Page 22 - bne_newspaper_June_01_2018

Opinion
June 1, 2018 www.intellinews.com I Page 22
es division amongst the elites between those who want to spend on elaborate state pro- jects and others calling for restraint. Much easier to keep the peace with an oil price high enough to maintain comfort but not so high as to create spending demands.
• Higher oil boosts alternatives. One of Mos- cow’s main points is that a high oil price
leads to bigger budgets for the development
of competing energy sources and especially
in the transport sector, which is the biggest consumer of oil each day. As far as Russia
is concerned $100+ oil only hastens the day when Ford or Toyota or another mass producer starts to roll out vehicles requiring much less oil to run.
Finally, the new-found relationship with the Saudi leadership is very important for the Kremlin. Although Moscow was becoming less comfort- able with oil approaching $80 per barrel, there was never any prospect of it walking away from the current deal or not wanting to replace it with
a new deal. Maintaining a close relationship with OPEC, with Saudi Arabia in particular, is a key geo- political priority for the Kremlin. It represents the ideal combination of good business and very good politics. Whether that is a new set of production targets from January 2019 or a staged increase in the current quotas, or some other agreed inter- vention mechanism, the main point is that Moscow will continue to work with Saudi to try and extend the age of oil, and with less volatility for as long as possible, and to protect respective market shares from the resurgent Americans.