OPEC seeks oil alliance with Russia for next 10-20 years - Saudi crown prince

Saudi Crown Prince Mohammed bin Salman giving a speech during the Saudi-US Partnership Gala event in Washington, DC. (Photo: AFP via Saudi Royal Palace by Bandar Al-Jaloud)
Updated 28 March 2018
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OPEC seeks oil alliance with Russia for next 10-20 years - Saudi crown prince

NEW YORK: Saudi Arabia and Russia are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.
Saudi Crown Prince Mohammed bin Salman said that Riyadh and Moscow were considering a deal to greatly extend a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices.
“We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” the crown prince told Reuters in an interview in New York late on Monday.
“We have agreement on the big picture, but not yet on the detail.”
Russia, not a member of the Organization of the Petroleum Exporting Countries, has worked alongside the 14-member group during previous oil gluts, but a 10 to 20 year deal between the two would be unprecedented.
Top OPEC producer Saudi Arabia recruited Russia and other non-OPEC countries to help drain oversupply when oil prices collapsed to below $30 a barrel in 2016 from over $100 in 2014.
Crude has since recovered to $70 but fast-rising output from US shale producers has capped prices.
“This is all about whether the arrangement is a short-term expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil,” said oil historian Daniel Yergin, vice chairman at consultancy IHS Markit.
“OPEC countries want to find a way to institutionalize this relationship rather than to have it be a one-shot deal.”
Robert McNally at consultancy Rapidan Energy Group said Riyadh wanted help in breaking the boom-bust cycles that characterize oil markets by capping crude on the upside as well as by helping lift low oil prices.
“History shows that without a long-term, powerful, competent coherent, disciplined swing producer in the oil markets ... you get space-mountain oil prices. Wild volatility of the sort we have seen in the past 10 to 15 years and that Saudi Arabia and Russia do not want to see again,” McNally said.
He said that would require Russia to join Saudi in building spare production capacity to use when prices rise too much.
SAUDI, RUSSIA ALLIANCE “THICKER THAN OIL“
A long-term pact between Moscow and Riyadh would effectively co-opt Russia to the Saudi-led OPEC cartel while strengthening Russia’s hand in the Middle East where the United States has long been the dominant super-power.
News of the potential oil alliance came at a time when the two have been working to cement an economic relationship despite being at odds over the conflict in Syria, where they back opposing sides.
A meeting between the Saudi crown prince and Russian president Vladimir Putin on the sidelines of a G20 meeting in China in September 2016 was instrumental in bringing Russia on board to support OPEC, non-OPEC oil curbs.
Last October, Saudi King Salman became the first Saudi monarch to visit Russia, providing investment and political support for a Russian economy battered by Western sanctions.
“It is a very important strategic development,” Helima Croft at RBC Capital Markets said of a potential 10 to 20 year Saudi-Russia oil collaboration.
“First, the Crown Prince is making the statement, not the oil minister, one more clear sign that he (like Putin) is the final word on his country’s oil policy.
“Second it is one more sign of the major reversal in Saudi-Russia relations. Saudi was a staunch cold war ally of the US Now this Russia-Saudi alliance appears to be thicker than oil and seems to be driven by the personal affinity between Putin and MBS,” said Croft.
ARAMCO IPO LATE 2018, EARLY 2019
The crown prince predicted that world oil demand would not peak until 2040, despite advances in renewable energy technologies and the electric vehicle.
In an attempt to end Saudi Arabia’s reliance on oil, he is leading a push to diversify the Saudi economy away from oil and gas by 2030.
Riyadh plans to raise funds through the flotation of a 5 percent stake in state Saudi oil company Aramco. Time is running out for an initial public offering this year but the crown prince said the IPO could still take place at the end of 2018 or in early 2019, depending on financial market conditions.
Saudi Oil Minister Khalid Al-Falih said last week that documentation was ready but that a venue for the IPO had not yet been decided. The New York stock exchange is still in the running for the IPO, alongside London and Hong Kong, but Falih said there was a risk of a “frivolous” legal action if Aramco were listed in the United States.


UK prime minister in last-minute push to win Brexit support

A European flag and a British Union flag hang outside Europe House, the European Parliament's British offices in London, Monday, March 18, 2019. (AP)
Updated 23 sec ago
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UK prime minister in last-minute push to win Brexit support

  • May aims to try a third time this week if she can persuade enough lawmakers to change their minds
  • May’s spokesman, James Slack, said Monday that the government would only hold a vote if there is “a realistic prospect of success”

LONDON: British Prime Minister Theresa May was making a last-minute push Monday to win support for her European Union divorce deal, warning opponents that failure to approve it would mean a long — and possibly indefinite — delay to Brexit.
Parliament has rejected the agreement twice, but May aims to try a third time this week if she can persuade enough lawmakers to change their minds. Her aim is to have the deal agreed before EU leaders meet Thursday for a summit in Brussels.
But there was no sign of a breakthrough, and the government faces a deadline of the end of Tuesday to decide whether they have enough votes to pass the deal, so that a vote can be held on Wednesday.
May’s spokesman, James Slack, said Monday that the government would only hold a vote if there is “a realistic prospect of success.”
May is likely to ask for a delay to Brexit at the Brussels summit. If a deal is approved, she says she will ask the EU to extend the deadline until June 30 so that Parliament has time to approve the necessary legislation. If it isn’t, she will have to seek a longer extension that would mean Britain participating in May 23-26 elections for the European Parliament — something the government is keen to avoid.
May’s goal is to win over Northern Ireland’s small, power-brokering Democratic Unionist Party. The DUP’s 10 lawmakers prop up May’s Conservative government, and their support could influence pro-Brexit Conservatives to drop their opposition to the deal.
Still, May faces a struggle to reverse the huge margins of defeat for the agreement in Parliament. It was rejected by 230 votes in January and by 149 votes last week.
Influential Conservative Brexiteer Jacob Rees-Mogg said he would wait to see what the DUP decided before making up his mind on whether to support May’s deal.
“No deal is better than a bad deal, but a bad deal is better than remaining in the European Union,” he told LBC radio.
British Foreign Secretary Jeremy Hunt said Monday he saw “cautious signs of encouragement” that the deal might make it through Parliament this week.
After months of political deadlock, British lawmakers voted last week to seek to postpone Brexit. That will likely avert a chaotic British withdrawal on the scheduled exit date of March 29 — although the power to approve or reject a Brexit extension lies with the EU, whose leaders are fed up with British prevarication.
EU leaders say they will only grant it if Britain has a solid plan for what to do with the extra time.
“We have to know what the British want: How long, what is the reason supposed to be, how it should go, what is actually the aim of the extension?” German Foreign Minister Heiko Maas told reporters in Brussels. “The longer it is delayed, the more difficult it will certainly be.”
Belgian Foreign Minister Didier Reynders agreed, saying: “We are not against an extension in Belgium, but the problem is — to do what?“
Opposition to May’s deal centers on a measure designed to ensure there is no hard border between the UK’s Northern Ireland and EU member Ireland after Brexit.
The mechanism, known as the backstop, is a safeguard that would keep the UK in a customs union with the EU until a permanent new trading relationship is in place. Brexit supporters in Britain fear the backstop could be used to bind the country to EU regulations indefinitely, and the DUP fears it could lead to a weakening of the bonds between Northern Ireland and the rest of the UK
Talks between the government and the DUP are aimed at reassuring the party that Britain could not be trapped in the backstop indefinitely.
May said in an article for the Sunday Telegraph that failure to approve the deal meant “we will not leave the EU for many months, if ever.”
“The idea of the British people going to the polls to elect MEPs (Members of the European Parliament) three years after voting to leave the EU hardly bears thinking about,” she wrote.
But May suffered a setback Monday when former Foreign Secretary Boris Johnson refused to support her deal.
Johnson, a staunch Brexiteer, used his column in the Daily Telegraph to argue that the backstop left the UK vulnerable to “an indefinite means of blackmail” by Brussels.