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Finance & MarketsSaudi Arabia wants Russia in OPEC, EU's Russian Oil embargo broken by...

Saudi Arabia wants Russia in OPEC, EU’s Russian Oil embargo broken by Greece, Malta and Cyprus

Saudi Arabia hopes to create a new agreement with OPEC +, which, despite sanctions, will include Russia. The intention was announced by the Minister of Energy of the kingdom Prince Abdulaziz bin Salman Al Saud in Financial Times. According to him, the agreement is not yet clear, but oil production can be increased if there is demand.

Riyadh hopes to “work out a consensus with OPEC+ that includes Russia,” insisting that “the world must appreciate the value” of the Union of Producers, the minister said. At the same time, he said that it is too early to talk about an agreement because of the “chaos” in the market.

In his opinion, under the new agreement, production can be increased if there is a corresponding demand for oil. The minister said that prices are rising primarily not due to insufficient production but the loss of processing capacity. “Over the past three years, the whole world has lost about 4 million barrels of oil refining capacity, 2.7 million of them just with the onset of the coronavirus,” he said.

The OPEC+ agreement has been in operation since 2017. In 2020, it was updated, and it will be valid until the end of 2022. Against the background of sanctions on Russian oil imposed after the start of the military operation in Ukraine, the United States began to pressure Saudi Arabia, urging it to increase production, but Riyad was not ready to violate the agreement.

In March, The Wall Street Journal (WSJ) sources reported that the United Arab Emirates and Saudi Arabia leaders refused to hold telephone conversations with U.S. President Joe Biden. According to the publication, against the backdrop of the Russian military operation in Ukraine, disagreements between the United States and the kingdom reached a peak by April.

The support of Moscow by Saudi Arabia is all the more valuable because it is a traditional ally of the United States, which, along with its Western and some Asian partners, declared economic war on Russia.

Russian participation is essential as Riyad understands that without one of the largest producers of oil and oil products, it will be extremely difficult, if not impossible, to fulfil its main task – stabilizing the oil market.

Cooperation between Riyadh and Moscow on quotas began in 2016. Since February 24, the Saudi has been trying to remain neutral regarding the situation in Ukraine. In almost three months, Arabian Crown Prince Mohammed spoke twice with President Putin on the phone, and on May 9, he and his father, King Salman, congratulated Russia on Victory Day.

In addition, several participants in the OPEC + agreement do not comply with its conditions and do not increase production by the necessary quotas. Among the 26 parties to the agreement, only the Saudi and the UAE have sufficient production capacity to increase output sharply.

Prince Abdulaziz believes there should be no politics in the OPEC + agreement. He also believes that the new deal will have to be amended due to the unexpected outbreak of the pandemic in China, the slowdown in the global economic recovery and big problems with supply chains. To increase oil production and refining capacity, he believes, more investment in the oil and gas sector is needed, despite the transition to clean energy, which is based on the elimination of fossil fuels and their replacement with renewable energy sources. 

“The situation requires us to sit down at the negotiating table and remove the masquerade and the so-called “political correctness,” says Prince Abdulaziz. “It is necessary to try to understand the existing reality and find ways to solve its problems.”

Oil Embargo circumvented

Greek shipowners are blocking a European embargo on the transportation of Russian oil by European tankers, the online edition of the Greek newspaper Imerisia reported. 

The paper said that Greece and Malta are calling for a new embargo, and Cyprus intends to veto a new package of sanctions. According to a publication in the German newspaper SPIEGEL, the situation has irritated the German government, writes Imerisia. 

The publication also cites information from Deutsche Welle that actions by Greece, Malta and Cyprus against a possible new embargo have paid off and the European Commission’s proposal to ban European tankers from transporting Russian oil is no longer part of the seventh package of sanctions against Russia. 

According to German media reports, two-fifths of oil tankers are owned by shipowners from Greece and Malta. According to an article in the Telepolis news agency, shipowners from Greece, Malta and Cyprus are making big money by circumventing the European embargo imposed on Russia’s merchant navy last month. The article states that shipowners have managed to pressure their governments and the EU by demanding that they not be embargoed. They say transport contracts bind them, and a possible embargo could jeopardize their economic survival. 

As an argument, they point out the huge investments they have made in ships that can transport liquefied gas, Imerisia points out.

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