OPEC and Saudi Shrewd Middle Power Diplomacy

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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.


Riyadh’s apparent logic reveals a shrewd effort to influence not just energy markets, but also global and regional realities. Riyadh is fearful of the fragility of the global economy and calculates that lower oil prices could enhance global economic growth, not least in Europe and the United States.

And in terms of oil futures, lower prices would likely slow investment into the burgeoning US-led shale gas (and increasingly oil) revolution, bolstering the Saudi position.

Then there is the growing mess in Syria and the underlying strategic competition if not Sunni-Shia proxy war in which Saudi Arabia and Iran are principal antagonists. Lower oil prices raise the cost of Iranian (and as Russian) support for the Assad regime in Damascus. Iran’s alliance with Syria underpins its ambitions of becoming a dominant regional power. The unraveling of the Assad regime and a Sunni-majority government in Damascus would be a potentially huge strategic setback for Iran. And Tehran, already squeezed by sanctions also fears Riyadh seeks to take its market share.

And the developments mentioned above would not hurt Riyadh’s reputation and status in the G-20, which despite its shortcomings remains a significant player in addressing global financial problems.

The Saudis seem to be betting that oil prices will not precipitously collapse, as they did after the Asian financial crisis of 1997-99, when they fell below $20 a barrel. If oil prices remain in the $70-$90/brl range, what might at first glance appear befuddling behavior for the world’s largest oil producer (now at a record high 10.1 brls a day), could turn out to be rather shrewd middle power diplomacy rippling across oil markets, the global economy and regional political realities.

Robert Manning is a senior fellow with the International Security Program at the Atlantic Council. This piece was originally posted on the blog New Atlanticist, with ISN partner Atlantic Council.

For additional reading on this topic please see:
The Arab Uprisings and the International Oil Markets
The MENA Region in the International Arena
Gain Seeking in a “Double Security Dilemma”: The Case of OPEC

For more information on issues and events that shape our world please visit the ISN’s featured editorial content and Security Watch.

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