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
0

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.


Turkish leader Recep Tayyip Erdogan faces new threat from former allies

Updated 20 July 2019
0

Turkish leader Recep Tayyip Erdogan faces new threat from former allies

  • Former prime minister Ahmet Davutoglu and ex-economy minister Ali Babacan have both made statements this month criticizing Turkey’s current trajectory
  • Turkish President Recep Tayyip Erdogan has downplayed the threat

ANKARA: Following losses in key cities this year, Turkish President Recep Tayyip Erdogan now risks losing more voters as former allies stick their head above the parapet and appear to be on the verge of creating new parties.
Former prime minister Ahmet Davutoglu and ex-economy minister Ali Babacan have both made statements this month criticizing Turkey’s current trajectory under Erdogan.
Rumors have swirled in Ankara for months that Babacan and Davutoglu may establish their own political parties to challenge the Islamic-rooted AKP that has dominated Turkish politics this century.
On July 8, Babacan, who is credited with overseeing Turkey’s economic boom during the AKP’s first decade in power, dealt the first blow when he resigned from the party.
He claimed Turkey needed a “new vision” and cited “deep differences” over policy, hinting a new party — or “new effort” — was “inevitable.”
With double-digit inflation, slower growth and a weakened lira, many hope Babacan will be the answer to Turkey’s economic woes and an alternative to Erdogan.
Ten days after Babacan, Davutoglu gave an interview broadcast live online in which he appeared to suggest he would be ready to set up a new party.
Erdogan has downplayed the threat but also warned Babacan against splitting the “ummah” — using the Arabic word for the Muslim community.
Experts say the president will not quietly accept these challenges.
“Erdogan is likely to combat any threat he sees to his personalized rule,” said Lisel Hintz, assistant professor of international relations at Johns Hopkins University.
She pointed to the jailing of Kurdish leader Selahattin Demirtas who had vehemently opposed Erdogan, and the ongoing trials of civil society leaders and AKP opponents.
Turkey has been to the polls eight times in just five years, but now any new party will have potentially until the next elections in 2023 to create momentum and attract voters.
When he announced he was standing down as prime minister in 2016 after two years, Davutoglu vowed never to criticize Erdogan in public.
That promise lay in tatters this week as he spoke online for three hours, saying he would remain within the AKP for now, but that: “If there is no other option, a (new) party must be set up.”
For now, it appears unlikely that Davutoglu will join forces with other splitters from the AKP, having been a fairly divisive figure himself in the past.
However, there have been reports that former president and co-founder of the AKP, Abdullah Gul, could act as an “honorary chairman” to a party led by Babacan.
It had been mooted that Gul would run against Erdogan in last year’s presidential elections, but he never came forward.
Erdogan criticized Babacan after his resignation, saying they disagreed over many issues, including interest rates, which the president controversially believes must be kept low to reduce inflation.
When asked if he was disappointed by Babacan, Davutoglu and Gul, Erdogan responded with evident exasperation: “For the love of Allah, should this question be asked? If one is not disappointed with them, who would one be disappointed with?”
But he said previous MPs had left the party and been largely forgotten.
The AKP came to power after the Turkish economy suffered a severe financial crisis in 2001, and needed an International Monetary Fund loan to emerge from the embers.
Eighteen years later, Turkey is again in an economic slump.
Inflation is at 15.7 percent; the rate of unemployment is 13 percent while the economy contracted by 2.6 percent in the first quarter of 2019.
According to Hintz, the success of any party launched by Babacan will “likely depend on the extent to which it offers concrete plans for tackling Turkey’s economic problems and social divides.”
She added that Babacan had a “shot at galvanizing Turkey’s center-right, particularly given widespread disillusion surrounding the personal enrichment of AKP leaders while Turkey’s economy slides further toward crisis.”
Erdogan and the AKP, set up in 2001, have won every general election since coming to power in 2002.
But after 25 years of the AKP and its predecessors running Istanbul, the country’s economic powerhouse is now in the hands of the opposition, despite a controversial push by the ruling party to order a re-run of the vote.
Erdogan still commands widespread loyalty, particularly in the provinces, said Emre Erdogan, professor of political science at Istanbul Bilgi University, and no relation to the president.
But he said any new challenger could be “destructive” to Erdogan’s chances at the next election, given that presidential candidates must win over 50 percent of the vote.