Naimi's Decision-Maker Status Weakens in Doha

  • Russia, Venezuela say minister lacked power to negotiate deal
  • Deputy Crown Prince is new Saudi authority after Doha: SocGen

Was the Doha Summit Doomed to Fail?

Saudi Arabia’s Oil Minister Ali Al-Naimi has been a dominant force in global energy markets for more than two decades, but at the Doha summit last weekend that power was absent.

Russia and Venezuela, two of the 16 nations that convened for the ill-fated negotiations to freeze crude output, said Al-Naimi lacked the authority to complete any deal. The real decision-maker wasn’t in the conference room, according to Venezuela’s Oil Minister Eulogio Del Pino. The view of Deputy Crown Prince Mohammed Bin Salman, a growing force in Saudi economic policy who had insisted that no deal was possible without Iran, eventually prevailed and the talks collapsed.

"The minister didn’t have the authority to change position on the freeze,” Russian Energy Minister Alexander Novak told reporters in Moscow Wednesday. “He had the authority to notify the OPEC meeting about the position that he was informed about, but not to change it."

Al-Naimi, an 80-year-old who rose from modest Bedouin roots, has steered the Oil Ministry of the world’s largest exporter for 20 years. In November 2014, he faced down opposition from a majority of members of the Organization of Petroleum Exporting Countries and led the group to maintain output to squeeze higher-cost supply, particularly shale oil. The resulting slump in crude prices to 12-year lows put producers under immense financial pressure and halted several years of rapid growth in U.S. production.

Minister’s Backing

The minister had backed the initiative to cap output since February, when Saudi Arabia, Russia, Qatar and Venezuela signed a preliminary accord. Although Al-Naimi ruled out cutting the kingdom’s production, he proceeded with the plan even after fellow OPEC-member and regional rival Iran dismissed the prospect of joining in.

After months of preparation, negotiations on an international accord to cap output at January levels and stabilize the oil market collapsed in Qatar’s Sheraton hotel. While a provisional text was agreed the previous day by nations including Saudi Arabia, the kingdom surprised many of them by insisting on April 17 that any accord had to apply to all OPEC members including Iran, which was absent from the talks, according to Novak.

The start of the meeting was delayed several hours while officials sought to agree the text. After hours of discussions, the ministers couldn’t reach a deal that would satisfy Al-Naimi and the meeting broke up.

Decision Maker

"The person making the decision was not in the room," Venezuela’s Del Pino told reporters in Moscow on April 18. The Saudi representatives at the Doha talks didn’t have the authority to negotiate, he said.

The outcome prompted external observers to reappraise who has real control of Saudi oil policy.

When it comes to global oil markets, people who used to hang on Al-Naimi’s every utterance now have to listen to Prince Mohammed, who clearly has the final word, said Michael Wittner, oil analyst at Societe Generale SA in New York.

The visible shift of influence away from Al-Naimi could have long-term implications, according to Olivier Jakob, managing director of consultant Petromatrix GmbH.

"He was about to achieve what would have been a milestone participation of Russia and other non-OPEC countries in at least a symbolic first step,” Jakob said. “Yet those efforts were torpedoed at the last minute by Mohammed Bin Salman, and in that process Al-Naimi will have lost credibility.”

Before it's here, it's on the Bloomberg Terminal.