Russia and Saudi Arabia agree on gas and oil cooperation; jointly control prices...

Russia and Saudi Arabia have agreed to jointly control raw material prices on the international market, Russian Fuel and Energy Minister Igor Yusufov told reporters.

According to him, the Russian government and the Saudi Arabian government signed an agreement on gas and oil cooperation, which envisages bilateral cooperation on key issues in this sphere.

In particular, Russia and Saudi Arabia will coordinate the supplies of oil products to the external market, Rossiya (Russia) television reports.

In addition, the agreement envisages cooperation of Russian and Saudi companies in implementing joint projects, both in Russia and Saudi Arabia, Mr. Yusufov said. The document also speaks about Saudi investments in the Russian economy.

According to the agreement, Russia and Saudi Arabia agreed to set up a joint group to develop bilateral cooperation in the oil and gas sector. Mr. Yusufov noted that such a working group had already existed, and it would be granted a new status after the signing of the agreement.

In addition, the Russian Fuel and Energy Minister said that a number of important documents would be signed shortly, including an agreement on avoiding double taxation and mutual investment protection.

Mr. Yusufov stressed that the Saudi Crown Prince’s gas initiative was one of the top issues on the agenda. According to the Fuel and Energy Minister, this initiative proposed joint development of gas fields, geological surveys, use of gas for desalinating sea water, the construction of gas pipelines, gas-powered power stations and other oil and chemical facilities. The projects are estimated at $20-25bn, according to Mr. Yusufov.

He said Saudi Arabia’s tender committees had already started accepting applications, and expressed hope that “Russian companies will take a worthy place in the implementation of these projects”. During the visit of Saudi Crown Prince Abdullah to Russia, a number of contracts would be signed between Russian and Saudi companies, Mr. Yusufov added.

I have always said that OPEC was a toothless institution, that if you understood your economics properly, it could not do more than give a temporary spike to oil prices. To do anything more would simply give away market share.

Nonetheless, the Saudis are doing their best to prove me wrong; Al Qaeda and the Russians are their attempt to give OPEC some teeth.

In a commercial world where the rules of commerce operate in isolation, OPEC has no power at all, despite the ravings of your average journalist. But in a world where the senior OPEC member is willing to blow up the competition's oil infrastructure, the normal rules are set aside and the rules of black-flag piracy adhere.

Combine that with Russian gamesmanship in Central Asia, and we could have trouble. We haven't seen this yet, as far as I can tell our partnership with Russia is still intact there. And also, as far as I can tell, despite what Putin may tell the Sauds, their intention is to rapidly increase production while singing lullabyes to Riyadh. Which is exactly what the OPEC members do to each other all the time, so Russia will fit right in.

A real alliance between Putin and the Sauds will be problematic as long as Saudi Arabia is funding the Chechens, but cutting off funding could cement an alliance just that quickly. Between that, and opening doors to Russian companies to operate in the Kingdom, Putin would be crazy to turn down the invitation. And he wouldn't.

None of that is a serious problem to us in isolation, unless the Russians begin to provide cover for Saudi operations. But Russian politicians and secret police are probably at least as easy to buy as are their American counterparts, when you are talking about the kind of money the Sauds throw about.

Our opportunity to turn up the fire under the Sauds is slipping away. We had better move with dispatch if we are going to move.

I have been hesitant to give credence to the idea that this is really a war about oil, because from our point of view it isn't. But for the French, for the Russians, it was. And what about Iran and Saudi Arabia? Riyadh's now public partnerhip the ISI, and its play to form an alliance with Russia speak volumes. Watch for Russian efforts to squeeze us in Central Asia (which I haven't seen yet). Watch for the PKK to make the Baku-Ceyhan pipeline untenable, and to launch attacks on the Kirkuk-Ceyhan line. Since the PKK has just announced an end to their cease-fire, that may be in the offing.

Watch us shift our focus to the Gulf of Guinea.

Not time to panic yet, but time to watch.

Not time to panic yet, but time to watch.

I see those gas prices, and I don't feel good. Also, Bush II might give France and Russia back their stranglehold on Iraq, further depressing Iraqi oil in a miasma of disputes and debt conflicts.

I think the boys who thought they could remake Iraq didn't count on a real oil war spouting, Iran and Saudi playing its cards to disrupt Iraq. Now the main concern is getting Bush II reelected, and hopes of an Iraqi renaissance dumped.

But then, no one connected to the admin is invested in Iraq, so maybe there isn't much of an urge to fix things for the greater good.

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