How should we view reports that Saudi Aramco will suspend its $10-billion refinery agreement with China?

Many responses to this question focus on speculating about the Saudi government’s thinking, while overlooking a very obvious fact. This fact is: Saudi Aramco is not a fully independent Saudi enterprise—it remains, to a large extent, under U.S. control and even enjoys privileges largely independent of Saudi law and government decisions. Article 23 of Aramco’s original concession agreement states: 'The enterprise under this contract shall be directed and supervised by Americans and shall employ Saudi nationals to the greatest extent practicable.' This clause has never been revoked or revised; today, roughly half of Aramco’s board members are non-Saudi nationals. According to rulings by U.S. federal courts, the U.S. classifies Aramco as an American company—not a Saudi or multinational corporation—and subjects it to U.S. jurisdiction. The U.S. Congress’s official publication, Congressional Quarterly, describes Aramco as 'the largest private U.S. investment overseas.'

What will inevitably result from the oil price war?

A plausible hypothesis is that when Crown Prince Mohammed bin Salman declares Saudi Arabia will once again maximize oil production to crash prices in a full-scale oil price war, Russian President Vladimir Putin may emerge unscathed—or even strengthened—while others fall. Within Russia’s intelligence community, there exists a saying: 'Ignorant people are cruelly used, unknowingly, in covert operations'—these are dubbed 'useful idiots.' In this context, it is difficult to imagine anyone more 'useful' than the Russians in advancing Saudi Arabia’s latest 'plan.' Regardless of how the oil price war unfolds, Russia stands to win. From a purely petroleum-economic perspective, Russia’s 2020 budget breakeven point is $40 per barrel of Brent crude, whereas Saudi Arabia’s is $84. Russia can produce over 11 million barrels per day without excessive effort; Saudi Arabia’s historical average output since 1973 has been just over 8 million barrels per day. Since the first OPEC+ agreement in December 2016, Rosneft—the Russian state-owned oil giant—has persistently urged President Putin to allow greater production and sales. Under these circumstances, Saudi Aramco—the Kingdom’s flagship oil producer—will suffer only value erosion. This includes losses borne by those who placed full faith in Salman and purchased shares in Aramco’s recent IPO. From both budgetary and foreign-reserve perspectives, Russia can withstand oil prices as low as $25 per barrel for up to ten years; Saudi Arabia, at most, can endure only two years. A key reason Russia can outlast Saudi Arabia, ironically, lies precisely in Salman himself. Last week, Russian Energy Minister Alexander Novak praised the past three years of cooperation within the OPEC+ group—a remark underscoring both Russia’s genuine, mischievous sense of humor and the irony at hand. He added: 'It earned Russia 10 trillion rubles ($140 billion).' To further accentuate the irony, Russia’s Ministry of Finance subsequently announced that funds accumulated under prior OPEC+ agreements would help support the ruble and sustain Russia through oil prices as low as $25 per barrel for a decade. Novak then added, almost as a flourish: 'If necessary, we may reach a new agreement with OPEC.' Still, one might argue: 'Surely Saudi Arabia cannot go bankrupt?' In fact—as emphasized above—if Saudi Arabia persists with this oil price war, bankruptcy is inevitable. As Saudi Deputy Economy Minister Mohamed Al Tuwaijri explicitly stated in October 2016, the Kingdom attempted precisely this same 'strategy' between 2014 and 2016: 'If we (Saudi Arabia) implement no reforms and the global economy remains unchanged, we are destined for bankruptcy within three to four years.' In other words, if Saudi Arabia continues overproducing to depress oil prices—as it is doing now, once again—it will go bankrupt within three to four years.

Asian Refiners in Dispute With Saudis Over 2027 Oil Contracts

1 day ago

Saudi Aramco and Asian refiners clash over 2027 oil contracts amid Middle East war disruptions, specifically regarding whether spot purchases offset contractual obligations.

bloomberg

2026-08-16

Asian Refiners Request Alternative Saudi Oil Pickup Locations Due to Red Sea Risks

2026-08-17

Saudi Arabia Offers Oil Cargoes Near Oman, Signaling Route Adjustments Through Hormuz

2026-10-20

Asian Refiners in Dispute With Saudis Over 2027 Oil Contracts

Asian Refiners in Dispute With Saudis Over 2027 Oil Contracts

FAQ