The relationship between Russia and the US has been in a deadlock due to some political disputes regarding Crimea’s annexation from Ukraine to allegations of Moscow’s meddling of the US presidential election, 2016. Since the coronavirus outbreak, Moscow wanted to rebuild its relationship with Washington and the recent oil deal was considered Russia’s initial move to appease the US.
Senior Russian officials said on Monday, April 13, 2020, the global oil production deal that finalized at the weekend would maintain a price-stable and save millions of jobs in the US.
Russia’s Reversal Outlook for Oil Deal
Russia’s support to the historic oil supply pact, which set to a large output cut of the oil producers, could have dire consequences for its own economy. The two major oil producers, Russia and Saudi Arabia had been planning to increase their productions for market share after the previous deal between the Organization of the Petroleum Exporting Countries (OPEC) and other producers failed in early March. Nevertheless, the new oil deal was a complete opposite of what Russia stood earlier.
The recent global deal for oil production aimed to remove as much as 20 million barrels per day (BPD) of oil from the market – roughly a quarter of all supplies. The deal arrived last week after several talks held among the leaders of various countries including the US, Russia, Saudi Arabia combined with G20 input.
Kirill Dmitriev, head of Russia’s sovereign wealth fund RDIF, told CNBC on Monday, “(Russia’s) President (Vladimir) Putin had as many calls with (US) President (Donald) Trump last week as he had for the whole of last year.” As explained by Russian Energy Minister Alexander Novak, speaking to Russian Rossiya-1 TV station that the total output cuts of the country’s oil production would be set between 15 and 20 million BPD. He also added that the heads of domestic oil producers had supported the deal.
Russia’s Views for Cooperation with the US
Talking to CNBC, Dmitriev, who is one of Moscow’s top negotiators and has supported the funding for Russia’s medical help to Washington, believed that the new global oil deal would help the US to save more than 2 million jobs. He cited, “This is an example of us working together for the best of our nations,” adding that without the deal, oil prices would be collapsing to less than $10 a barrel from more than $30 now.
Kremlin spokesman, Dmitry Peskov stated on Monday that the deal was an imperative action since it would help to keep global oil prices from collapsing. With this new deal, Moscow has anticipated a revenue loss from its oil production. An oil industry source said Russian oil output has already started to decline, falling to 11.24 million BPD this month, from 11.29 million BPD in March.
Moscow’s obligations under the deal, which set to cut its output to 8.5 million BPD from May to June, has brought the oil production to the lowest level since 2003. Kirill Tremasov, head of investment research at Loko-Invest said that this would lead to a severe impact on Moscow’s economy as the resulting economic impact could be as much as 1.2 percentage points from Russia’s gross domestic product. Under the deal, the curb on oil and the production cut would be effective until April 2022.
I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.
You can reach out to me at: [email protected]