From rags to riches
[via Trade Arabia]
In Saudi Arabia, the wealthy and powerful are usually born into affluence. In Ali Al-Naimi’s case, however, this could not be further from the truth. Al-Naimi, director of Aramco, Saudi Arabia’s leading oil company, is considered to be somewhat of an anomaly. Al-Naimi was born into a family of Bedouin shepherds, but he now dominates the Organisation of the Petroleum Exporting Countries (OPEC). The organisation is comprised of 12 different countries, which together control 60% of the world’s oil production. The strength of this group is now being tested by the world’s largest single oil producer, Russia.
Russia is not a member of OPEC, however, it produces the most oil in the world, just ahead of Saudi Arabia. In a bid to claim the industry’s top spot, Saudi Arabia is currently trying to edge Russia out of the European market, starting with Poland.
In an attempt to seduce Poland, Saudi Arabia is offering the country oil at excessively low prices. Igor Sechin, chief executive of Rosneft, Russia’s biggest oil company, has specifically complained that Aramco is “dumping actively”. At an oil roundtable last week, Nikolai Rubchenkov, an executive at Tatneft, posed the following questions: “Isn’t this move a first step toward a redivision of Western markets? Shouldn’t the government’s energy strategy contain some measures to safeguard Russia’s interests in its existing Western markets?”
Saudi Arabia dominated the European oil market in the 1970’s, but this lasted only until the Soviet Union built oil export pipelines from its West Siberian oil fields to Europe. In response, Saudi Arabia switched its attention to the Asian markets, where it had more potential for growth and revenue. The Saudi share of the European crude market dropped throughout the 2000’s to 5.9%, but crept back up by 2013, where it reached an 8.6% share. Indeed, despite the fact that Saudi Arabia has been slowly increasing its European presence, it has never attempted to sway Poland – a country traditionally within Russia’s sphere of influence – until now.
Europe’s energy sources
[via Yahoo Finance]
Events in Ukraine have pushed Poland to reconsider its relationship with Russia. Indeed, Poland is apparently a great proponent of the European Union’s current push to cease their dependency on Russia’s energy market. The country has increased security measures and military expenditure, and, crucially, announced plans to change their energy supply. On Thursday, Poland announced its intention to construct a natural gas pipeline to and from the Baltic States with Lithuania, Latvia, and Estonia; a bold move to manifest independence from Russia’s gas supplies.
It’s a smart move on the part of the Saudis, then, to take advantage of Poland’s wavering loyalty to Russia in order to infiltrate the European oil market once again.
If the Chinese economy continues its current trend, the oil market may become too small to hold both Saudi Arabia and Russia. Both countries, whose economies are basically oil-dependent, have turned increasingly to the Asian markets. Russia has pre-empted Europe’s desire to turn away from their oil supply, and has reacted accordingly. In May, Russian crude supplies to China even surpassed those of the Saudis. However, Saudi Arabia is certainly notorious for its extremely rapid oil production, at very low prices. Lurking in the background, however, is the spectre of Iran’s return to the world stage. The approval of the nuclear deal, and the impeding end of sanctions, means that Iranian oil may soon be poised to flood the European markets. With several competing economic interests, it will be interesting to see how this saga continues to unfold.