The de facto ruler of Saudi Arabia, Crown Prince Mohammed bin Salman, has not accepted an invitation to attend the BRICS summit to be held on October 22-24 in Kazan.
In September, Russian Foreign Minister Sergei Lavrov announced that the Kremlin wanted to see bin Salman at the summit, which officials called “the most significant foreign policy event” in Russian history. But Riyadh refused. “Saudi Arabia will send a foreign minister,” said Putin’s international affairs aide Sergey Ushakov, commenting on preparations for the summit last week. Ushakov did not specify the reason for the prince’s decision, but made the stipulation that Western countries are putting pressure on Russia’s “partners”, threatening consequences if they go to Kazan.
Saudi Arabia, which did not join the sanctions, has remained a key ally of the Kremlin in the oil market since the start of the war. Although Joe Biden’s administration in the fall of 2022 persuaded the Saudis to increase production to replace the embargoed Russian barrels, bin Salman remained true to his alliance with Putin and, on the contrary, cut supplies by 2 million barrels per day.
The goal was to keep prices close to $100 a barrel. But two years later, the mood in Riyadh began to change. The kingdom is concerned about its declining market share and intends to switch to a policy of increasing production, even if it means putting up with low prices for a long time, sources familiar with the situation told the Financial Times in late September. Saudi Energy Minister Prince Abdulaziz bin Salman said some OPEC+ countries, notably Kazakhstan and Iraq, were not meeting their quotas and threatened that the price of a barrel could fall to $50.
For Russia, this is the worst-case scenario, notes Luke Cooper, a research fellow at the London School of Economics: a collapse in oil prices to 2014-16 levels would significantly complicate the financing of Putin’s “war machine”. In the current year’s budget, the government has bet oil at $70 and expects roughly the same price ($69.7) next year.
Saudi Arabia, unlike Russia, can more easily survive cheap oil, Cooper explains: the deposits in the Arabian Desert are much closer to the surface than the Siberian permafrost deposits, and therefore the cost of Saudi barrels is lower. Moreover, Riyadh can easily and quickly increase production and offset price losses through volumes.
Bin Salman clearly demonstrated to Putin how this happens in 2020, when Russia, in the midst of the pandemic, decided to withdraw from the OPEC+ deal. Saudi Arabia increased production to 12 million barrels per day, announced record discounts for the past 30 years and dropped oil prices to 1990 levels (less than $10 per Brent barrel). A few months later, the Kremlin was forced to capitulate, return to the agreement and, under the new conditions, at most reduce production, writes Mediapool.
“Unlike Saudi oil, Russian oil is not cheap to produce. Therefore (Russia) is ill-prepared for a low-price situation,” notes Cooper. “This explains the Russian logic of military escalation, which requires rapid successes on the battlefield before oil prices fall.”
Saudi Arabia is currently producing 8.9 million barrels per day – the lowest output since 2011. Starting in December, the kingdom will begin adding 83,000 barrels per day to the market each month, and by the end of December 2025, it will increase supplies by 1 million barrels per day. According to FT sources, production growth could occur even faster if OPEC+ countries do not stick to quotas.