Following the July 13-16 visit to Israel and Saudi Arabia, US President Joe Biden announced that Washington will continue to implement its active policy in the region, according to Reuters. However, the American leader did not manage to create a shared regional security system for Arab countries and Israel in order to counteract Iran. His attempts to convince Saudi Arabia to ramp up oil production failed to pan out as well.
What the White House tries to present as a success actually demonstrates that Biden’s Middle Eastern tour was a failure, Deputy Director General of the National Energy Institute Alexander Frolov says. No significant increase in oil production is in the works. According to the expert, current oil production figures indicate that Mideast countries do not intend to accommodate the West or help it solve its energy problems. He also reiterated that a president’s visit usually only solidifies already concluded agreements. That said, prior talks between Washington and Riyadh on boosting oil production have already been unsuccessful and this visit has only confirmed this trend.
The expert added that the chances that Saudi Arabia will yield to the US and violate earlier agreements on decreasing oil production within the framework of OPEC+ are slim. Such a move would lead to a price war and plummeting prices. This is utterly unpragmatic for the Saudi authorities so oil production can be increased only if the US uses some special levers of pressure on Riyadh, the expert added.
Strategically, American influence in the Middle East will gradually subside, according to Director General of the Russian International Affairs Council Andrey Kortunov. In his opinion, Biden’s visit was not exactly a failure, yet it hasn’t ironed out any significant problems in relations between Washington and the Arab world. The Persian Gulf monarchies still have doubts that the Middle East is a priority for the US in the security sphere. That said, the rapprochement of Saudi Arabia and Israel continues despite the failed talks on a regional defensive bloc. Indirectly, the US itself hinders the unification of the Arab states and Israel over the anti-Iranian agenda since their trust is undermined by Biden holding talks with Iran on returning to the nuclear deal. The Saudis, much like other key Middle Eastern players, will continue to find a balance between China, Russia and the US. They will make some concessions to the US yet Washington won’t always be able to push through its interests. The consultations between the US and the UAE on introducing sanctions against the Russians exemplify such unsuccessful attempts, the expert noted. The Emirates adopted a neutral stance with regards to the events in Ukraine and did not join the anti-Russian restrictions.
In general, the Ukrainian crisis is a part of the West’s "big game" against Russia following a scenario laid out by the late Zbigniew Brzezinski who served as US National Security Advisor in 1977-1981, Russian Foreign Minister Sergey Lavrov said in an interview with Izvestia published on Monday.
"If one looks at the current events through the prism of history, then the entire Ukrainian crisis is seen as a ‘big game’ according to the scenario promoted once by Zbigniew Brzezinski. All talks about good relations, about the West’s readiness to take into account the rights and interests of those Russians who found themselves in independent Ukraine and other post-Soviet countries following the breakup of the USSR turned out to be nothing more than an act. Back in the early 2000s, Washington and the European Union began to openly demand that Kiev decide whether it is with the West or with Russia," the top diplomat pointed out.
He added that since 2014, the West has been "unconditionally stage-managing the Russophobic regime it brought to power via a coup d’etat," "Bringing [Ukrainian President Vladimir] Zelensky to the forefront of any more or less noticeable international forum is also part of this staged act. He speaks, utters passionate speeches and when he suddenly proposes something reasonable, he gets a slap on the wrist, like it was following the Istanbul round of Russian-Ukrainian talks. Back then, at the end of March, it seemed that some hope emerged in the dialogue, yet Kiev was forced to backpedal, using, among other things, the openly staged Bucha episode," the Russian foreign minister explained.
An embargo on importing Russian oil and coal as well as decreased Russian gas imports can increasingly lead to the economic stratification of the European Union. Currently, four months before the onset of the heating season, the figures on how much the European underground storage facilities are filled up clearly show that the poorest countries are the worst off.
Over the recent years, Europe has conducted several very dangerous experiments with its own economy, Director of the National Energy Security Fund Konstantin Simonov pointed out. These include the energy transition strategy, shunning Russian coal and oil as well as efforts to decrease the gas import from Russia. These "gaps" have to be plugged with money. Each of these actions demands additional billions of euro which not everybody has. This can lead to a rise in energy poverty and Europe’s segregation along economic lines, the expert noted.
"If common sense does not prevail in Europe, which I am very much hoping for, then centrifugal forces may intensify and then the attempts of countries to leave the EU are quite possible," the expert cautioned, noting the process may snowball. According to the expert, the European Union has not yet outlived its usefulness and may continue to exist for a long time, yet when political projects are not supported by economic might they are destined to fail.
The shaping of one’s own oil benchmark is an important solution on the path to overcoming dependency on foreign oil pricing agencies, however, launching trading on a national platform in the fall of 2023 is a difficult task, analysts told Izvestia. According to the Russian government’s plan, it is precisely the national benchmark oil that will be traded on a domestic platform that will create the actual pricing without external pressure and restrictions. The experts think that in order for an oil brand to become a benchmark, several factors should come together: sufficient volumes of actual supplies, convenience of shipments and buyers’ trust. The last aspect is crucial since it means that market players should have confidence in the oil’s quality, the stability of shipments and their ability to buy and sell it with minimal expenses.
"It is not quite clear why Platts and Argus ‘dictate’ prices to us, and not only on crude oil but on petroleum products as well. The mechanism of their formation is not transparent, to put it mildly," Associate Professor at the Russian Government’s Financial University Valery Andrianov notes. "Moreover, the national taxation system for the oil industry is based precisely on these figures established by the companies from unfriendly states. This shouldn’t be, and the formation of our own benchmark is an important solution on the path to overcoming dependency on foreign pricing agencies," he noted, adding that overall, the emergence of a new benchmark on the market that doesn’t depend on the West’s political pressure will make the international trade system more transparent, economically logical and less politically engaged.
"By themselves, benchmark brands are an illusion, they have been historically based on the physical properties of raw materials in specific deposits, yet nowadays these deposits, above all, Brent in the North Sea, are depleted and do not fit the part of a pricing reference point. At the same time, the Russian Urals export blend with a potent raw materials base behind it, is not a benchmark brand and its pricing de facto is defined by the quotes for foreign benchmarks," he told Izvestia.
According to head of the Energy Development Center Kirill Melnikov, in reality, it is not Brent but the Urals brand that has been the most popular in Europe for the past five-seven years. "Nowadays, the creation of our own benchmark is seen as a way for Russia to lessen dependency on the price formation based on Brent, and a shift to selling oil for rubles or the buyers’ national currencies as well as create our own reference point for the taxation of the oil and gas industry," the expert added.
At the scheduled meeting of the Board of Directors on Friday, the Bank of Russia will continue to lower the key rate, analysts think. According to their forecasts, it will drop by no less than half a percent, that is, at least to 9% annually. The continued lowering of the key rate is justified by low inflation over the past two months, weak consumer demand and the slowdown of loans.
According to Sergey Grishunin, managing director of the NRA's rating service, on Friday, the Central Bank may lower the key rate to 8.5-9% annually with 9% being a more likely figure. Yet, if the Bank of Russia decides that the profit from lowering the key rate is higher than the losses of the economy from inflation risks, then the key rate will be lowered by one percentage point, the expert thinks.
The lowering of the key rate is usually a factor of weakening the ruble, yet in the current situation this interrelation won’t fully work, while the exchange rate of the Russian currency will be determined above all by the country’s balance of payments and the degree of currency control measures, Director of Russian Standard Bank’s Department of Financial Market Operations Maxim Timoshenko says. According to his forecast, the cycle of lowering the key rate is likely to continue. "By the end of this year, we expect the key rate to be at the level of 7.5-8% annually," the expert noted.
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