SHAFAQNA- In April 2014, when the Russian President Vladimir Putin was at the peak of his tsarist splendor after his invasion and subsequent annexation of Crimea, he spoke about his ability to control Europe’s gas and energy supplies.
He was like a hurricane, blowing away any objections by the West and the US. His only interest was to know what Saudi Arabia’s stance was.
At the time, media outlets quoted Putin as saying that Russia’s oil and gas revenues would not drop unless prices did, which would be the case if more oil was pumped into the market. He also said that of all the countries in the world, only Saudi Arabia has the real potential to increase production and bring down world prices.
Putin said that he had great respect for the Custodian of the Two Holy Mosques, the King of Saudi Arabia, adding that he considered him to be a very clever and balanced man.
That was more than six months ago. Today oil prices are witnessing a fast decline, primarily hurting the countries that estimated prices would remain high, such as Iran and Russia, among others. As for Saudi and other Gulf states, they insist on letting the market correct itself. This is not the first wave of price decline, asserts Saudi oil minister Ali Al-Naimi.
For an apprehensive country such as Iran, what happened was a “betrayal.” As oil prices fell by more than 40 percent since June, Iranian President Hassan Rouhani accused unidentified countries—the reference to Saudi Arabia and Gulf is clear—of conspiracy. Iran’s 2014 budget was designed on the assumption that oil would be going for 100 US dollars per barrel.
Like Iran, Russia is groaning at falling oil prices. Saudi has huge financial reserves and a great internal debt capacity. According to experts, the price decline will not affect Saudi now or in the medium term.
I will leave the interpretation of the economic and financial implications to the experts. What concerns us here is the political fallout.
There is nothing strange in Iran believing in conspiracy or Russia flattering Saudi Arabia. But the Kingdom would not irresponsibly risk its wealth for the sake of political payback. At the same time, while it is prioritizing its economic interests, Saudi is not interested in providing comfort and tranquility for other oil-rich countries pursuing hostile policies.
There has always been a debate over the relationship between politics, economics and petroleum. Had Saudi Arabia not adopted a pragmatic line on petroleum, it would not have remained safe for over half a century in this field, compared to what has happened in other countries.
However, one cannot always separate oil from the fire of politics. Petroleum is the essence of wealth in our region; it is a commodity that dominates the economy and politics.