By Dr. David Ramin Jalilvand for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.
Ahead of the Organization of the Petroleum Exporting Countries’ (OPEC) ministerial meeting in Vienna Nov. 30-Dec. 1, Iranian Oil Minister Bijan Namdar Zanganeh expressed hope that production cuts that were agreed to last year would be extended.
What was at stake, however, was more than energy markets. Zanganeh and his counterparts, including Qataris, Saudis and Emiratis, met amid a delicate geopolitical situation. In light of regional competition that features economic blockades, proxy warfare and the exchange of public insults, the prospect of negotiating and subsequently enforcing a joint plan to shape global oil markets might have appeared unlikely.
On the contrary, a deal was reached to maintain the production cuts without major obstacles. As in the previous year, though, an effective deal could only be realized through cooperation with non-OPEC energy giant Russia, which together with Saudi Arabia, OPEC’s leading producer, is bearing the brunt of cuts.
For Iran, the Russian-Saudi accord is somewhat of a mixed blessing. On the one hand, Tehran is pleased with the outcome itself. On the other hand, it would certainly be alarmed if Russian-Saudi cooperation would extend to sensitive arenas where the two are at odds — including regional geopolitics.
But rather than representing an overall warming of Russian-Saudi relations, the process leading to the OPEC cuts reflects a combination of necessity (in Riyadh) and realpolitik (in Moscow).
Low oil prices have caused an economic crisis in Saudi Arabia. As the Saudi government’s financial reserves are depleting and tangible progress of its touted “Vision 2030” reform program remains outstanding, Riyadh needs any increase in oil export revenue it can get.
The kingdom takes harsh stances on most of its pressing policy issues, including domestic opposition, the conflict in Yemen, the crisis with Qatar and the proxy warfare in Syria. But Riyadh continues to show remarkable flexibility on oil policy — even though Moscow is a key backer of Syrian President Bashar al-Assad and a partner of Tehran.