPEC’s landmark agreement to lower bloc-wide output by 1.2 million barrels per day in an effort to alleviate an international supply glut.

As a major oil exporter, Russia was invited to participate in the agreement when it was being discussed back in 2016. American exports were still limited to specific destinations back then, and U.S.-based companies had only just begun to secure supply contracts in Asian and European markets. Any threat to the success of the deal from the other side of the Atlantic seemed far-fetched just a year ago. 

But the tables have turned.

Washington doesn’t rely on oil profits to run its nation. Moscow and Riyadh do—and heavily so. A boost in active rigs in the Permian basin, as well as other areas in the north of the country, has put shale oil and gas in the center of Russo-American geopolitics. As Moscow approves an extension of its 300,000-bpd output drop commitment with OPEC, the U.S. department of energy eyes new markets for American fossil fuels. Energy Secretary Rick Perry made his rounds to Japan in May to open the world’s largest liquified natural gas (LNG) consumer’s doors to U.S.-drilled supplies. The carbon-light fuel is considered a gateway energy source for developed countries as grid systems shift to renewable and alternative power options.

In Europe, American infringement of Russian dominance in gas markets is even clearer. The European Union has faced off against Moscow regarding the Crimea annexation and the Syrian revolution in recent years, but Russian control over Europe’s energy supplies undermined the continent’s geopolitical leverage. 

This new landscape puts Saudi Arabian interests in line with those of Russia. Both mega producers need to contain the growth of the outbound American fossil fuel industry, but the Iran issue remains a key point of contention between Riyadh and Moscow. The KSA is neck-deep in a showdown against Qatar for its involvement with Tehran on the South Pars gas field. New Crown Prince Mohammad bin Salman’s assertive stance locks the country in an irreconcilable rivalry with Iran. In contrast, Moscow stood by Iran through the latter’s experience as an international global pariah.

So far, President Trump has announced Iran’s official decertification from the nuclear deal, which doesn’t dismantle the deal completely, but provides the Republican Congress a route to sanctions it didn’t have before. The White House also approved new sanctions against the country’s Revolutionary Guard last week. These new developments are bound to bring back the Tehran and Moscow alliance in full force, potentially alienating the KSA in its anti-Iran stride.

The exact dynamics of the Moscow-Riyadh axis are still being forged in OPEC meetings around the world. Time will tell whether Saudi wants this new ally badly enough to reduce its belligerence against Iran, if that’s what the future of the relationship comes to.

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RationalExuberance's picture

No because there is no such thing as a Russia-KSA alliance except in Tyler's imagination. 

DuckDog's picture

Why are my comments being doubled?

Albertarocks's picture

Because you are an especially important duckdog.

DuckDog's picture

Washington doesn’t rely on oil profits to run its nation. Moscow and Riyadh do—and heavily so...

No the US needs endless credit to run Washington via the US Petro Dollar and endless printing by the FED...

valjoux7750's picture

 

Just off the top of my head and just reading the headline. The best thing the US could do is just fucking get along with people. 

 Hell if we wanna dominate the ME just partner with Russia "the other white meat", and clean house. Everyone wins except the brownskins.

Is that racist?

Expat's picture

yeah, we can just send a few troops into Kuwait, Saudi and Iran.  We will be greeted as liberators.  The invasion will pay for itself. 

Success guaranteed just like in Iraq.

CRM114's picture

Putin in the driving seat. He can play Iran and Saudi off against each other, unless the USA starts pulling out of the region altogether, which might not be a bad idea. The US has enough oil to carry it through to a society which isn't so oil dependant.

WTFUD's picture

No the US is now dependent on opiates. 

not dead yet's picture

US oil production is just short of 10 million BPD. The US consumes just short of 20 million BPD. The pundits say the US creates more energy than it uses, think nat gas for one, so people assume that includes oil. Not even close.

It's the US that plays countries against each other. In recent years the Russians and Chinese have found cooperation and getting along pays higher dividends than conflict. Saudi Arabia and Iran don't like each other so it's hard to play them off against each other. What Russia and China will do is to smooth the waters between them. The US floated TPP and there was no enthusiasim for it but the Russians and Chinese set up the Shanghi Cooperation Council and other stuff and countries flock to them.

pitz's picture

Yeah not sure why this 'energy independance' or 'exporter' lie keeps coming from.  

Herdee's picture

WAshington is gradually losing the petro-dollar status that Kissinger negotiated.  It means that they'll be a lot less recyling of U.S. dollars into New york.  As more and more countries trade directly through their currencies bi-passing the dollar it means less and less influence.  The great warmongers in Washington hate that their world American hegemony program is going by the wayside.  At home it has resulted in run down infrastructure, huge prisons full of people and pension systems that are bust.  The comparisons to the old Roman Empire are very troubling with the vast corruption of Washington politicians being the sole cause.

CRM114's picture

Not the sole cause - you have to blame the f#ckwits who keep voting for them. 

And that's important, because you will still have to deal with those f#ckwits even if you manage to get rid of the current Washington crowd.

not dead yet's picture

What about the fuckwits that call voters fuckwits. Here's how it works. A guy the party selects gets elected to DC and upon arrival he's told how to vote and act or he may as well pack his bags and go home. Forget about being reelected as the party backs a more pliant candidate against him. When the guy gets enough seniority, seniority means everything in DC unless you're a newbie like Hillary was when she was a senator and had power backing her, he's so corrupted and used to the perks he goes over to the dark side.

The late Les Aspin, who held the seat now occupied by Paul Ryan, had a bad habit for voting for what he thought was right not what the party wanted. The party put up with this for years until Les got one of the most powerful committee chairmanships. He was repeatedly warned to tow the line and when he didn't they stripped him of everything PUBLICLY. No attempt was made to keep it secret as it was a warning to anyone thinking about bucking the party. After a few weeks he convinced the party he was going to be a good boy and got his chairmanship and other duties back. He didn't play ball totally but enough to keep his job. If they can do this to one of the most powerful congressman imagine what they can do to those just starting out.

A few years ago Senator Lisa Murkowski of Alaska lost in the primary to a party backed tea party candidate. When she announced her intention to be a write in candidate the party stripped her of everything. The party got a black eye when she won the vote.

The parties control all. We just don't know who is controlling the parties.

screw face's picture

..opss to late,

"China to ‘Compel’ Saudi Arabia to Trade Oil in Yuan – Ending Petrodollar as World Reserve Currency"
roadhazard's picture

Trump needs to get another treatment from The Orb.

Ben A Drill's picture

Re-post

Read this browsing MSN.com. https://www.msn.com/en-us/news/world/a-russian-ghost-submarine-its-us-pu...

Russia and China are playing the USA. Israel is a thorn in the USA side. This is going hot very soon. USA is unprepared. NK maybe the spark that sets this off but Iran will side with the Russians and Chinese. The USA is truly in a bad place right now. And they know it.

The coming mini ice age, solar minimum is going to be a game changer. Rest of the world is preparing, the USA is not.

Posa's picture

The US is getting boxed out on every front--- goodbye Pox Americana

MEFOBILLS's picture

The author is historically ignorant.

The 73 Saudi Kissinger agreement was a landmark equal to Bretton Woods.  It established the Petro-dollar, and continued dollar as reserve status worldwide.  Oil being priced in dollars was a key reason for invading Iraq.  At the time Saddam as doing swaps for oil, and threated to price oil in Euros.

U.S. Zionist Oligarchy today does not have the savvy of its grandfathers.  Our illuminist leaders put sanctions on Russia, precisely to deny Russian FX in dollars and other currency good for reserve swaps.  Russia was export dependent, to then acquire dollars, to then emit Rubles.  Russia's central bank came under BIS rules during the Yeltsin years.  The ((Harvard Boys)) convinced the Yeltsin crowd that an extraction economy, along with dollar debts, would be good for Russia. This then converted Russian's into drawers of water and hewers of wood, who go around poking holes in their earth, to then sell their minerals on the world market.  Russian platinum and her wealth is then fashioned into goods as prices elsewhere, not Russia.   Labor was cut out of the equation as ((Capital)) wanted its pound of flesh in Russia.

Russia was in the cross hairs, to be destroyed and broken into many failed states.  Then the looting by Western Oligarchy could continue.  Saudi was enlisted to "pump more" to then make oil prices drop further.  This then would deny Russia needed foreign exchange.  

Saudi saluted and did what their masters told them.  The 73 agreement insures Saudi monarchy and guarantees transhipment of oil, guarantees military protection, allows Cartelization.  But, the 73 agreement forbids Saudi from playing in finance, and Saudi is to recycle petrodollars into TBills.

Saudi's, due to low oil prices, are now having to sell their TBills... dip into their savings.  The Panama papers exposed where Saudi TBills are laundered.

So, Saudi's are waking up to reality, and maybe Uncle Sam isn't such a reliable partner.  Finance Oigarchy in U.S. was also happy to lower prices, even to the point of screwing over U.S. Shale Producers.  But, instead the Shale producers got even more efficient and are able to pay down their debts despite the lower oil prices.  Finance could have grabbed those fields in a bankruptcy swap for debt instruments.

True that the U.S. doesn't depend on oil sales, but U.S. finance sector does depend on petrodollars, and having Saudi pivot to Russia puts the 73 agreement in Jeopardy.  It is blow-back, as the Saudi's feel screwed over, especially after their loss in Syria and mounting losses in Yemen.  Russian and Iranian oil will be getting to market overland by way of pipelines, cutting out tanker shipping.   U.S. fifth fleet is largely to insure Saudi tanker transhipment of oil, thus protecting dollar hegemony of 73 agreement.

 

WTFUD's picture

Plant a Tree in '73 - was just starting skool back then and daft as a brush, not realising the future was in $$$$$$$$$$$$$$$$$$$$$$ business. I wonder if my tree contributed to those dirty dollars?

ali-ali-al-qomfri's picture

Plant a Tree in '73,

cuz we'll be printin' like crazy,

callin' it QQQQQQQQEEEEEEEE!

researchfix's picture

I downvote this article. Just did not find the button.

Cloud9.5's picture

“Both mega producers need to contain the growth of the outbound American fossil fuel industry…”

 

Goebbels would be pleased.  Tell a lie long enough and loud enough and it becomes the accepted mantra.   The United States is a net importer of oil. https://www.eia.gov/tools/faqs/faq.php?id=727&t=6

WTFUD's picture

True dat! The debts piling up for most shale producers, however, not only for them but the Oil Majors also ( as per a brilliant article the other day from our resident Oil Expert ).

If the EU can just hang on, hold it together, for another 3/4 years, in anticipation that the US will build the necessary infrastructure to sail their flotillas across the Atlantic then . . . i'm impressed, not.

Winston Churchill's picture

Even more important is the grade and quality of that product.

Pretty much ultra light and not fit for industrial uses.Much like Brent ended up sold overseas,

and heavy oil imported in its place.

Oil is not oil if you cannot get the fractions you need overall.Talk of self sufficiency is BS for that reason alone,

before we even get into eroei.

Crap writer, or propaganda.

researchfix's picture

I love these articles which claim energy independence of USA.

Why? So I don´t have to have a bad conscience, after they are driven out of Eurasia.

They can take care of themselves at home. Peaceful times coming.

 

Grandad Grumps's picture

Isn't that more the forte of Hellary and the commies?

Deep Snorkeler's picture

Donald Trump

A bad tangerine rectum.

Archdruid of distortion.

The nation suffers from Trump-fatigue

and fake patriotism.

Grandad Grumps's picture

Who is that a photo of?

rejected's picture

A person who is a legend in his own mind.

WTFUD's picture

Could Barry drive a wedge between Reggie's cheeks?

NickPeeMe's picture

If Trump is involved failure is baked into the cake.

WTFUD's picture

Apparently that chocolate cake he shared with Xi went down a treat, hit the right buttons; just before those 40 odd scuds landed in Syria's 'no man's land' albeit terrifying a herd of goats.

Mike Masr's picture

Bye, bye Petro-dollar!! 

Drop-Hammer's picture

We do not need the towel-heads and need to break free from their oil which we should have done 45 years ago after the first Arab oil embargo.  We need to ally with our fellow Caucasians, the Russians, form an alliance and defeat and destroy the colored world, enslave the untermensch, jews included, and bring forth a utopia on earth.

Expat's picture

Hmm, I can't tell if you are trolling, being sarcastic, or are serious and therefore immensely stupid? 

Koba the Dread's picture

I place my money on immensely stupid.

redmudhooch's picture

Can't we all just get along?

-R. King

Expat's picture

There is no need to drive a wedge.  The Russians and Saudis are unlikely to cooperate on oil production simply because both need cash more than they need higher prices.  Saudi is taking big steps to reduce spending and reduce subsidies.  Gasoline prices in Saudi are in line with market levels these days, or will be shortly.  Gone are the days of 0.05 $/gallon gasoline.  Saudis make money with oil at 59...lots of money, just not enough to cover the budget.

Russia has the same problems.  They need cash since so much of other hard currencies are siphoned off into offshore accounts.  They will continue to sell as much as they can especially since their flows are moving into higher value refined products or into higher priced markets (like ESPO).

Trump can try to drive a wedge into the Saudi-Russia relationship if he wants.  For once, he actually won't be totally ignorant since he knows the Russians very well and knows what a wedge is, avid golfer that he is.

researchfix's picture

Don´t be too pessimistic. Times change. US is now a big oil and LNG exporter (to Poland and the Baltics), and Russia is a big weapons exporter (to the rest of the world).

Expat's picture

US is a net oil importer (nearly 5 mm bpd).  US exports some light,sweet crude and lots of products.  Also exporting LNG but not sure how long that will last.

As for arms, US is about 33% bigger than the Russians.  We will sell anything to anyone.  I mean, if we can shoot the shit out of our school children, why would we deprive other nations of that taste of freedom.

rejected's picture

There isn't a person in or out of the US government that could compete with Vlad on any level. Biggest difference I can see is one side uses a sledge hammer while the other whispers sweet deals.

The US and NATO, (One and the same), have done nothing but piss everyone off with its bullying and destroying small nations that could do no harm to the US even if they wanted to. All the US has accomplished is generating hatred from the ME and very possibly destroying its European allies by the refugees created by all its useless invasions and bombings. 

Russia and China just stand back, laugh and wait for the inevitable self destruction of the US by the governments internal divide and hate policies and its foreign gunboat affairs laughingly called diplomacy.

Posa's picture

Yup. The Chinese Party Congress anticipates stepping into the vacuum the US Predator Class has created... the world is disgusted by US serial genocide that's gone on for decades... The Chinese-Russian line is "Build, not bomb"...

This is an old replay of Peace and Prosperity... but it's awfully appealing

Karl Marxist's picture

Why would he? Trump, Russia and the Sauds are Isral's puppets. Fake news.

David Wooten's picture

This oil stuff is rubbish.  All the Saudis want from Russia is to reign in the Iranians and all Russia wants from the Saudis in to reign in Sunnis.  The US cannot play peacemaker as Congress, if not the WH, will always side with Israel, sometimes with blinders on.  Neither the Saudis nor the Russians are a serious threat US.  Oil demand will decline regardless of what either country tries to do about it.  

redmudhooch's picture

Trump should drive a big fucking wedge between us and Israel.

Problem solved!

JibjeResearch's picture

TRUMP: A master of negotiation....

BAWAHAHAHAHHAHAHAHHAHAHA 

Catahoula's picture

Let Russia provide security for the Saudis. Never trust Muslims and negroes

oncemore's picture

Who is the moronic author?
He jumps from one subject to another , talks about Iran decertification, goes back to the oil.
A lcomp!ete mess. He should publish for his fellow asian and afrikan people, not here