Russia’s ability to wage war in Ukraine could be curtailed if Saudi Arabia tanks the oil price, researchers have said.
Riyadh has hinted that it could flood the market with oil, if the Organization of Petroleum Exporting Countries (OPEC) does not commit to reducing output.
Mohammad bin Salman’s kingdom could push oil prices as low as £39 a barrel, a move which would inflict severe damage on the Russian economy.
Writing in IPS Journal, LSE research fellow Luke Cooper wrote: “With Russia already selling its oil at discounted rates and with higher production costs, a low-price environment in oil markets may impact its ability to finance its aggression in Ukraine.”
Speaking to Business Insider, Simon Henderson, director of the Bernstein Program on Gulf and Energy Policy at The Washington Institute said: “Saudi Arabia is fed up. Leadership of OPEC is a multifaceted responsibility. It can work well, but it’s also like herding cats — pretty damn impossible, at least some of the time.”
Russia is one of a few OPEC countries that is overproducing oil, churning out barrels above the agreed quotas.
According to S&P Global Ratings data, Moscow produced 122,000 barrels more than its daily quota in July. Now, Saudi Arabia may be making Russia pay the price for breaking OPEC agreements.
Mr Cooper believes that Russia will seek to escalate the conflict in Ukraine if it is hit by falling oil prices, to force Kyiv to the negotiating table.
Dwindling oil prices, Mr Cooper argues, means Russia will struggle to continue to fight the war into the long term.
“Unlike Saudi Arabia, its oil is not cheap to extract, making it poorly equipped to deal with low-price conditions. This drives a short-term escalatory logic for Russia’s war on Ukraine, requiring rapid battlefield successes prior to the emergence of low-price oil market conditions.”
