Saudi Arabia uses oil policy for diplomacy

Source: The post Saudi Arabia uses oil policy for diplomacy has been created, based on the article “Understanding the unlikely Saudi push for lower oil prices” published in “Business Standard ” on 3 May 2025. Saudi Arabia uses oil policy for diplomacy.

UPSC Syllabus Topic: GS Paper2- International Relations

Context: Saudi Arabia, the leader of Opec, is now pushing oil prices down, despite cartels usually seeking higher prices. This move appears aimed at disciplining Opec+ members violating output targets. But broader strategic objectives may explain Riyadh’s shift ahead of the May 5 Opec+ meeting.

Unruly Producers and the Need for Discipline

1. Cheating by Member States: Kazakhstan, Iraq, and the UAE are breaching their production quotas. Riyadh hopes that falling prices will pressure them into compliance.
2. Historical Pattern of Enforcement: Saudi Arabia used this tactic before — in 1985–86, 1998, and 2020 — to punish Opec rule-breakers. This strategy is not new.

A Clear Shift from Saudi First Policy

1. Low Prices as a Strategic Signal: Riyadh has made no effort to raise prices verbally or otherwise. It appears comfortable with Brent crude staying below $70, a shift from its earlier $100-per-barrel target.
2. Production Flexibility Over High Prices: To sustain high prices in 2023, Saudi output fell to its lowest since 2011. Continuing that policy would restrict production increases in 2025 and 2026.

US Relations and Oil Diplomacy

1. Complex Dynamic with US Shale: Riyadh previously waged a price war against US shale producers in 2014–16. But renewed action would face domestic political resistance in the US.
2. Wider Diplomatic Calculations: Saudi–US talks cover defence, arms, Iran, and nuclear energy. Oil policy likely factors into these discussions, especially with Trump visiting Riyadh in May.

Geopolitical Factors Beyond the US

1. Anticipating End of Sanctions: Saudi Arabia benefited from US sanctions on Iran and Venezuela. If sanctions ease, Riyadh wants higher output beforehand to influence future Opec+ negotiations.
2. Strained Ties with Russia: The long Saudi–Russia oil partnership now seems transactional. With Putin courting Trump, Riyadh may be hedging against a future split.

Conclusion:

Though punishing cheaters is a reason, Saudi Arabia’s policy reflects deeper aims—market flexibility, geopolitical positioning, and diplomatic leverage. Kazakhstan is likely a side effect, not the core target.

Question for practice:

Discuss how Saudi Arabia’s current oil pricing strategy reflects broader geopolitical and diplomatic objectives beyond disciplining Opec+ members.