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How Russia Is Reacting To The Oil Price War

DAVID GREENE, HOST:

Let's turn now to the big role that oil has been playing in the response to coronavirus. Russia and Saudi Arabia are the world's biggest oil exporters. For more than three years, they've been coordinating their oil production to help fix prices. But last week, that deal fell apart. With the coronavirus threatening the world's economies, Saudi Arabia demanded that Russia cut its oil output to help prop up prices.

NPR's Lucian Kim reports from Moscow on how the Kremlin has reacted to that.

LUCIAN KIM, BYLINE: When the Soviet Union was still a superpower, Moscow had chilly relations with Saudi Arabia, a key ally of the United States. But in recent years, President Vladimir Putin has worked hard to build an energy partnership with Riyadh, while at the same time chipping away at U.S. influence in the Middle East. In October, Saudi King Salman received Putin with full honors.

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KIM: Putin kept a straight face as a Saudi military band stumbled its way through the Russian national anthem. The cacophony foreshadowed the current discord in the relationship, as Saudi Arabia now floods markets with cheap oil. The effect was immediate, as reported here by CNBC.

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UNIDENTIFIED REPORTER: An oil price war evolving - crude prices crash 30% in the worst drop since the Gulf War as Saudi Arabia...

KIM: Saudi Arabia is betting low oil prices will force Putin to follow its lead on cutting production. Russia is heavily dependent on oil exports, but Putin's finance minister says Russia is better prepared for low prices than other oil-producing nations. That confidence comes in part from Russia's $570 billion in reserves. It's also driven by a belief that U.S. shale oil producers will be collateral damage in a price war since shale oil production makes economic sense when prices are high.

On Wednesday, Putin met with some of Russia's leading businessmen to discuss the rise of the coronavirus and the drop in oil prices.

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PRESIDENT VLADIMIR PUTIN: (Speaking Russian).

KIM: "I don't hope, I'm sure," Putin said, "that Russia will get through this turbulent period with dignity and calm."

Putin has staked his whole career on economic and political stability. A day earlier, he told the Russian Parliament that because only he could guarantee Russia's steady development, he deserves to stay in power for another 16 years.

Lucian Kim, NPR News, Moscow.

(SOUNDBITE OF JONNY GREENWOOD'S "PROSPECTOR'S QUARTET") Transcript provided by NPR, Copyright NPR.