“The US is isolated by Russia and China.” That was the line that Russian President Vladimir Putin was taking as he met with China’s President Xi Jinping, who is the guest of honour at this year’s St Petersburg International Economic Forum (SPIEF) that kicked off on June 6.
China and Russia have been moving ever closer together as China’s relations with the US deteriorate, rapidly pushing the two erstwhile allies into the same corner. At the end of May Beijing accused the US of “naked economic terrorism” as US President Donald Trump winds up his trade war with China adding another $200bn of tariffs to Chinese goods. Moscow has been using the same phrase as the US imposes ever more painful sanctions on Russian business and businesspeople in the last year.
And as Chinese anti-American rhetoric becomes increasingly hard its friendship with Russia becomes increasingly warm. Both leaders are now actively building a new economic alliances with the other emerging markets and attempting to turn the BRICS idea into a political alliance from the mere marketing gimmick to sell equities it started life as.
Trouble with the Saudis
Russia has made big inroads in the Middle East, inserting itself in the middle of the special relationship shared between Riyadh and Washington. But this relationship is under pressure as Russia’s interests begin to diverge from those of the house of Saud.
Putin said on the opening day of SPIEF that Russia is “comfortable with an oil price of $60-$65,” whereas Riyadh needs a price of $85 or more to balance its budget. Only a weak earlier the CEO of state-owned oil giant Rosneft Igor Sechin called again for an end to the OPEC+ production cuts deal, arguing all that was happening is the hole in the market it creates was being filled by the US ramping up its shale oil production.
Putin also emphasised the differences between the two architects of the OPEC+ deal. He reiterated the desire to continue cooperation, but there is a clear split in opinion amongst the allies now over how to manage production going forward.
“We have certain differences in opinion regarding the fair price,” Putin told reporters at SPIEF. “$60-65 a barrel suits us just fine” because Russia’s budget is based on $40 crude, he said. One of the big achievements of recent years is the Ministry of Finance has made budget cuts that have reduced the price of oil needed balance the budget from $115 in 2008 to just over $40 now.
The OPEC+ deal expires at the end of this month and it remains unclear if it will be extended. Saudi Energy Minister Khalid Al-Falih has said he wants to prolong the cuts, while his Russian counterpart Alexander Novak remains at best non-committal.
“We need more time to work out a final position,” Novak told reporters after meeting with Falih on June 6, reports Bloomberg. “Closer to the date of the meeting we’ll understand better what actions to take.” The two sides are due to meet in Vienna in July to continue the talks. Both Novak and Falih will speak at the energy panel at SPIEF on June 7. (The session will be streamed live here at 10am Moscow time and will remain available to view afterwards.)