Behind the Russia-Saudi Breakup, Calculations and Miscalculations – The New York Times
Sergei Guriev, a professor of economics at Sciences Po in Paris and the former chief economist of the European Bank for Reconstruction and Development, said torpedoing the production agreement with OPEC is “not at all in Russia’s interest” because it has only opened a price war with the Saudis and is unlikely to kill off competition from American shale oil companies.
“They won’t die, but only go into hibernation,” he said of the American companies, which will lay off workers and mothball drilling rigs until prices recover to profitable levels.
All the same, Mr. Guriev added, Mr. Sechin and others in Russia opposed to the alliance with the Saudis “are happy to shoot themselves in the foot, so long as they can shoot the Americans, too.”
The share price of Mr. Sechin’s company, Rosneft, has fallen 16 percent since Friday. That was the day major oil producers failed to reach an agreement in Vienna to reduce production, as concerns about coronavirus’s impact on economic demand spread across the globe. Following the Vienna meeting, the price of crude oil promptly fell by nearly 30 percent, though it recovered slightly on Tuesday.
That Russia would risk a punishing and possibly prolonged struggle with Saudi Arabia for market share underscores how much geopolitical tensions — amplified by Russia’s annexation of Crimea in 2014 and the sanctions imposed by the West as punishment — have scrambled Russia’s economic calculations and also the balance of influence within the Kremlin.
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