Politico: Saudi Arabia Can Undermine Russian Economy

• 3.10.2024, 11:04

A huge risk for the budget of the Russian Federation.

Russia risks facing a shortage of funds for the military economy if Saudi Arabia increases oil production. Riyadh is dissatisfied with the inconsistency of countries in reducing supplies to raise prices from the current $70 to $100 per barrel.

Politico reported.

Saudi Arabia plans to increase exports to capture market share, even as prices decline.

Experts warn that such a strategy would deal a blow to the Russian economy, which relies heavily on oil revenues.

Mikhail Krutikhin, a Russian energy analyst, believes the move poses a “huge risk” to Russia's budget. If prices fall by $20, this could reduce Russia's revenues by 1.8 trillion rubles, which is 1% of GDP, economist Aleksandra Prokopenko notes.

Against the backdrop of low oil demand and violations of production quotas by Russia, Saudi Arabia is considering changing tactics to strengthen its dominance in the market.

Saudi Arabia is ready to increase oil production, warning that it will strive for market share, not high prices. Russia and other countries such as Kazakhstan and Iraq are accused of exceeding the quotas agreed with OPEC+. Moscow continues to produce oil above its quota, despite promises to cut production.

Russia's profit from fuel sales increased by 41% in the first half of the year, despite the sanctions. The Kremlin uses the “shadow fleet” to circumvent restrictions, earning billions by supporting the war with Ukraine. Even if Saudi Arabia lowers prices, Russia is unlikely to stop its military actions.