Saudi and Russia: Best Buddies

Saudis Stop West From Seizing Russian Bonds [Morning Reckoning] July 11, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Saudi and Russia: Best Buddies Asti, Northern Italy July 11, 2024 [Sean Ring] SEAN RING Good morning Reader, Some of the best friendships start that way. A knockdown, dragout brawl kicks things off. A brutal beating was taken on both sides. A moment of clarity ensues. The look that says, “What did we start fighting over to begin with?” A shoulder shrug, indicating no one can remember what the catalyst was. A smile. A handshake. And a drunken night out with raucous backslapping and man hugs to consummate the new, fast friendship. It seems the Saudi-Russian bromance knows no bounds. Since their kerfuffle in the oil market crash of 2020, MBS and Pooty Pooty have been fast friends. And if the news is to be believed, the Saudis went above and beyond the call of duty to their relatively new friends. According to [Bloomberg]( Saudi Arabia whispered to its buddies earlier this year it would sell its European debt holdings if the G7 seized $300 billion in Russia’s frozen assets. “Whispered,” in this context, means “quietly threatened.” Let’s get into this newfound friendship and why it’s such a big story on the political stage. The Russia/Saudi relationship experienced significant shifts after the oil crisis of 2020. Here’s a detailed look at how their relationship evolved. [Exposed: Democrats’ Secret Plan to Keep Trump Out of the White House]( [Click here to learn more]( Former advisor to the CIA, the Pentagon and the White House Jim Rickards just released… [This shocking new video exposing Democrats’ secret plan to keep Trump out of the White House…]( Even if he wins the election. [Click here to see the details and learn how to prepare…]( Because this could trigger the biggest constitutional crisis in our nation’s history. [LEARN MORE]( The Oil Crisis of 2020 In March 2020, a “disagreement”— their word, not mine — between Russia and Saudi Arabia over oil production cuts led to a price war. This was in the period of collapsing global demand thanks to the government-mandated private sector shutdown known as the COVID-19 pandemic. Initially, both countries increased production, flooding the market with oil and driving prices to historic lows, even into negative territory for a brief period. Changes Post-2020 Oil Crisis After the initial price war, both countries recognized the mutual harm of continued low oil prices. In April 2020, they and other OPEC+ members agreed to historic production cuts to stabilize the market. This marked a significant reconciliation and deepened their cooperation within the OPEC+ framework. Post-crisis, Saudi Arabia and Russia managed oil production and supply together. They coordinated subsequent agreements to adjust production levels in response to market conditions, demonstrating a more unified approach to oil market management. The crisis underscored the importance of collaboration between the two major oil producers. Both countries expressed a commitment to long-term cooperation to avoid future market destabilization. This strategic partnership started to extend beyond oil, involving discussions on broader economic and political cooperation. And that’s where it started getting interesting. Their relationship saw an increase in joint investments and economic initiatives. Both countries explored opportunities in energy projects, infrastructure, and other sectors to diversify their financial ties. The oil crisis acted as a catalyst for closer diplomatic relations. Both countries recognized the importance of maintaining a stable and cooperative relationship to increase their benefits internationally. They took a more proactive role in stabilizing oil prices and engaged in continuous dialogue and regular meetings to assess market conditions and adjust production levels. Saudi Arabia and Russia also developed better crisis management mechanisms to prevent future disagreements from escalating into price wars. These included more transparent communication and a willingness to compromise on production decisions. To be fair, it was much easier to develop this relationship because the U.S. experienced its shale oil revolution, and the Europeans caved into their Green parties, getting scammed into less efficient alternative forms of energy like wind and solar. This and the crisis highlighted the delicate balance of power and influence in the global oil market. Saudi Arabia and Russia, through their collaboration, aimed to counterbalance the influence of other major players, particularly the United States, in the global energy landscape. Country Saudi Crude Oil Imported (bbls/ day) China 1,780,000 Japan 950,000 South Korea 860,000 India 710,000 United States 500,000 Saudi Has Russia’s Back Therefore, the Saudis' threat to dump European bonds if the G7 confiscated $300 billion in Russian assets is a strategic move analyzed through several lenses, reflecting geopolitical, economic, and strategic considerations. Saudi Arabia and Russia have a significant partnership, especially in the energy sector. We know they’ve worked closely within the framework of OPEC+ to manage oil production and prices. The Saudis view confiscating Russian assets as a destabilizing move that could harm their ally and, by extension, their interests in maintaining stable oil markets and prices. Europe is a major trading partner for Saudi Arabia, and the Kingdom holds substantial investments in European assets, including bonds. Threatening to dump these bonds is a way for Saudi Arabia to leverage its economic power to influence G7 decisions, signaling that punitive actions against Russia will have broader repercussions for the global financial system and will not be tolerated. By threatening to dump Europe’s government bonds, Saudi Arabia is warning of potential financial instability that will arise from such a large-scale daylight robbery. The sale of a “chunk” of European bonds will significantly impact yields and borrowing costs for European countries, potentially triggering a broader financial crisis. Saudi Arabia's threat is also a defensive move. If the G7 sets a precedent by confiscating Russian assets, other countries with significant holdings in the West, including Saudi Arabia, fear similar actions in the future. In this light, the threat can be seen as a determined move to protect their financial interests. The threat should also be interpreted as diplomatic signaling, indicating Saudi Arabia is willing to take drastic measures to support its geopolitical and economic partners. It reminds us that actions taken by major powers like the G7 have unintended, far-reaching consequences. Wrap Up The Saudis' threat to dump European bonds in response to the potential confiscation of Russian assets by the G7 is a complex interplay of geopolitical strategy, economic interests, and financial stability concerns. It reflects the intricate web of relationships and dependencies that characterize global politics and finance. Saudi can’t be counted on anymore to do the U.S.’s bidding, those days died with Kissinger. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Could Elon Musk’s New Project be worth trillions of dollars?]( Elon Musk has predicted that his new venture “[X-9840” could be “a multi trillion dollar company…”]( As big as Microsoft… Apple…and Nvidia… Companies gave their early investors a chance to become millionaires over the long term, starting with just $1,000. [Click here to see the details]( because this has nothing to do with electric vehicles…Self-driving cars, rockets, brain chips, or satellites. [LEARN MORE]( In Case You Missed It… Is This Crypto’s Big Moment? Or Big Breakdown? Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Instead of a sizzling summer rally, crypto once again finds itself at a crossroads. The year began with hope and excitement. Bitcoin had just led stocks off their lows during the fourth-quarter melt-up rally, gaining more than 60% off its October lows. Crypto bulls were giddy as two big developments appeared on the horizon: the impending Bitcoin ETF approvals – courtesy of the Securities and Exchange Commission – and the halving. Both were seen as potentially transformational events that had the potential to spark the next leg of an already red-hot rally, finally pushing Bitcoin over the hump on the road to $100,000. But, of course, it all didn’t play out as smoothly as everyone thought. For a while, the bulls enjoyed near-perfect trading conditions. The stars aligned for Bitcoin during the first quarter as the ETFs earned approvals in January. Following a quick reset, Bitcoin launched higher, rallying 70% by March, and nearly 160% over the trailing 12 months. Bitcoin finally posted a new high in March after eclipsing $73,000, its first all-time high following the ugly “crypto winter” bear market that began in early 2022. Perhaps even more impressive was the fact that Bitcoin managed to gain more than 350% off its bear market lows. And with the halving in sight, bullish predictions got even bolder. Just how high could crypto rise by the end of the year? Was $150,000 a ridiculous target? What about $175,000? Unfortunately, this is exactly when Bitcoin started to run out of steam. Nearly four months have passed since those all-time highs printed. Since this high water mark, Bitcoin’s pops and drops have been confined to a wide trading range of roughly between $57K - $72K. The halving came and went in late April, but it failed to spark a major rally right away. Bitcoin did manage to kickstart a fresh leg higher in May, yet it did not extend beyond $70K not once, but twice over the next six weeks. Since the early June retest, Bitcoin endured a slow retreat back to the bottom of its wide trading range. One failed bounce at $60K was all the bears needed to trigger a quick breakdown. This leaves Bitcoin in an uncomfortable position as it teeters in no-man’s land, a cool 25% off those all-time highs set back in March. More importantly, Bitcoin has lost a critical support level as it falls to prices not seen since February. As the crypto-HODLers lick their wounds, we should take a moment to discuss what the price action is revealing – and try to make some educated guesses as to what the next few weeks and months have in store for Bitcoin. First, it’s important to recognize that $60K was a big, obvious level for Bitcoin. We need to respect the breakdown and give the bears the benefit of the doubt until the situation improves. Not only was $60K a clear, horizontal support level – it also happens to be where we’ll find Bitcoin’s rising 200-day moving average (not pictured). While I don’t use moving average breaks as sell signals, it’s worth noting that the last time Bitcoin broke below a rising200-day moving average was August 2023. It took two months of sideways action before it reclaimed those levels. This was also part of a bigger consolidation pattern for Bitcoin – one that took nearly seven months to play out. A best-case scenario for the bulls that doesn’t involve an immediate recovery would be a similar sideways consolidation to what we witnessed last year. The sideways trend in 2023 had its fair share of rallies and dips, yet never got to a point that would have warned of a bigger breakdown (Bitcoin never fell back below $25K following the March rally). Taking a more bearish view, I could also see Bitcoin tumbling back to the $43K-$44K range, which was an area that acted as resistance back in December - January. If this scenario were to play out, I suspect we would have to endure a longer drawdown period before expecting crypto to reset for its next bull run. Another point for the bears is the complete failure of the halving to generate any sustained positive momentum. We’ve discussed the halving track record before since the past 3 halving events have led to a massive run-up in price. Yes, this is a ridiculously small sample size. But I did like our chances to at least see some positive follow-through following the event in April. Instead, all we got was more chop. As for how to react right now, I think it’s important to note that while shorter-term trends have turned bearish, I doubt crypto is completely broken. Instead, it probably just needs time to regroup. Whether this takes three weeks, three months, or longer remains to be seen. This isn’t a dip I’m rushing to buy. Not yet! Crypto is like any other over-hyped asset. No one wanted to buy Bitcoin as it languished below $20K for three months in late 2022. But everyone wanted in on the action as it roared back above $60K earlier this year. Now, these bulls that were late to the party are going to have to try to wait out this corrective action. We’ll soon see just how resilient these speculators can be… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. 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