Saudi Arabia, the world’s third-largest oil producer by volume, is actually buying “record levels” of oil in recent months, according to Reuters, and reselling it to European buyers. Why would the oil-soaked kingdom buy other people’s oil when they produce so much of their own for export?
Two words: Russian sanctions.
“Top oil exporter Saudi Arabia imported 261,000 tonnes of Russian diesel in March and early April,” said Reuters, “the largest volume it has ever received from Russia.”
Russian diesel exports — the Putin regime’s main source of hard currency — are capped at $100 per barrel, well below market prices. Saudi Arabia is buying priced-capped Russian diesel, “laundering” it with their own, and then selling it mostly to European buyers at market prices.
In effect, EU countries are bypassing their own sanctions against buying Russian fuel. The difference is that the Saudis are keeping most of the profits instead of Moscow.
Neat trick, eh?
While the fighting in Ukraine continues, as inconclusive as it is brutal, sanctions are hitting Moscow’s finances in ways even the most pro-Ukraine Western media has been slow to notice.
The Russian ruble, which against all expectations had maintained its value against the dollar (after recovering from the initial shock of sanctions around this time last year), has seen its value crumble 35% since mid-January. Al Jazeera reported on Friday that the rouble is “the third-worst performer among global currencies so far this year, behind only the Egyptian pound and the Argentinian peso.”
Not exactly stellar company, a chronic basket case and a left-wing Latin nuthouse — and that’s despite Putin’s emergency war measures like currency controls to protect the ruble.
Business Insider reported Monday that the “Kremlin has wildly reversed a 1.13-trillion-ruble, or $14 billion, surplus in the first quarter of 2022, to post a 2.4 trillion ruble quarterly budget deficit this year.” Spending — largely due to Putin’s stupid war in Ukraine — “jumped 34% in 1Q to 8.1 trillion rubles, or $99 billion,” according to BI, while “energy revenues plunged 45% to 1.6 trillion rubles due to boycotts and sanctions.”
The next body blow to the Russian economy could come from energy giant Shell last week, which is liquifying its billion-dollar stake in a Russian energy project. The company will reportedly repatriate $1.2 billion from the sale out of Russia.
While it’s true that a weak ruble makes Russian exports cheap, Russia’s only real exports are oil and gas. As we’ve just seen, Western sanctions can be skirted thanks to third-party players like Saudi Arabia — but only so long as Moscow is willing to take a painful hit to its expected profits. Another report indicates that even if China wanted to help more, its at its physical limit of importing and storing Russian oil and LNG. The pipelines simply don’t exist and anything that moves by ocean is subject to those Western price caps via shipping insurance.
When I think of Saudi Arabia these days, I think of one of my favorite lines from Bull Durham. Kevin Costner’s character is a veteran catcher training up a headstrong young pitcher played by Tim Robbins. When Robbins insists on throwing the heat after Costner signals for a curveball, Costner quietly tells the batter exactly which pitch to expect. The batter then hits the next pitch clear out of the park.
“When you speak of me,” Costner tells the smiling batter, “speak well.”
Between Putin’s stupid war and Europe’s profitable hypocrisy, the Saudis are in the position of that lucky batter getting a free home run out of other people’s disputes.
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