Covid-2019 and Saudi Arabia – Russia disagreement on oil production

Saudi Arabia may refuse to cooperate with the Russian Federation in terms of coordinating oil production volumes due to Covid-2019 which is demonstrating how a virus might impact not only the national security but also the economy and the international trade market with serious repercussion in the case of Russia because the country strongly depends on energy export.

According to sources, Saudi Arabia is concerned that the spread of the coronavirus will have a negative impact on global oil demand, while the Russian side believes that there is no reason to reduce production because the effects of the coronavirus on oil demand in China will be temporary. In addition, Moscow believes that the reduction in supplies from Lybia and Venezuela will compensate and balance the weakening demand for oil in China.

Because of the coronavirus Saudi Arabia together with Kuwait and the United Arab Emirates (UAE), which account for more than half of the total production of OPEC countries, are holding talks on the possibility of reducing total oil production by an additional 300 thousand barrels per day.

Why this news matters? Because the Russian Federation is heavily dependent on oil and gas exportation (in 2019 the energy revenue contributed approximately 7.9 trillion Russian rubles to the federal budget.) and the reduction in production and export might affect the country which has been facing economic and financial problems due to the lack of diversification and Western sanctions.  Moreover, a disagreement in terms of oil production might affect Saudi – Russian relations which the Kremlin has tried to restore and improve according to its strategy in the Arab-Muslim world.