Will Riyadh come to rue its short-sightedness?
OPEC members and Russia met Sunday in Doha, Qatar to try to work a deal to cap oil production and help oil prices recover. Russians thought a deal was close but it turned out to be anything but.
Iran withdrew its participation at the last moment, and talks between other participants ultimately collapsed over Saudi intransigence.
Saudi Arabia insisted all OPEC members as well as Russia should cap their production at current levels. This would have been extraordinarily unfair to Iran.
Iran, however, has only just had sanctions against it lifted. Sanctions which were making it difficult for Tehran to pump and sell oil. Iran therefore is very far from the theoretical limit of how much oil it could be producing.
For Tehran to cap production at current levels would be tantamount to re-imposing sanctions against itself after it has made major concessions to the US to have them lifted. Yet this is exactly what Saudis demanded:
“If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. “If we don’t freeze, then we will sell at any opportunity we get.”
Riyadh won't take a higher price of oil at the cost of losing market share to hated rival Iran.
This is rather ironic because it is perhaps Saudi Arabia which needs a higher price the most.
Between its financing of the jihad in Syria, its expensive military adventure in Yemen, its 2015 arms shopping spree and its subsidies to its population that keep the Saudi dynasty in power it is burning through its reserves at a rate of up to $20 billion a month.
In the oil boom years Riyadh accumulated over $750 billion in foreign currency but is already down to $600 billion. That's a lot of money but there are few states in the world as dependent on oil revenue as the Wahhabi monarchy.
This all sounds like the streak of shortsighted decisions from the new leadership of Saudi kingdom continues.