Russia and OPEC: Smiling through clenched teeth

The USA is ready to ruin the organization of oil-exporting countries

OPEC Secretary General Alvaro Silva Calderon reported that he was satisfied with his Moscow visit and his negotiations with Russian Energy Minister Igor Yusufov. Igor Yusufov "pleased" his colleague by reporting that Russia would increase the extraction and exportation of oil. The Russian minister had all the reasons not to “bow” before the head of the world's oil cartel. Last week, Yusufov discussed this with US Energy Secretary Spenser Abraham. Moreover, he organized for the American a confidential meeting with the leaders of the biggest Russian oil companies. Russia seems to seriously hope to become the big oil supplier to the US. What else should OPEC do? Though Russia is still a stranger in the oil market and could easily one more time fall into a trap during the next conflict between the US and the Arab world.

The US finally expressed its benevolence in answer to Russia’s invitation to widen and deepen energy cooperation between the two countries, as if Russia really might help weaken American dependence on Middle-East oil. Spenser Abraham complimented the Russian government for its faithfulness and expressed the wishes of his leadership. The details of the negotiations are being kept secret, as usual, though it is obvious that the US is finally seriously ready to consider the possibility of wider cooperation with Russia in supplying energy and raw materials to the US economy. This is certainly a great plus. A guaranteed demand should secure Russia a guaranteed profit. While it is known that every buisnessman dreams of receiving a state order, Russia also wants to receive a state order from the US. If Russia does indeed secure American cooperation, it can behave more independently towards OPEC. However, Russia must not miscalculate.

Hopefully, Yusufov did not miscalculate while negotiating with Calderon. However, taking into account the fact that, before meeting with the American and the OPEC head, the Russian minister explained to President Putin that we should have no doubts regarding the Russian position being reasonable. Therefore, Calderon did not express too much anger about the abrupt escalation of oil extracting and exportation, though he stressed that the OPEC quotas remained unchanged, while decisions about changing them will be taken jointly.

OPEC and Russia understand very well that the main aim in the energy game is to obtain stabilization of world's raw materials market and that they can do it together with the US, which is not shameful, because this country is the biggest oil consumer. This was admitted by Calderon as well. An interesting turn: the US as an arbitrator in relations between Russia and OPEC. Can this be understood in a way that OPEC will ruin the Russian economy only with the Bush administration’s permission, or only if America needs the Russian public support and immediate concessions?

The US needs cheap oil and obedient Arabs. OPEC needs a predictable and stable world market of oil products and coordination with the majority of oil-exporting countries. However, OPEC is most of all interested in the world's biggest oil consumer: the US. While Russia needs oil prices to rise and the US and the EU to "forget" about Chechnya and to buy more of not only Russian raw materials, but also refining products, for they are more expensive. Is it possible to reconcile so many different aims?

For America's aims, America will use all economical, political, and military levers. To build Pax Americana, the whole might of the American continent was used. The EU, OPEC, and Russia are nothing but instruments, strategically temporary allies. US interests weigh more than any partnership. The more divisions there are between other participants, the easier the US can reach its aim. For Russia, the position of the distant arbitrator is the most suitable position. The US president hardly will hesitate to ruin OPEC for the statisfaction of US interests, even if the world is plunged into an oil chaos. All the same, the US will be the winner in the end.

In the meantime, Utro.Ru reports that signs of division among oil-exporting countries are obvious. According to a report prepared by Petrologistics, an international consulting agency specializin in the oil market, OPEC is gradually loosing its positions and its well-known discipline. The organization's members ignore declared quotas while trying to fill their pockets while oil prices are high. The agency, while analyzing oil volumes leaving OPEC harbours, conclude that the quotas are being kept only to 63 percent, and this figure is becoming less. According to another investigation, only this June, OPEC countries extracted 9 percent more oil than was prescribed by the cartel.

The most active infringers are Nigeria and Algeria. Both countries have been promising for a long time to introduce strict oil discipline, trying to attract foreign companies and investments; however, so far, they only give empty promises. Both states have serious budget troubles and are trying to persuade OPEC to increase the quotas, though, so far, they simply ignore the quotas.

Even Saudi Arabia, the biggest oil exporter in the world and a kind of corner stone of the whole quota system, also sells more oil than it is prescribed. Er-Riyad is constantly pressed by Western countries, for which cheap oil would be a good in their fight with economical crisises. Moreover, the growing possibility of a US war against Iraq increases oil demand, so Saudi Arabia, with its large deficit, it trying to sell as much as possible to patch up the hole.

Though on the paper, the OPEC quotas remain the same, and OPEC tries to enlist the support of independent exporters (Mexico, Norway, Russia, and others) to decrease volumes of extracted oil. The published results of the investigation complicate this task. All the more, since each OPEC member has its own reasons not to keep discipline.

In other words, OPEC power over the oil market gradually weakens. In two or three years, it probably will not look so strange if the US Secretary of State dictates oil quotas to the cartel.

Dmitry Slobodyanyuk PRAVDA.Ru

Translated by Vera Solovieva

Read the original in Russian: http://www.pravda.ru/main/2002/08/07/45325.html