The US Congress considers it necessary "to take measures to prevent excessive oil production by the Kingdom of Saudi Arabia and the Russian Federation." Such an appeal is contained in a letter from Republican congressmen Kevin McCarthy, Mac Thornberry and Greg Walden to Secretary of State Mike Pompeo.
“At this critical moment, when a pandemic is raging in the world, Saudi Arabia and Russia decided to flood the oil market with an unprecedented volume of crude oil supplies. Such market manipulation further destabilizes the global economy, exacerbating the suffering of ordinary citizens. It is imperative that the US government respond with decisive action, ”says the document, which RT reviewed.
Since the beginning of 2020, energy consumption in the world began to fall sharply against the background of the spread of coronavirus, and oil began to gradually become cheaper. As expected, the OPEC + alliance members had to further reduce production in order to stabilize the market situation.
On March 6, in Vienna, the two-day negotiations of the parties to the OPEC + transaction were completed, however, as a result of the meeting, the parties did not reach consensus and decided to completely abandon all obligations undertaken earlier. So, the parties agreed to continue cooperation, but already without guarantees to reduce energy production. After the failure of the negotiations on the OPEC + deal, oil prices collapsed.
Meanwhile, as the head of the Russian Ministry of Energy Alexander Novak emphasized, the Russian side did not call for a complete rejection of the deal.
On March 9, it became known about Saudi Arabia’s plans to increase crude production in April up to 10 million barrels per day, and if necessary up to 12 million barrels. Moreover, Riyadh announced record 20-year oil discounts for all its customers.
As stated by Russian Prime Minister Mikhail Mishustin, the fall in markets occurred as a result of OPEC’s decision not to renew the agreement and the announcement by Saudi Arabia of an “unprecedented reduction” in oil prices and a sharp increase in production.
“In this regard, I would like to note the following. First: it was not we who initiated the withdrawal from this agreement. On the contrary, we proposed to extend the agreement on existing terms at least until the end of the second quarter or for a year, including so as not to complicate the situation that has developed with the spread of coronavirus, ”he said.
As the Prime Minister emphasized, Russia's position was “absolutely verified and justified.”
However, Russian authorities have repeatedly emphasized that the country is not engaged in any economic confrontations.
“There are no price wars between Russia and Saudi Arabia. There is a very unfavorable pricing environment for many countries, ”emphasized Russian President’s press secretary Dmitry Peskov, adding that Moscow and Riyadh have“ good relations, partnerships. ”
In addition, as Alexander Novak announced on April 2, Russia is not going to increase oil production amid overproduction on the market.
As an analyst with Finam Group Alexei Korenev explained in a conversation with RT, in this situation, Russia continues to produce oil at the level of previous agreements.
“We were invited, like everyone else, to increase the reduction in oil production, at that time Russia had already reduced by 300 thousand barrels per day, but we were offered another 300 thousand barrels. Russia refused to further reduce, but does not increase the volume. Now Russia is producing 11.3 million barrels per day, that is, our production has not changed, Russia keeps its word in this regard. We both mined and mined 11.3, ”he stressed.
- © Sputnik / Alexei Druzhinin / Kremlin via REUTERS
Moreover, on April 3, Russian President Vladimir Putin announced the country's readiness to cooperate on oil with OPEC + and the United States on a partnership basis.
“Russia considers it necessary to join efforts, we were not the initiators of the OPEC + deal breakup, we are ready for agreements with partners under this OPEC + mechanism and are ready for cooperation with the United States of America,” he said.
As the president emphasized, it is necessary, through joint efforts, to balance the market and reduce oil production.
“According to preliminary estimates, I think that we can talk about a reduction in the volume of about 10 million barrels per day, a little less, maybe a little more ... Of course, this should all happen in a partnership,” he added.
Putin explained that we are talking about the level of production in the first quarter of this year.
Saudi Arabia also called on partner countries within OPEC + to hold an extraordinary meeting to discuss the situation on the oil market.
In the coming days, the OPEC + countries intend to hold a meeting, as a result of which it is possible to expect that the parties will come to new agreements. However, the US position remains unclear, emphasized Alexei Korenev.
“Russia has already proposed its implementation mechanism for each of the countries, someone is reducing it by 200, someone by 100, maybe even we will go down by 300 thousand barrels per day. Saudi Arabia will also certainly be ready to make concessions, but America’s position remains unclear. They suffer quite a lot from low prices, because almost half of the oil produced in the USA is shale oil, and the cost of its extraction is quite high, ”the expert emphasized.
"Diplomatic pressure"
Nevertheless, in their letter to Mike Pompeo, congressmen urge the State Department to influence Moscow and Riyadh.
“It is imperative that the State Department use appropriate diplomatic pressure to prevent these foreign states from unnecessarily damaging the economies of countries around the world. Saudi Arabia and the Russian Federation should realize that now it is necessary to jointly overcome the global crisis associated with the COVID-19 pandemic, and that there are consequences for those who decide to become a source of instability in world markets, ”the document says.
- Reuters
- © Leonhard Foeger
Earlier, the American media also announced the possibility of introducing new anti-Russian sanctions. So, on March 19, The Wall Street Journal, citing certain sources, claimed that the United States was studying the possibility of imposing new sanctions against Russia as one of the levers of influence on the oil market in order to stabilize prices.
In April, the Financial Times, citing sources, reported that American oil producers launched a lobbying campaign in support of restrictive measures against Russia and Saudi Arabia in order to force US authorities to influence both countries.
Meanwhile, Russian presidential spokesman Dmitry Peskov, commenting on such materials by the American media, attributed the sanctions to the "spring exacerbation provoked by coronavirus in patients suffering from Russophobia."
According to Alexei Korenev, despite the fact that American companies suffer enormous damage due to the current economic situation, Donald Trump’s approach to it remains, to put it mildly, strange.
“In the United States, the first major shale oil producer, Whiting Petroleum, was ruined, but, interestingly, President Trump yesterday yesterday first called on OPEC to reduce production by 10 million barrels per day, and after 15 minutes, he called on to reduce production by 15 million barrels per day. day, but immediately declared that this in no way meant any kind of obligation for America. That is, America is outside OPEC, therefore, it will not make any reductions. In general, a fairly characteristic position for Washington, which is used to consider itself above the others, ”the expert emphasized.
As Dmitry Solonnikov, director of the Institute of Contemporary State Development, noted in an interview with RT, in the United States they are habitually trying to shift responsibility for the current situation to Moscow.
“In America they will look for those responsible for the negative situation in the American markets, an unprecedented increase in US unemployment, and a huge drop in the stock market. Now it is starting to stabilize against the backdrop of a huge pumping of money from the Federal Reserve System and the promises made by the Trump administration, but there is no growth. Someone should be to blame for this, and, of course, not the Americans, ”he concluded.