On Tuesday, the International Monetary Fund delivered a sharp downward revision to Saudi Arabia’s economic growth projection, cutting the forecast from 3.2 percent to just 1.9 percent. The downgrade directly ties to the kingdom’s sweeping crude production cuts implemented through its OPEC+ agreement, which have caused a significant drop in oil revenues that form the backbone of Saudi Arabia’s economy.
This downward revision marks a stark reversal for Saudi Arabia, which claimed the title of fastest-growing economy among G20 nations in 2022. Just last year, the kingdom reaped a massive revenue windfall after Russia’s full-scale invasion of Ukraine sent global crude prices soaring to multi-year highs. In the months that followed, Saudi Arabia led the push for coordinated production cuts across the OPEC+ alliance — a bloc that combines traditional OPEC members with Russia and other independent oil producers — to prop up flagging oil prices.
Yet the burden of these cuts has fallen disproportionately on Saudi Arabia, with multiple analysts and industry observers arguing that Russia has largely avoided its pledged cuts and reaped the benefits of the kingdom’s actions. Back in July, the International Energy Agency noted that Russia was poised to overtake Saudi Arabia as the top oil producer within the OPEC+ alliance. Greg Priddy, a consultant with U.S.-based Spout Run Advisory and senior fellow at the Center for the National Interest, summed up the dynamic: “Russia has been pretty much cheating and free-riding off of Saudi Arabia’s cuts.”
Because global crude prices are set by broader supply and demand dynamics, analysts explain that Moscow has seen higher prices for its exports without making the deep production cuts that have reduced Saudi Arabia’s overall revenue. This uneven burden has fueled growing behind-the-scenes tensions between the two key OPEC+ allies, according to reporting from the Wall Street Journal.
Both nations have moved aggressively to dismiss reports of a fractured relationship. During a recent OPEC+ ministerial meeting last week, Saudi Arabia and Russia released a coordinated joint announcement of new export cuts. Saudi Energy Minister Prince Abdulaziz bin Salman argued that the move silenced “the cynical side” of observers who claimed bilateral cooperation was unraveling.
Still, many industry insiders reject the narrative of smooth cooperation. Adi Imsirovic, director of Surrey Clean Energy and a former head of oil trading at Gazprom’s international trading division, has described the alliance’s coordinated effort as “an illusion,” reiterating that “Saudi Arabia is the one doing all the heavy lifting.”
The imbalance in burden-sharing was underscored in the same Tuesday IMF report that downgraded Saudi Arabia’s outlook: the fund upgraded Russia’s 2024 growth forecast by 0.8 percentage points, citing large-scale government fiscal stimulus that has kept the Russian economy growing despite ongoing sanctions and the protracted war in Ukraine.
Looking ahead, the slower growth projection raises pressing questions about the future of Saudi Crown Prince Mohammed bin Salman’s ambitious economic diversification agenda, which aims to reduce the kingdom’s long-term dependence on fossil fuel exports. The IMF notes that Saudi Arabia requires Brent crude prices to hold above $80 per barrel to balance its national budget and free up capital for massive infrastructure projects, including the futuristic city of Neom and luxury resort developments along the Red Sea coast. As of Wednesday trading, Brent crude was holding just above that threshold at $82.79 per barrel, leaving little margin for further price drops that could derail the kingdom’s transformation plans.