The Russian Federation and the Kingdom of Saudi Arabia, the world’s leading oil exporters, were rocked by the collapse of oil prices in 2014. They both initially responded by trying to retain their positions on key export markets. But by December 2016, they had reached an agreement to coordinate production cuts with the Organization of the Petroleum Exporting Countries (OPEC) in hopes of restoring balance to the market. This year has seen both countries state their intentions to form a longer-term partnership and to continue coordination into the future, sparking concern that the two have formed a political entente of sorts. However, a close consideration of the context in which the two states agreed to cooperate suggests it is markets, not politics, that drive cooperation.
Rising shale production in the United States, political risks to oil markets created by sanctions on oil production in Russia, Iran, and possibly Venezuela and differing political interests in the Middle East suggest that energy cooperation is not, at its root, political. Even if Russia continues to coordinate production with OPEC in the longer term, this so-called OPEC+ will likely face the same market challenges that OPEC has faced since the 1980s, with shifts in price, demand, and non-OPEC+ production affecting the market. Oil prices are likely to remain volatile, creating a boom-and-bust cycle for oil markets and Russia-Saudi ties.