The active cooperation between Russia and Saudi Arabia in the oil sector could potentially create problems for the US economy and even for the campaign for the re-election of United States President Joe Biden for a second term, reports Bloomberg. Both countries are interested in rising oil prices to balance their budgets.
“This month, the OPEC+ group decided to cut oil production, doing so for the second time after Biden flew to Saudi Arabia last summer in an attempt to increase pumping volumes. And it is possible that this is only the beginning, ”the publication notes.
In connection with such moves by Saudi Arabia and OPEC +, the risks of a recession in the US have increased, because “consumers who spend more money on electricity will have less to buy other things, and inflation will creep up,” Bloomberg believes. The agency also admits that Russian President Vladimir Putin, thanks to this, “will receive more funds for offensive operations in Ukraine.”
Analysts polled by Bloomberg note that Saudi Arabia is interested in rising oil prices and stabilizing them at least at $75-80 per barrel in order to balance its budget and fulfill all social obligations to citizens. To implement ambitious plans to build new cities and implement large-scale infrastructure projects, the kingdom would benefit from an oil price close to $100 per barrel.
Russia, in turn, also benefits from rising oil prices to $100 per barrel. Alex Isakov, an economist at Bloomberg Economics Russia, has calculated that this price level will help the Kremlin balance the country’s budget amid rising military spending.
Saudi Arabia and other major Arab oil producers – the UAE, Iraq and Kuwait – decided on April 2 to support Russia’s efforts and unilaterally cut production. We are talking about a reduction of 1 million barrels per day from May until the end of the year, while Russia will extend for the same period the reduction in production by 500 thousand barrels already begun in March. This led to an increase in the price of oil. According to Western analysts, an increase in oil prices will push inflation and make it even more difficult for the US Federal Reserve to find a balance between increasing the key rate and maintaining financial and economic stability.
Read more about the reduction in production – in the material “Kommersant” “Foreign countries did not let us down.”