Vision 2030 and energy agreements define Saudi talks at G20
London - Global energy markets welcomed the announcement that an agreement by Saudi Arabia and Russia to address the global oil glut had been reached.
Saudi Energy Minister Khalid al- Falih and his Russian counterpart Alexander Novak pledged to “act together” to stabilise energy markets. Neither minister, however, provided details on how the issue would be tackled.
The announcement, made at the Group of 20 summit in China, came ahead of a meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Algeria, which Novak is scheduled to participate in. The prospect of a production freeze might become a reality if Moscow has its way.
Novak was quoted by Russia’s official news agency was saying that the agreement under discussion would see a six-month output freeze at levels maintained during July, August or September. In an interview on Al Arabiya news channel, Falih said an output freeze would be “favourable” but was not necessary because the market was steadily improving.
The Saudi delegation at the G20 meeting, was led by Deputy Crown Prince Mohammed bin Salman bin Abdulaziz, who met with Russian President Vladimir Putin to discuss common concerns, particularly the war in Syria. Riyadh and Moscow support opposing sides in the conflict but are both battling the Islamic State (ISIS).
Following his meeting with Prince Mohammed, who is also Saudi Defence minister, Putin, described Saudi-Russian relations as friendly and stated that the two countries “agree on the need to work together in some way or other on the world oil market”.
“Saudi Arabia did not rule out the possibility of freezing production and there have been long-running discussions on this issue,” Putin said.
However, analysts say the talks went much further.
“Russia and Saudi Arabia are working together to resolve outstanding regional issues and the two countries are getting closer in terms of relations with each additional new step and understanding reached,” said Alexander Shumilin, director of the Centre for the Analysis of Middle East Conflicts at the Russian Academy of Sciences.
Shumilin stressed that an agreement between the two countries on the stability of oil prices is economically motivated, beneficial to both and is not necessarily tied to political issues in the Middle East.
“Both are working in earnest to find speedy solutions to the Syrian and Yemeni crises, although there are a lot of obstacles,” Shumilin said. “The insistence of the two countries to continue cooperating and coordinating will contribute to gradually remove these obstacles until a full understanding is reached on resolving the crises in the region.”
Saudi Arabia also took the opportunity at the G20 summit to generate interest in its ambitious Vision 2030 reform plan. The brain child of Prince Mohammed, who is also head of the kingdom’s Council of Economic and Development Affairs, the plan is designed to wean the kingdom’s economy off its oil dependency while creating jobs and stimulating the private sector.
The plan includes selling a stake in the world’s most valuable company, Saudi Aramco, as well as creating the world’s largest sovereign wealth fund.
To that effect, the deputy crown prince’s meetings in China involved a who’s who of global leaders and decision makers, including US Secretary of State John Kerry, British Prime Minister Theresa May, Indian Prime Minister Narendra Modi, UN Secretary-General Ban Ki-moon, German Chancellor Angela Merkel and French President François Hollande.
In a related development, Bloomberg News reported that Saudi Arabia could cancel billions of dollars’ worth of projects and slash ministry budgets by 25%.
The report, which quoted an unidentified official, states that the government is looking into thousands of projects valued at about $69.3 billion, with one-third of them possibly on the chopping block. The report said a separate plan includes the merging of some government ministries and eliminating others.
Since mid-2015, Saudi Arabia and fellow Gulf Cooperation Council states have curtailed spending on construction projects and some have reduced energy subsidies to limit budget deficits caused by low oil prices.