Last week, Russia, Saudi Arabia and other major petroleum producers (sans the United States) signed a historic deal to cut oil output by a whopping 9.7 million barrels per day over the next two months in a bid to end the oil glut which sent prices falling off a cliff in March.
Russian President Vladimir Putin didn’t sign on to the OPEC+ oil deal last week out of an altruistic sense of concern over the fate of the US shale industry, but as part of Moscow’s broader diplomatic effort to try to bring the Cold War Part II brewing between Washington and Moscow over the past several years to an end, M.K. Bhadrakumar, a retired diplomat and veteran columnist for several respected Indian newspapers, believes.
Last week, after the signature of OPEC+ deal on crude production cuts, energy market analysts told the New York Times that speaking frankly, Russia and Saudi Arabia may saved the US shale industry from annihilation by reaching the deal.
As crude prices scraped lows unseen in decades in March after OPEC+’s failure in Vienna to agree on cuts amid the COVID-19 pandemic, America’s shale industry sounded the alarm about imminent bankruptcies caused by high production costs and flagging demand.
Washington instituted an emergency short-term measure to assist producers, buying up millions of barrels in domestic crude to fill up the Strategic Petroleum Reserve. For some, the move came too little, too late, with at least one major producer filing for bankruptcy, as major US banks began planning to take over other oil and gas fields if more companies go belly up.
U.S. President Donald Trump hosts a signing ceremony for the $2.3 trillion coronavirus aid package bill in the Oval Office of the White House in Washington, U.S., March 27, 2020
The Trump administration watched the Russian-Saudi talks on production cuts closely, and even helped Mexico, which refused to cut output by any more than 100,000 barrels per day (bpd), by promising to make up the balance of its 400,000 bpd in cuts requested by OPEC+.
However, as some observers have pointed out, despite Washington’s desperate desire to see an OPEC+ agreement, America itself was conspicuously absent from the talks. Even as Riyadh expressed hopes that producers including the US would cut production “using their own approaches” to supplement OPEC+’s cuts, the cartel did not get any firm commitments from the Trump administration on the matter. Instead, Washington insisted that its shale industry would reduce output through market forces and owing to lower global crude prices, which (theoretically) would make it unprofitable for many shale producers to continue operations.
What’s Moscow’s Game?
But there has to be a reason for Moscow to have agreed to the OPEC+ deal, Bhadrakumar believes, pointing out that in the absence of firm commitments to cuts from Washington, and amid the economic losses Russia is expected to bare by cutting some 1.6 million bpd of its own output, it’s not immediately obvious what Russian President Vladimir Putin stands to gain by saving US shale from the chopping block just in the nick of time.
“For Trump, a constructive engagement with Russia is something he wanted all along. Three precious years have been lost because of the Mueller investigations on ‘Russia collusion’ and so on. But after successfully outmaneuvering his opponents in the impeachment drama, Trump is now unbound. Putin understands that, too,” the journalist notes.
According to Bhadrakumar, even Trump’s adversaries in the media, on Wall Street, and in the deep state apparatus in Washington would not dare to cross his efforts to negotiate with Moscow on saving the US oil industry, no matter how Russophobic they may be. “There is a broad consensus among the American elite that Putin holds the key to unlocking an oil crisis that can severely damage the US economy when it is already heading into a deep recession,” he argues.
Indeed, with millions of Americans already losing their jobs and applying for unemployment assistance over the past two months amid the COVID-19 pandemic, the gutting of the oil and gas sector, which employs more than 10 million people and accounts for as much as 7 percent of GDP, could easily push the USA into a full-blown depression.
Fracking drill rig
Telephone Diplomacy
Bhadrakumar points out that between April 10 and 13, as Russia and other OPEC+ partners fervently negotiated the OPEC+ deal, Presidents Putin and Trump spoke by phone on three separate occasions, presumably not just on oil-related issues, but a broader effort to start détente.
Clues of these mostly behind-the-scenes negotiations can be seen in recent statements by the Russian president and the Kremlin, according to Bhadrakumar. On April 10, for example, even as the OPEC+ deal was being finalized, Putin took the opportunity to speak to Russian and US cosmonauts and astronauts aboard the International Space station ahead of Russia’s Cosmonautics Day holiday and to mention Russian-US relations and the potential for cooperation.
“We are happy that our specialists are successfully collaborating with their colleagues from the United States,” Putin said. “It is a vivid example of an effective partnership between our countries for the benefit of all of humanity. We are now also trying to organize work on current problems…I’m talking about the fight against the pandemic, as well as the situation in the global markets. The US President and I discussed these issues just yesterday, and we will speak more on that topic. So fortunately, cooperation is developing, and not only in space but also in other areas.”
Separately, in a brief April 12 statement by the Kremlin on the subjects that were discussed in the telephone talks between Putin and Trump, “issues of ensuring strategic security,” i.e. the two countries’ nuclear arsenals and the fate of the New Strategic Arms Reduction Treaty (New START), which is set to expire in early 2021, were said to have been mentioned.
A Russian RS-24 Yars intercontinental ballistic missile system rolls down the Red Square during the Victory Day parade in Moscow on 9 May, 2019
OPEC+ as a Means to an End
In January, Putin proposed a September summit meeting between the permanent members of the UN Security Council (Russia, the US, China, France and the UK) “anywhere in the world” to discuss measures to “defend peace” in the face of global challenges. President Trump reportedly welcomed the idea, as did China’s Xi Jinping.
Bhadrakumar believes that it’s at this summit that the leaders of the world’s major powers may discuss a tripartite détente and the construction of a more secure world in the wake of the coronavirus crisis, with the hope being to at least partly replace great power competition with great power cooperation.
Sourse: sputniknews.com
