Additional Coverage:
- Saudi Arabia has a big plan for oil that could hammer Russia’s war machine, economists warn (newsbreak.com)
Saudi Arabia’s Move Threatens Russia’s War Funding
Russia’s war in Ukraine has been fueled by its oil revenue for the past two and a half years. However, Saudi Arabia’s plan to increase oil supply could jeopardize this strategy.
By flooding the market with cheap oil, Saudi Arabia aims to challenge the more expensive U.S. oil industry. This could drive down oil prices, hurting Russia’s oil-dependent economy.
Low Oil Prices Could Hinder Russia’s War
Unlike Saudi Arabia, Russia has higher production costs for its oil. Low oil prices would squeeze its profit margins. As a result, Russia could face pressure to end its war in Ukraine before its oil revenue dries up.
Russia’s Economic Growth a Mirage
Despite sanctions, Russia’s economy has grown. However, this growth is largely due to increased military spending, which is not sustainable in the long term. Russia’s hidden inflation and budget deficit also pose challenges.
Factors Determining Russia’s Oil Revenue
The green transition, Saudi Arabia’s oil exports, and regional conflicts will impact oil prices and Russia’s ability to fund its war. If oil prices collapse as they did in 2014-2016, Russia may struggle to finance its military operations.