Bluff and Drama – Saudis and Russia

Initially, the four laggards resisted. What followed was a week-long drama that pitted Riyadh and Moscow against fellow oil nations. Consistent with officials involved within the talks, consultants, and oil traders, who asked to not be named. Everyone had an excuse, from technical problems to errors of measurement. But Moscow and Riyadh took a tough line.

The Russian delegation made clear the one-month extension was “contingent” on better compliance, consistent with an individual conversant in the message. Days later, Novak explained his view during his OPEC+ opening speech: “It is vital to notice the market remains fragile and wishes decisive action. So that’s why it’s now as important as ever to take care of 100% conformity.”

Saudi Arabia went a step further

Saudi Arabia went a step further: Not only did it insist that compliance had to enhance to 100%. It asked the cheaters to catch up on their past sins. They might need to cut deeper from July to September to form up for his or her over-production. In May and June — a very painful punishment even as oil prices are rising.

Soon, Prince Abdulaziz, a seasoned oil diplomat, rallied other members behind his proposal and he presented an ultimatum. The entire OPEC+ agreement was contingent as well as on the four countries accepting the concept of compensation.

After some diplomatic wrangling, Nigeria, Angola, and Kazakhstan bowed to the pressure. But Iraq was resolutely against the deal. Ali Allawi, who was representing Iraq as acting oil minister, sent a letter saying Baghdad would only be ready as well as to fulfill its quota by the top of July — and rejected the thought of compensation.

With the talks at an impasse, Russia and Saudi Arabia told everyone that the first June 4 meeting wouldn’t plow ahead. And threatened to cancel the long-planned June 10 gathering too.

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