China and Saudi Arabia reaffirm the long-term stability of oil trade
Countries such as China, Turkey and India are proving to be eager partners for Russia's fuel industry, as Turkey has doubled Russian oil imports this year and vied to become a hub for Russian LNG transfers to Europe following damage to the Nord Stream pipelines. That crude oil market faces many uncertainties as a result of complex and changing international conditions. Saudi Arabia stressed that it remains "the most reliable partner and exporter of crude oil supplies to China".
Saudi Energy Minister Abdulaziz bin Salman bin Abdulaziz met by videoconference with the head of China's national energy administration, Zhang Jianhua, and both "assured their readiness to cooperate to maintain the stability of the global hydrocarbon market, maintaining effective communication, and strengthen reciprocity to meet future challenges". The two noted the importance of exchanging views as two of the world's largest energy producers and consumers, according to the official Saudi news agency SPA, which further elaborated that the two leaders stressed the importance of a reliable long-term oil supply to bring stability to the oil market. During the conversation it was also agreed to "cooperate within the framework of the bilateral cooperation agreement in the field of peaceful uses of nuclear energy between the governments of China and Saudi Arabia", among other things.
The thirteen members of OPEC+, led by Saudi Arabia and Russia, decided on 5 October to reduce their production quotas in order to maintain the price of crude, a decision that strained relations between Riyadh and Washington, causing the White House to review its relationship with Saudi Arabia, which it accused of "aligning itself with Russia". The Kingdom, for its part, defended the OPEC+ agreement to reduce oil supply and claimed that it was a purely economic decision, something that was backed by many countries, mostly in the Gulf. Despite the large discounts, the price of oil is still much higher than it was in 2020, before the pandemic, allowing Russia to earn more money from oil exports even though production has fallen.
EU countries have struggled to disengage from Russian fuel in general, not just oil; Russian natural gas, pumped through routes such as the Nord Stream 1 pipeline damaged in September, provided around 40% of Europe's natural gas before the invasion of Ukraine. But even as Europe tries to move away from Russian gas flows, investing instead in Norwegian fuel, Russian LNG is finding its way to European markets via cargo ships, as Javier Blas wrote in Bloomberg earlier this week.
Even with the Nord Stream 1 pipeline out of service, and leaving aside transfers to China, now Russia's biggest buyer of natural gas, European countries are importing record amounts of Russian LNG at market prices, according to Bloomberg. France has bought 6% more Russian LNG between January and September this year than in the whole of last year; Spain has already broken its record for Russian LNG imports this year, and Belgium is on track to do the same. The stakes for natural gas imports are somewhat different from those for Russian oil in several ways.
First, the EU has not imposed sanctions against it as it has with oil products, although the bloc intends to eliminate its dependence on Russian fossil fuels by 2027. Second, Russia has already used European subordination of its natural gas as an instrument of war; Russia cut off access to many European countries that refused to pay for LNG in roubles, and cut total production to Europe by 60% in June and 80% in July, according to Reuters.
As Russia moves further away from the world market, these methods will become more pronounced and common, as they have in other sanctioned states such as Iran and Venezuela, making fuel for Russia's war machine and the revenues it generates even harder to track.
