“We do not think that anyone should intervene in these relations,” the Russian presidency’s office stated Friday of its “good relationship” and “partnership” with the Saudis, hitting back at Trump’s comments on the emerging oil-price war. Yesterday President Trump described the Saudi-Russia oil price war as “very bad” for Saudi Arabia but ultimately “devastating” to Russia, but with the consolation of lower prices at the pump for American consumers.
Trump assured the public that “we have a lot of power over the situation,” adding that that Washington will attempt mediate the dispute “at the appropriate time.” This after US oil prices collapsed by a staggering 24% Wednesday to just $20, before clawing back Thursday afternoon and into Friday morning to $25 on Trump’s comments and especially reports that the US will buy up to 30 million barrels of crude for its emergency stockpile by the end of June.
But as expected the Kremlin has remained unblinking since launching its ‘war on US shale’ when it early this month ditched Riyadh and OPEC+ plans to significantly cut production, sending crude prices crashing and leaving dozens of American producers teetering on bankruptcy. Russian presidential spokesman Dmitry Peskov downplayed the emerging crisis Friday: “There are no price wars between Russia and Saudi Arabia. There is a very unfavorable pricing environment for many countries,” he said according to TASS.
So it does indeed appear Moscow and Riyadh are in for a long game of chicken, and certainly the Russians have signaled they’ve long built up the reserves necessary to weather the storm of however far the Saudis want to take things. On this note, Bloomberg warns “Russian President Vladimir Putin will refuse to submit to what the Kremlin sees as oil blackmail from Saudi Arabia, signaling the price war that’s roiling global energy markets will continue.”
And further, the Kremlin is bracing itself to endure through the carnage, writes Bloomberg further: “The unprecedented clash between the two giant exporters — and former OPEC+ allies — threatens to push the price of a barrel below $20, but Moscow won’t be the first to blink and seek a truce, said people familiar with the government’s position. Russia is confident “it can hold out longer than Riyadh,” the report observed.
As for the White House signaling a potential near-future intervention, which reportedly involves talk of more sanctions on Russia with diplomatic pressures on Saudi Arabia to curb output as opposed to the expected flood of cheap crude to hit the market in April, the Russian presidential spokesman dismissed the scapegoating as but more “Russo-phobia” in Friday comments.
Peskov said further, “We understand that indeed many companies are now suffering due to low oil prices, we know that the huge US oil sector is now in distress because of these prices.” He singled out those who produce shale oil: “There is a serious crisis, we also understand this,” Peskov said, per state-run TASS.
“Certainly, this price situation is fairly unpleasant. It is possible to agree in this respect,” Peskov added, but then crucially referenced Russia’s safety margin in terms of reserves, tipping its cards showing just how far it’s willing to hold out.
“When saying that this is a catastrophe for Russia, there is probably no way of agreeing with this in midterm, since as our president and our government reiterated that we have a solid safety margin for several years, which will support fulfilling all social commitments, development plans, and so on,” Peskov added.”There were times when the price was even lower.”
But as Bloomberg notes, “The losses are already visible for Russia, weakening its currency and potentially putting the nation on course for a recession.” The Russians are ready for it to sting a bit, but are resolved to make their geopolitical rivals suffer first. “The state budget, which is based on oil prices of just above $40 per barrel, may be in deficit this year, forcing the government to tap its sovereign-wealth fund just two months after Putin promised higher social spending,” Bloomberg added.