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Opec and Russia considering 10-20 year oil alliance: Saudi Crown Prince

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering a deal to greatly extend a short-term alliance

Reuters  |  New York 

Saudi Arabia's Crown Prince Mohammed Bin Salman
Saudi Arabia's Crown Prince Mohammed Bin Salman

and are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.

Saudi told Reuters that and were considering a deal to greatly extend a short-term alliance on curbs that began in January 2017 after a crash in crude prices.

"We are working to shift from a year-to-year agreement to a 10 to 20 year agreement," the told Reuters in an interview in late on Monday.

"We have agreement on the big picture, but not yet on the detail."

Russia, not a member of the Organization of the Petroleum Exporting Countries, has worked alongside the 14-member group during previous gluts, but a 10 to 20 year deal between the two would be unprecedented.

Top OPEC recruited and other non-OPEC countries to help drain oversupply when prices collapsed to below $30 a barrel in 2016 from over $100 in 2014.

Crude has since recovered to $70 but fast-rising output from U.S. shale producers has capped prices.

"This is all about whether the arrangement is a short-term expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil," said Daniel Yergin, vice chairman at consultancy

"OPEC countries want to find a way to institutionalize this relationship rather than to have it be a one-shot deal."

at consultancy said wanted help in breaking the boom-bust cycles that characterize by capping crude on the upside as well as by helping lift

"History shows that without a long-term, powerful, competent coherent, in the ... you get Wild volatility of the sort we have seen in the past 10 to 15 years and that and do not want to see again," McNally said.

He said that would require Russia to join Saudi in building spare production capacity to use when prices rise too much.

SAUDI, "THICKER THAN OIL"

A long-term pact between and would effectively co-opt Russia to the Saudi-led OPEC cartel while strengthening Russia's hand in the where the has long been the dominant super-power.

News of the potential oil alliance came at a time when the two have been working to cement an economic relationship despite being at odds over the conflict in Syria, where they back opposing sides.

Riyadh supports rebels fighting Syrian Bashar al-Assad's army, while Russian and Iranian forces have backed Assad - meaning that Russia effectively sides with Iran, Riyadh's regional arch-foe.

A meeting between the Saudi and Russian Vladimir Putin on the sidelines of a meeting in in September 2016 was instrumental in bringing Russia on board to support OPEC, non-OPEC

Last October, Saudi Salman became the first Saudi monarch to visit Russia, providing investment and political support for a Russian economy battered by Western sanctions.

"It is a very important strategic development," at said of a potential 10 to 20 year Saudi-Russia

"First, the Crown Prince is making the statement, not the oil minister, one more clear sign that he (like Putin) is the final word on his country's

"Second it is one more sign of the major reversal in Saudi-Russia relations. Saudi was a staunch cold war ally of the U.S. Now this Russia-Saudi alliance appears to be thicker than oil and seems to be driven by the personal affinity between Putin and MBS," said Croft.

IPO LATE 2018, EARLY 2019

The crown prince predicted that world would not peak until 2040, despite advances in and the electric vehicle.

In an attempt to end Saudi Arabia's reliance on oil, he is leading a push to diversify the Saudi economy away from by 2030.

Riyadh plans to raise funds through the flotation of a 5 percent stake in state Saudi oil company Time is running out for an initial public offering this year but the crown prince said the IPO could still take place at the end of 2018 or in early 2019, depending on financial market conditions.

Saudi said last week that documentation was ready but that a venue for the IPO had not yet been decided. The stock exchange is still in the running for the IPO, alongside and Hong Kong, but Falih said there was a risk of a "frivolous" legal action if were listed in the

First Published: Wed, March 28 2018. 07:46 IST
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