Editor's note: Hannan Hussain is a security analyst at the London School of Economics-South Asia Centre and an author. The article reflects the author's opinions, not necessarily the views of CGTN.

The three-year pact between the Organization of the Petroleum Exporting Countries (OPEC) and Russia took a critical hit on Friday after Moscow refused to heed Riyadh's call and support a drastic cut in oil production. The measure was proposed as part of OPEC's "take-it-or-leave-it" deal to Russia, with Riyadh insisting that the cuts were necessary to balance global oil prices against the COVID-19 outbreak. In the aftermath of the fallout, OPEC effectively relinquished all restrictions that govern its own production.

Russia's refusal to proceed with OPEC's demand signaled two things. First, it underlined Riyadh's aversion to alternatives other than consolidating oil demand. Second, it offered a snapshot of the deep divisions that have accompanied the Russia-OPEC alliance ever since its formation in 2016.

In terms of the former, it is true that Brent – the global standard for light crude oil – dropped to about 45 U.S. dollars a barrel, its lowest since 2017. But using drastic production cuts to revive lost value, could spell trouble for the various oil-dependent economies the alliance caters to. For instance, not all nations across South America and Central Asia are capable of adapting to a spike in oil prices at the same given pace. 

Their process of acclimatizing to drastic changes may not be as smooth as OPEC presumes. However, whichever way one sees it, the oil bloc ends up as the chief beneficiary of any major cuts in production.

Russia's decision to walk out was also on the back of key domestic transformations. For instance, Moscow can now afford to balance its budget even if crude oil hangs at the existing price levels. For Riyadh to do the same, it needs an additional 38 U.S. dollars in crude prices.

Thus, Moscow and Riyadh represent two starkly divergent priorities that were never quite factored into Thursday's proposal. Senior OPEC officials continue to declare their optimism for talks with Moscow. "We are hoping that our friends from Russia need more time to think about it and maybe come back," said Suhail Al Mazrouei, the United Arab Emirates' Energy Minister. However, Russian President Vladimir Putin's decision to rule out any immediate talks indicates the cost of perceiving all member priorities as the same.

Moreover, Putin is ready to ramp up domestic spending this year – a plan which arrives regardless of an oil muscle at play. Unlike Riyadh and its allies, the Kremlin wouldn't mind a decline in the value of its currency, since exports in U.S. dollars continue to provide an easy outlet for Russia's domestic producers. Russia also enjoys some of the largest international reserves, complemented by its increasingly meager debt margins. This underlines an important miscalculation in Friday's talks: OPEC's global concerns don't necessarily mirror Russia's domestic challenges.

Interestingly, Moscow's fear that U.S. shale producers would benefit most from prospective cuts also strengthened its resolve to back out. This unwillingness to placate North American producers is reflective of a larger friction which Washington has helped cultivate with Moscow in recent times.

Consider the fact that Russia has been forcibly operating under U.S. sanctions for nearly half-a-decade – a constraint it has used to sustain its modest growth policies. These same austerity measures are now culminating into stronger spending forecasts for Russia.

But member countries could have still catered to each other's interests, should Riyadh have seen the value in Moscow's "incremental approach." Russia insisted that countries should first implement the existing production agreement of some 2.1 million barrels per day, which were slated for signatures in Vienna on March 13. The idea was to clear the backlog before opting for the additional emergency cuts.

Kremlin also made no secret of this position – it had argued for long that the impact of the COVID-19 on oil demand was far from conclusive. Hence, its message in Vienna was clear: Oil powers should rethink their enforcement of existing and new cuts, especially when they totaled some 3.6 million barrels a day, the highest since the 2008 financial crisis.

Meanwhile, Saudi Arabia has retaliated by effecting a 10 percent cut in export oil prices over the weekend, signaling the start of a potential price war with Russia. More importantly, the dramatic move puts the spotlight on three key realities.

First, it is Riyadh – not Moscow – that has effectively risked the financial well-being of U.S. shale. American producers are unable to bolster production at the same given rates, with experts fearing a drop in U.S. oil output, should the current trend persist.

Second, Riyadh is now likely to ramp up its oil production in hopes of substituting lost revenue. With most of the focus shifting inwards, the kingdom appears comfortable overriding OPEC's collective interests, which included crafting pathways to salvage the Vienna deal.

Third, it is unlikely that an increase in oil supply in the market would prompt a convergence between Russia, Saudi Arabia and North American producers as well as allies in the Middle East. What is likely is that a low-price dynamic will continue to dominate the global market, with nearly fatal implications for reviving the OPEC-Russia alliance.

Thus, OPEC's credibility as a price stabilizer – in both theory and impact – is beginning to appear weaker than ever.

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