Saudi Arabia’s evolving oil strategy and its recent move to join BRICS (Brazil, Russia, India, China, and South Africa) have created ripple effects in global energy markets and sparked complex dynamics with Russia, particularly within the energy and geopolitical realms. Here’s a detailed exploration of the situation:

Saudi Arabia’s Voluntary Oil Production Cuts

Since mid-2023, Saudi Arabia has been implementing significant voluntary oil production cuts as part of its strategy to support global oil prices. The kingdom, as the de facto leader of OPEC (Organization of the Petroleum Exporting Countries), has always played a central role in managing supply to stabilize prices. In 2023, Saudi Arabia slashed its oil production by an additional 1 million barrels per day (bpd), tightening global supply to boost prices, which had been sagging due to economic slowdowns in major markets like China and Europe.

Impact on Russia:

While Saudi Arabia’s cuts help stabilize prices, Russia has not been as disciplined with its OPEC+ commitments. Facing economic pressure due to sanctions from the Ukraine war, Russia has been more focused on maintaining its revenue by selling oil, even at discounted rates. This divergence in policy has created friction within the OPEC+ alliance, as Saudi Arabia sacrifices production to prop up prices, while Russia seeks market share through higher exports, undercutting Saudi efforts.

Russia’s Discounted Oil Sales

Russia, in response to Western sanctions, especially the G7 price cap on its oil exports, has been selling its oil at steep discounts to countries like China, India, and others. India, for example, has become one of the biggest buyers of Russian crude, purchasing it at discounts of up to 30%. This move allows Russia to continue generating revenue despite sanctions but creates challenges for Saudi Arabia.

Competition for Market Share:

By selling oil at discounted rates, Russia directly competes with Saudi Arabia in key markets like China and India. As a result, Saudi oil becomes more expensive, making it harder to compete in the same markets. This has led to growing tensions, as both nations are major oil suppliers but have divergent economic and political goals. While Saudi Arabia aims to keep prices stable or high to support its domestic economy, Russia focuses on maximizing revenue in the short term, even if it results in lower prices.

 Joins BRICS Saudi Arabia

Saudi Arabia’s entry into BRICS in 2024 adds a new geopolitical dimension to the global energy landscape. BRICS, a group of emerging economies, has increasingly become a platform for countries seeking alternatives to Western-dominated institutions like the G7 and the IMF. By joining BRICS, Saudi Arabia is signaling its intent to diversify its diplomatic and economic relationships beyond its traditional Western allies, notably the U.S.

Energy Diplomacy within BRICS

Saudi Arabia’s inclusion in BRICS has the potential to reshape energy diplomacy within the group. China and India, two of the largest oil consumers in the world, are already major buyers of both Saudi and Russian oil. Saudi Arabia could use its BRICS membership to assert more influence over energy trade agreements and reduce reliance on Western markets. This could also create tension with Russia, which has been deepening its ties with China and India, especially as it seeks alternative markets to Europe.

BRICS, with Saudi Arabia’s membership, could become a powerful bloc in the global energy sector, potentially setting oil prices, fostering new trade agreements, or even establishing an alternative currency mechanism for oil trade, as some BRICS members have discussed.

Russia-Saudi Competition within BRICS

Within BRICS, Russia and Saudi Arabia may find themselves in competition for leadership in energy policy. While both countries share common interests in stabilizing global oil markets, they have differing approaches. Saudi Arabia has a long-term vision focused on maintaining high oil prices to fund its ambitious Vision 2030 development plan, which aims to diversify its economy away from oil. In contrast, Russia is more focused on the short-term goal of maximizing revenue from its oil sales to compensate for the economic fallout from sanctions.

China’s Role:

China, the largest energy consumer in the world, holds considerable sway over both Russia and Saudi Arabia. China’s demand for oil is critical for both nations, and it has been the largest buyer of both Russian and Saudi crude. As Saudi Arabia joins BRICS, it could deepen its energy ties with China through new long-term contracts, potentially edging out Russian oil. Alternatively, China could play both suppliers against each other to secure more favorable terms, creating further competition between the two energy giants.

Diversification and Geopolitical Strategy

Saudi Arabia’s long-term strategy revolves around diversifying its energy relationships and reducing dependence on Western-dominated markets. By aligning more closely with China, India, and other BRICS nations, Saudi Arabia can tap into growing markets with strong energy demand, reducing its vulnerability to Western sanctions or price fluctuations. This aligns with Crown Prince Mohammed bin Salman’s broader push to make Saudi Arabia a global investment hub and a key player in international diplomacy.

Competition with Russia for Influence:

Saudi Arabia’s diversification efforts could challenge Russia’s energy dominance within BRICS. Russia has traditionally used its energy exports as a tool of geopolitical influence, particularly in Europe and Asia. As Saudi Arabia expands its presence in BRICS and deepens ties with major oil-consuming countries, Russia may find itself facing increased competition for influence in regions like Asia and Africa, where both countries have growing interests.

Potential Impact on Global Energy Markets

The shifting dynamics between Saudi Arabia and Russia, especially within the BRICS framework, have the potential to reshape global energy markets. If Saudi Arabia and Russia fail to coordinate their oil strategies, it could lead to increased volatility in oil prices. For instance, if both countries compete aggressively for market share in key regions like Asia, it could drive prices down, creating economic challenges for oil-dependent nations.

Conversely, if Saudi Arabia and Russia find a way to align their strategies, perhaps through BRICS or OPEC+, they could maintain tighter control over global oil prices. This would benefit both nations in terms of revenue but could cause friction with major oil-importing countries like China and India, which prefer lower prices.

Conclusion

Saudi Arabia’s new oil strategy, particularly its growing involvement with BRICS, is reshaping its relationship with Russia and the global oil market. As the two countries navigate their roles as major energy suppliers, their competition for market share and influence within BRICS will likely intensify. Although both nations share some common interests, such as stabilizing oil markets, their differing strategies—Saudi Arabia’s focus on price stability and Russia’s emphasis on revenue generation—could heighten tensions, both within OPEC+ and BRICS. The outcome of this evolving dynamic will have significant implications for global energy markets and geopolitics in the coming years.