Putin's Middle East trip aims to boost flagging OPEC+ credibility, Russian power-broking

Russian President Vladimir Putin is heading to the Middle East on Dec. 6 in a rare overseas trip, aiming to shore up Moscow's OPEC+ alliance with Saudi Arabia and the UAE in the face of US sanctions pressures and growing regional security concerns.

With the oil market greeting the latest OPEC+ production cut announcement with ennui, and Russia seeking to burnish its increasingly important geopolitical ties with Riyadh and Abu Dhabi, the Kremlin is rolling out its biggest guns, including senior officials and business leaders, to accompany Putin on his tour.

Putin's first stop in Abu Dhabi will be amplified by the UAE's simultaneous hosting of the UN's COP28 climate talks in Dubai, a forum at which big oil producers have usually been vilified, but which this year casts a spotlight on the petrostate's efforts to include fossil fuel interests in the environmental debate.

The Russian leader will travel on the same day to Saudi Arabia, where he will meet Crown Prince Mohammad bin Salman for what the Kremlin described as talks on "trade, economic and investment themes ... and an exchange of views on questions on the regional and international agenda."

It comes as the OPEC+ group's latest effort to boost oil prices with production and export cuts, unveiled Nov. 30, risks falling flat, with oil prices seemingly stuck below the symbolic $80/b mark amid seasonal demand weakness and worries over China's economy. The Platts Dated Brent North Sea benchmark was assessed at $78.13/b on Dec. 5, continuing a broadly downward trend since late-September.

Kremlin spokesman Dmitry Peskov acknowledged the issue in announcing Putin's trip, saying Dec. 5 that markets were subject to "inertia" and efforts to bolster the market sometimes had a "delayed" effect, in comments quoted by Ria Novosti news agency.

The drive to shift that inertia will be amplified by the participation of Deputy Prime Minister Alexander Novak, who coordinates Russia's ties with the OPEC+ producer group, and central bank chief Elvira Nabiullina, a key figure in Russian efforts to facilitate trade in non-dollar currencies and thus circumvent western sanctions.

Providing added heft will be the founder and former chairman of Russia's second largest oil producer Lukoil, Vagit Alekperov, a veteran of Moscow's outreach to OPEC since before the wider OPEC+ group was formed in late 2016. Russia co-chairs the alliance with Saudi Arabia.

Novak underlined the urgency on prices saying Dec. 5 "if current actions are not sufficient, OPEC+ countries are ready to take additional steps to eliminate speculation and volatility," according to the Tass news agency.

OPEC+ fatigue

However, the visit also reflects a sense that new life needs to be breathed into the OPEC+ group following an acrimonious run-up to the latest meeting on Nov. 30, which concluded without a press conference or a press release detailing each countries' commitments, leaving members to announce their own measures.

OPEC committed to slash more than 2 million b/d of production in the first quarter of 2024, including a rollover of Saudi Arabia's existing 1 million b/d cut, and Russia deepening its export reduction from 300,000 b/d to 500,000 b/d.

But there was criticism from some commentators who note that Russia's approach -- which involves specifying export curbs, split between crude and oil products, rather than production cuts per se – may lessen the force of the group's pronouncements.

George Voloshin, a Paris-based international financial crime analyst and Russia expert, said the goal of the visit would largely be to "reaffirm the solidity of the OPEC+ alliance as, despite continued cuts, doubts persist as to whether these voluntary cuts will all be honored."

Tamas Varga, an analyst with brokerage PVM Associates, said Russia represented a "rather crucial wild card" for the OPEC+ agreement. "Russia has a war to finance -- unless its domestic interest forces it to prioritize the internal market in the year of the [March 2024] election, it will likely send as much oil abroad as its buyers demand," Varga said.

Middle East influence

Putin will find a ready audience among Middle Eastern and other countries inclined to be skeptical of US foreign policy and sanctions, including the latest innovation: a price cap on Russian oil exports.

"The Saudis and the Emiratis hate the price cap... because of what it represents -- a demand-side intervention in the market," said Tobias Borck, a senior research fellow for Middle East Security Studies at the UK's Royal United Services Institute.

The usefulness of OPEC+ for helping Russia sustain ties with countries looking to hedge geopolitical bets was evident from a decision announced Nov. 30 to admit Brazil to the group. As well, Saudi Arabia, Iran and the UAE have been invited to join the BRICS alliance, which includes Russia and Brazil and is portrayed as a counterweight to perceived western hegemony.

Putin is due to go on to meet Ebrahim Raisi, the president of Iran -- another sanctioned country -- immediately upon his return to Moscow on Dec. 7.

That meeting and Putin's trip to Riyadh and Abu Dhabi underline that Russia's geopolitical ties are increasingly linked by oil.

"Middle East powers -- Saudi Arabia and the UAE -- are central to Russian efforts to support oil revenue and trade, [while] Iran is a critical supplier of military drones," said Jim Burkhard, S&P Global Commodity Insights' vice president of oil markets, energy and mobility. "And the Israel-Hamas war is an opportunity for Russia to fuel division between Gulf powers and the United States. It is no wonder that the Middle East is the destination for one of his rare international trips."

However, there was dissent from a senior US official on the sidelines of COP28 against Russia's self-proclaimed role as a reliable global energy supplier.

"Russia is never again going to be viewed as a reliable energy supplier," Geoffrey Pyatt, assistant secretary at the US State Department, said at the Atlantic Council's Global Energy Forum in Dubai, alluding to the collapse of Russian gas supplies to Europe. "We have maintained trans-Atlantic unity in our price cap coalition, on the principle that we will deny Russia the fossil energy resources that it used [for] this terrible war against the people of Ukraine. It's been my priority here [at COP28]."