The Most Important Geopolitical Meeting This Year

Authored by Venand Meliksetian via OilPrice.com,

Relations between the United States and Russia have deteriorated dramatically over the years due to Moscow’s intervention in neighbouring Ukraine and its annexation of Crimea. This change in foreign policy has some analysts talking about a ‘new cold war'. Moscow's participation and support for President Assad of Syria put Russian interest and soldiers against America’s. One of the reasons the intervention took place during the height of the Ukraine crisis was the Kremlin’s intention to reduce the effectiveness of the isolationist policy of the West vis-à-vis Russia by making itself indispensable for solving the crisis.

The alleged meddling of Moscow in the American presidential elections of 2016 created a political minefield for President Donald Trump when trying to meet with President Vladimir Putin of Russia. Although they have spoken several times on the fringes of international events such as the G20 gathering in 2017, an official bilateral visit has not yet been organised. Recent developments, however, have provided an opening for both leaders. Besides the civil war in Syria and the ongoing conflict in Ukraine, coordination in the energy domain has proven to be another reason for communication.

The recent unilateral withdrawal of the United States as a signatory to the JCPOA, or the Iran Nuclear Deal, requires the cooperation of major energy producers to absorb the shocks of Trump’s decision. In order to isolate Iran and deprive it of financial resources, it is imperative for the U.S. administration to reduce the export of Iranian oil. However, as Iran is a major exporter of oil with 2,6 million barrels/day, withholding the world’s markets this amount in the current situation, will seriously increase prices. With midterm elections on the horizon for 2018, President Trump fears higher prices for the summer driving season will negatively affect support for Republican candidates.

Enter the fray Russia and OPEC.

Although the U.S. president has lambasted OPEC for “artificially increasing the price of oil”, cooperation with other major producers is the only viable alternative for the U.S. administration to keep prices in check while isolating Iran. The U.S. apparently has quietly asked Saudi Arabia and some other producers of OPEC to increase production with 1 million barrels/day.

It is in Riyadh’s interest that the prices remain as high as possible as it would provide highly needed revenues and it would ensure the maximum result on the coming IPO of 5%of the national Saudi Aramco oil company. Saudi Arabia, however, seems to have listened to the heeded calls and advice from partners and allies. During the meeting this June in Vienna, OPEC in cooperation of non-members such as Russia and Mexico agreed to increase the daily production with one million barrels/day.

Just days after the agreement to boost oil production, U.S. energy secretary Rick Perry is expected to meet with his Russian counterpart energy minister Alexander Novak at the World Gas Conference. It is expected that the U.S. will discuss cooperation in light of sanctions kicking in this summer for Iranian oil exports. Moscow welcomes cooperation with Washington as it proofs the indispensable position of Russia in world affairs.

Furthermore, a cooperation of some sorts between the two countries is a good precursor for the upcoming meeting between the Russian and American presidents on 16th of July in Helsinki. National security advisor John Bolton has met with Russian foreign minister Sergei Lavrov on 26 June in Moscow in order to discuss a meeting between Trump and Putin and its possible content. Coordination in the energy domain could pave the way for the upcoming visit.

Unlike other partners, the modest bilateral trade and the corresponding deficit between the U.S. with Russia, respectively $24 and $10 billion in 2017, will most likely not lead to a trade war. Therefore, Moscow could make use of the opportunity to improve relations with Washington in areas of agreement while lacking serious imperatives such as trade.