Russia now find itself involved in a bitter oil price war with Saudi Arabia, the world's second-largest oil producer and largest oil exporter. (Image source: iStock)
Russia's refusal to reach an agreement with Saudi Arabia on global oil quotas could ultimately have a disastrous impact on the Kremlin's long-term ambitions of extending its influence in the Middle East.
Last week's dramatic fall in the value of global stock markets was prompted, in part, by Moscow's decision at the end of last week to end its cooperation with the Saudis to agree to new oil production targets, a measure designed to maintain global oil prices at a sustainable level.
The Saudi response, to launch an oil price-war against Moscow, was clearly not the outcome the Russians had been anticipating.
Thus, instead of guaranteeing Russia's market share in the global oil market, which had been Moscow's primary objective at last week's meeting of OPEC and non-OPEC producers in Vienna, the Russians now find themselves involved in a bitter price war with Saudi Arabia, the world's second-largest oil producer and largest oil exporter.
The consequences of the fall-out between Moscow and Riyadh could have a profound impact not only on the Russian economy, but also on Russian President Vladimir Putin's wider ambitions to promote Russian influence throughout the globe, especially in the Middle East.
The Russian economy is heavily dependent on revenues from the country's vast energy resources. But a combination of increasingly effective US sanctions, as well as the general slowdown in the global economy caused by the coronavirus epidemic, has resulted in dramatic falls in the value of the rouble, with Moscow's finances now coming under increased pressure as a result of Saudi Arabia's decision to launch an oil war against Russia.
The primary motivation behind the Saudi move is to protect its own share of the global oil market, which is under threat from a combination of softening demand and the renewed strength of the American oil industry. Because the Saudis enjoy low oil production costs of around $6-7 a barrel, they are able to cope with lower oil prices, while countries like Russia, which have much higher extraction costs, need global prices to be at least $50 a barrel to make a profit. Thus the Saudi price cut, which saw oil prices fall to around $31 a barrel, will hit the Russian economy hard.
The other important consideration for the Saudis, though, is that, by undermining the strength of the Russian economy, they will force the Kremlin to rethink its ambitions on the world stage, especially its involvement in the Middle East, where Moscow's main allies are Iran and the Assad regime in Syria.
Previously Riyadh had tried to persuade Moscow that its interests would be better served by working with the Saudis rather than their long-standing rivals in Tehran, which was the reason Saudi ruler King Salman invited Mr Putin to a state visit in Riyadh last October.
Since then relations between the two countries have soured as a result of the key role the Russian military has played in helping the Assad regime to regain control of Idlib province, the last remaining rebel stronghold in northwestern Syria. The Saudis, who are committed to overthrowing the Assad regime, support some of the rebel groups fighting in Idlib, and are bitterly opposed to Russia's involvement in the conflict.
The Saudi calculation now, therefore, is that with the Russian economy suffering as a result of the oil price war, the Kremlin will no longer be able to afford costly military interventions in countries such as Syria.
"The oil price war is going to be a game changer for the Middle East," a senior advisor to the Saudi royal family told me earlier this week. "The Russians rely on their oil revenues to fund their military activities in Syria. But if the oil revenues collapse, then they will no longer be able to afford these long and costly wars."
Con Coughlin is the Telegraph's Defence and Foreign Affairs Editor and a Distinguished Senior Fellow at Gatestone Institute.