A fascinating read on how the members of OPEC came through with the deal to cut their respective oil production and help reduce the glut in the global oil market.
It appears that Russian President Vladimir Putin has played a key role in helping OPEC rivals, Iran and Saudi Arabia, set aside their differences and forge the cartel’s first cut in production in 15 years.
According to OPEC and non-OPEC sources, ahead of the OPEC meeting on Wednesday, key interventions from Putin led to talks by Saudi Deputy Crown Prince Mohammed bin Salman and Iran’s Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani.
His intermediary role between the Saudis and Teheran was pivotal and underscore Russia’s rising influence in the region, which appears to have grown ever since it militarily intervened in the Syrian civil war, just over a year ago.
Putin’s move started when he met Saudi Prince Mohammed in September on the sidelines of a G20 meet in China.
With the oil glut having their respective countries lucrative oil revenues since 2014, both countries agreed to cooperate and help the world clear the glut. Incidentally, oil prices have shot up by 10% to $53 a barrel this week.
The financial pinch felt by both countries pushed the leaders to set aside their political difference and forge ahead with a cut in oil production.
“Putin wants the deal. Full stop. Russian companies will have to cut production,” said a Russian energy source briefed on the discussions.
Putin was able to engineer the deal since he established that the Saudis would shoulder the lion’s share of cuts, as long as it doesn’t appear to be making too large a concession to Iran.
Crucially, a deal was possible if Iran didn’t celebrate victory over the Saudis. To tie up loose end, Putin made a call to Iranian President Rouhani.
As per a source close to Ayatollah, after this call, Rouhani accompanied by Iran’s oil minister Bijan Zanganeh went to Ayatollah, Iran’s supreme leader for his approval.
“Zanganeh thoroughly explained his strategy … and got the leader’s approval. Also it was agreed that political lobbying was important, especially with Mr. Putin, and again the Leader approved it,” said the source.
During the crucial OPEC meeting on Wednesday, Saudi Arabia agreed to take “a big hit” (in the words of Riyad’s energy minister Khalid al-Falih) while Iran was allowed to slightly boost its production.
As per OPEC delegates, Iran’s Zanganeh kept a low profile during the meeting.
During the previous night, Zanganeh had already agreed to the deal, with Algeria’s mediation. He was careful not to make a fuss about it.
“During the meeting, the leader Khamenei underlined the importance of sticking to Iran’s red line, which was not yielding to political pressures and not to accept any cut in Vienna,” the source said.
Crucially, after the meeting, the usually combative Zanganeh curtly avoided by statements or comments which might be read as claiming victory over Riyadh.
“We were firm,” said Zanganeh to Iranian state television. “The call between Rouhani and Putin played a major role … After the call, Russia backed the cut.”
Despite these careful manoeuvrings, OPEC’s signature last minute quarrel threatened to derail the deal. Iraq had an issue. It could not cut its output, given the cost of its war against Daesh.
But faced with a united pressure to cut production from the rest of the OPEC members, Jabar Ali al-Luaibi, Iraq’s Oil Minister called up his Prime Minister, Haider al-Abadi, in front of his peers.
As per an OPEC source, “Abadi said: ‘Get the deal done’. And that was it”.