When Custodian of the Two Holy Mosques King Abdullah received Russian President Vladimir Putin at his palace late last Sunday, the energy fraternity keenly awaited the outcome of their discussions. Eyes were glued to it. Markets were curious to get a hint, an indication of what transpired during the meeting, for much in the crude markets depended on their decisions. After all it was the summit of the movers and shakers of the energy world — Saudi Arabia and Russia — the world’s top oil producers.
And the outcome was evident the next day. While addressing Saudi Energy Forum the next day, the Russian President was very clear on the approach. He was keen to stress on common grounds.
“Russia and Saudi Arabia should be allies instead of rivals on the world energy market. We know how rapidly the world economy will develop, and how much resource it needs now and how much it will need in the future,” he said. “To put it in technical terms, our instincts tell us that we are rivals. But this is not so in the context of the growing energy needs of the world,” Putin said, insisting that “this means that we are not rivals, but in fact allies and partners.” “Russia and Saudi Arabia are the world’s leading energy producers and exporters, and here it is easy for us to find common ground,” the Russian leader emphasized.
The visit of Putin to Riyadh was an historical first in many ways. Some analysts in Dhahran, the virtual global energy capital, felt recalling the August 2000 arrival of Hugo Chavez of Venezuela in Riyadh as red carpet was rolled out for him then. Signifying the importance attached to that visit, the then King Fahd was himself present at the airport to welcome Chavez.
That visit today is being termed as a turning point in OPEC history by many, for the oil organization has embarked on a more confident course since then.
Could the visit of Putin also be another turning point, another milestone in the world of energy politics. Many feel so and have reasons for that. History could be repeating itself — indeed who knows!
The brief Putin carried with him was without doubt dominated by energy-related issues. The stability of the global crude market to a large extent depended on the outcome.
The Russian president, by any means, could not have missed out on the great oil price fall of 1985-86. Crude prices fell precipitously then, from approximately $30 per barrel in late 1985 to just over $10 by mid-1986. As a junior KGB officer then, posted in what was then the East Germany, the developments may not have been soothing for Putin. In fact he must have witnessed all that to his great horror, though very much from the sidelines, unable to alter the cycle of events.
The drop crippled the Soviet economy, like that of other oil producers and — in the opinion of many Russian analysts today — helped expedite the demise of the USSR.
Now that Putin is at helm, with oil prices again falling and the Russian relations with the United States cooling, that history could have very much up the president’s mind. “You can say that Russia remembers this problem,” said Fyodor Lukyanov, editor in chief of the Moscow-based journal “Russia In Global Affairs.” “Today’s Russia is very different from the Soviet Union of those days, but nevertheless predictability on the oil markets is a big concern for our economy and for our leadership. Some kind of communication with Saudi Arabia in this regard is very important.”
Things have turned full circle since the cold war days, when the communist USSR was an ideological pariah to most in the region. The US today is the sole surviving superpower and many feel let down by the US policies. Many today insist on the absolute necessity of countering the designs of the neoconservative establishment in Washington. And Russia could be a major player in this new equation, most in the Arab streets concede. In these circumstances, protecting Moscow’s interests in the volatile energy markets, is key to Kremlin’s domestic prosperity and international clout, many argue. “Russia’s economy really stands and falls with world commodity prices, oil and gas prices,” says Clifford Gaddy, a Russia specialist at the Brookings Institution. “And that uncertainty is a big question mark, a big obstacle for Russian policies, for both its domestic policy, thinking about the health of the state, for revenues into the budget and other projects they want to undertake, as well as, of course, its international status.”
And when President Putin sat down with Qatar’s Sheikh Hamad Khalifa Al-Thani in Doha, it was a meeting of two natural-gas powers. Qatar has the world’s third-largest natural gas reserves after Russia and Iran. Earlier in January, Iran raised the idea of a cartel in January and Putin later called it “interesting” and promised to “think about it.” This subject could not have been missed out in Doha.
This meeting of minds in the region could be another milestone for the global energy markets!
