Andrey Ivochkin: Russia will cut its oil export. A little.

Russia will reduce the export of oil by 150 thousand barrels a day from January 1, 2002. This decision was made by Mikhail Kasyanov on Wednesday during a session between the Russian premier and the supervisors of Russia’s nine oil companies, which total 95% of the entire Russian oil exports.

Vice-Premier Viktor Khristenko, energy minister Igor Yusufov, spokesmen for such companies as Surgutneftegaz, Rosneft, Transneft, Slavneft, TNK, Tatneft, LUKOIL, and so on participated in the session.

Kasyanov believes that the decision pertaining to the reduction of the oil export down to 150 thousand barrels a day will be executed by the Russian exporters of hydrocarbon raw materials. Kasyanov guaranteed the execution of the decision on the part of the government. As the press-service of the government said, “the Russian government and the oil companies consider it possible to carry out a further reduction of the export of the Russian oil.” Like the premier stated, it was a consolidated decision, the goal of which is to stabilize the oil prices on the world market.” Kasyanov added that the decision was made taking account of the positions of other world exporters of oil, both independent and OPEC members.

OPEC asked the four largest independent oil producers – Russia, Mexico, Norway and Oman – to cut their total oil export to 500 thousand barrels a day. Norway and Mexico agreed with OPEC’s suggestion and reduced their export by 200 and 100 thousand barrels a day, respectively. Oman actually agreed for “a certain” reduction of oil extraction and export, but this country has not yet announced its final decision. Russia was trying to delay its answer due to the painful aspect of that issue for the budget, but it gradually was making concessions to OPEC. There was a session between premier Kasyanov and the heads of the oil companies on November 23, and it was decided that Russia would reduce the extraction and export of oil in the fourth quarter of the current year by 50 thousand barrels daily. It was earlier stated that the reduction would make up 30 thousand barrels, a very symbolic figure for Russia. Today’s decision of the Russian government is a forced concession to OPEC, which is putting more pressure on the Kremlin.

The foreign reaction to this news was immediate. The prices of oil on the London exchange went up suddenly after Russia decided to cut exports. The January and February futures reached the level of $20 per one barrel, which was about 70 cents higher than the price registered at the moment, when the exchange was closed on Tuesday.

As OPEC's office in Vienna reported, OPEC welcomed Russia’s decision to cut the volume of oil export. As this organization believes, the decision will contribute much to the stabilization of the world markets of raw materials and to the reduction of the price on the crude oil, which must be on the level of $20-25 per barrel. Experts calculated that if other non-OPEC countries keep their promise and reduce the exporting volumes of oil (Mexico – by 100 thousand barrels a day, Norway – by 200 thousand barrels and Oman –by 50 thousand), then it will be the optimal figure of the oil export reduction, to which OPEC was aspiring. Therefore, this may mean that the amount of the crude oil on the world market will make up 1.5 million barrels on the part of OPEC (from January 1 ,2002) and 0.5 million barrels daily on the part of the independent oil producers.

Russian oil companies do not wish to cut their exports, which means that they are going to suffer losses. The USA, on the other hands, is waging war in Afghanistan and it is surely interested in cheap oil: the cheaper, the better. Russia is trying to enlist the USA’s support, since they both are allies in the struggle with the international terrorism. Therefore, the decision on the reduction of oil exports was a result of the collision between different external and inner political interests; It is not likely to exert a serious macroeconomic situation in the country.

Andrey Ivochkin PRAVDA.Ru

AP photo: Russian President Vladimir Putin, left, speaks to Vagit Alekperov, oil giant Lukoil chief, in the Kremlin in Moscow