by Viktor Mikhin, New Eastern Outlook:
The largest oil-producing countries, led by Saudi Arabia and Russia, decided on December 4 to maintain current production levels in the face of uncertainty and the entry into force of new sanctions against Moscow. Representatives of the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their 10 allies, headed by Moscow, decided to stick to the course agreed in October to reduce production by two million barrels per day until the end of 2023.
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OPEC+ described its decision to cut production as an arrangement “which was dictated solely by market considerations,” adding that it was “a necessary and correct course of action to stabilize global oil markets.” At the same time, the alliance said it was ready to “meet at any time and take immediate additional measures” to solve market problems and support the oil market, if necessary.
Angered by this decision and unable to influence the oil-producing countries, the EU, the G7 and Australia have agreed on a $60 per barrel price cap for Russian oil, due to come into effect on December 5, along with an EU embargo on offshore shipments of Russian crude oil. This, according to oil consumers, will prevent sea shipments of Russian oil to the European Union, which account for two-thirds of oil imports from Russia, in an attempt to deprive Moscow of billions of euros.
In other words, there is an economic struggle going on for resources and a certain right of the West to dictate its terms to the rest of the world.
While Russia denounced the oil price cap, threatening to cut off oil supplies to any country that adopted the measure, European sycophants Poland and Ukraine have proposed setting the price cap even lower. In this regard, the question arises: what about the market, which plays by its own rules and would it be possible for Russia to impose a price cap on European goods? For example, on German Mercedes Benz cars?
For OPEC+, the big unknown in the oil equation is how much the sanctions will hit Russian supplies. At the same time, Moscow’s threat to halt supplies to price capping countries would put “some people in a very uncomfortable position,” said OANDA analyst Craig Erlam. “The choice is between losing access to cheap Russian oil or G7 sanctions,” he was quoted as saying. Amid economic gloom fueled by soaring inflation and fears of lower energy demand in China due to Covid-related restrictions, two global crude oil benchmarks remained temporarily close to their lowest levels of the year, away from their March peaks. Since the group’s last meeting in early October, North Sea Brent Crude and its US equivalent, WTI, have lost more than six percent of their value.
Moving forward, OPEC+ may still feel compelled to take a “more aggressive stance” by cutting or threatening to cut output, said UniCredit analyst Edoardo Campanella. In addition, “Russia could also retaliate by using its influence in OPEC+ to push for further production cuts in the future, exacerbating the global energy crisis,” he added. It is quite obvious that such unwise actions of the West will only lead to an increase in the price of oil and its derivatives, spurring even more disaster and inflation in their countries. However, as evidenced by the facts, even the disasters of their peoples will not stop the current Western rulers of narrow-mindedness in making their silly decisions.
When the West brazenly and cynically began to lecture Arab countries in its characteristic manner of diktat, then both Saudi Arabia and the United Arab Emirates resolutely insisted on the decision of OPEC and its allies to cut oil production. And this happened in due course at the behest of the oil-producing countries, despite the fact that US President Joe Biden personally threatened the world with “economic uncertainty” and retaliatory measures against OPEC countries.
Despite ostentatious cordiality, comments at the Abu Dhabi International Petroleum Exhibition and Conference showed a sharp division between the United States and the Arab countries of the Persian Gulf, whom they support militarily. US politicians and officials have already threatened to annul an arms deals with the Saudi kingdom and described this situation with horror as a “Saudi defection” to Russian President Vladimir Putin.
Saudi Energy Minister Prince Abdulaziz bin Salman hinted at this in brief comments during the international conference. “We do not owe this to anyone but us,” the Prince said to applause, noting that the upcoming UN Climate Change Conference shall be held in the United Arab Emirates (the previous one was held in Egypt). “It was done for us, by us, for our future, and we have to follow through.” The UAE Minister of Energy and Infrastructure Suhail Al Mazrouei supported this statement. He was cited saying that OPEC and its allies were “a phone call away if there is a demand” for a production increase, but he offered no suggestion that such an increase would occur any time soon. “I can assure you that we, the UAE, as well as our OPEC+ colleagues, are interested in providing the world with the oil it needs,” said the UAE Energy Minister. “But at the same time, we are not the only producers in the world.”
OPEC, led by Saudi Arabia, insists its decision was prompted by concerns about the global economy. Analysts in the US and Europe are warning that a recession is looming in the West due to inflation and the subsequent rise of interest rates, as well as the fact that the US-led war against Russia in Ukraine has negatively affected food and oil supplies. “The world economy is on a knife’s edge,” insisted Sultan Ahmed Al Jaber, Managing Director of the state-owned Abu Dhabi National Oil Co. It should be added that all these troubles in the economic and financial fields are due to the West adopting its “smart” decision.
