The two leaders met this past week as the Russian national soccer team clobbered Saudi Arabia 5-0 in Moscow. It appears both have agreed to cement the cornerstone of an already deepening energy and economic relationship, even as they look to alter a successful oil production deal that brought them together.
On Friday, Russia's energy ministry said it has reached a general consensus with Saudi Arabia that its newfound relationship with the Organization of Petroleum Exporting Countries (OPEC) should be "institutionalized," and be extended to monitor the market and take action if needed. OPEC will meet this upcoming Friday, and then with Russia and other non-OPEC members after that.
The chumminess of Russia and Saudi Arabia, however, is not unexpected. The relationship between two of world's largest oil producers is being reinforced as OPEC is poised to grapple with several thorny issues. Chief among them is how to deal with the declines of supply from OPEC member Venezuela, and the effect of renewed sanctions on Iran by the United States.
Iran is being sanctioned by the U.S. after President Donald Trump withdrew from a deal between Iran and six other countries designed to end its nuclear program. Trump said the deal was not tough enough, and under the renewed sanctions, companies around the world in essence will have to stop dealing with Tehran if they want to deal with the world's largest economy.
"This time more than most, [OPEC's meeting] is almost more about geopolitics than it is about the market," said Daniel Yergin, vice chairman of IHS Markit.
"Iranian exports are already down. One of the challenges they face is calibrating the impact of sanctions on Iran, which are already being felt in the market place, although they haven't actually been imposed yet," said Yergin. "There's suddenly a disruption in Libya, and Venezuela keeps sinking."
The U.S. is definitely the elephant in the room, with pressure also coming from Trump, who has tweeted twice, including this past week, about high oil prices.
"Of course, Trump has brought a new form of jawboning into play, but they're hearing the same thing form the Indians who are very concerned about what high oil prices mean about growth and the economy, and next year's election in India," Yergin said.
Also playing out in the background are domestic political considerations, amid November's hotly contested Congressional elections. Economic growth is a centerpiece of Republicans' efforts to maintain an increasingly tenuous grasp of control on the House and Senate.
"This is one time when U.S. mid-term elections are going to figure into what OPEC does," said Yergin.
"The message from Trump is he is not wanting high oil prices, either as a result of sanctions on Iran or heading into the November congressional election. These elections could be of such decisive importance," he added.