For middle powers like Saudi Arabia an effective foreign policy requires both cunning and a knack for identifying force multipliers. Of course, being the world’s largest oil producer is a bit of a force multiplier by itself, as the move on Thursday by the Organization of Petroleum Exporting Countries (OPEC) not to reduce production despite a price decline from $128 to $97 per barrel suggests.
OPEC price hawks like Iran sought to reduce the current 30 million barrel a day production quota (actual production is nearly 32mil brls a day as OPEC members routinely exceed their quotas). But Riyadh was not only opposed, but sought a production increase, though in the end the compromise was the status quo. That may sound a bit counter-intuitive – it was the first time in a decade that OPEC did not reduce production quotas after a more than 20 percent price decline. In fact, the Saudis were actually contemplating a production increase, even though that might drop prices close to the roughly $80/brl they need to balance their budget.
Why?