Kasyanov and oil – death tandem

Price policy in oil market, relations with OPEC, the 2002 Russian budget – all these questions are interconnected. A negative oil conjuncture could demolish the budget, in whose fragments Kasyanov’s government will perish. The economy and policy. What will Kasyanov do?

Today, in the Russian White House, Mikhail Kasyanov is carrying out a session with representatives of the 11 biggest oil companies of Russia. According to RIA ‘Novosti,' at the session in the Department of Governmental Information, the situation in the oil market and possible measures to stabilize it are being discussed.

During the meeting, Vice-Premier Viktor Khristenko, energy minister Igor Yusofov, Surgutneftegas official Vladimir Bogdanov, Rosneft official Sergei Bogdanchikov, Transneft official Semen Weinstock, Slavneft official Mikhail Gutseriev, TNK official Semen Kukes, Tatneft official Shafagat Takhautdinov, YUKOS official Mikhail Khodorkovski, Bashneft official Amir Syrtlanov, LUKOIL official Rafil Maganov, and Sibneft official Yevgeni Shvidler took part.

A similar meeting was carried out by the premier on November 23. At that time, the decision about a 50-thousand-barrel daily reduction of oil export was taken. Russian oil experts’ reaction to OPEC's proposition addressed to independent oil producers to reduce oil extraction by 500 thousand barrel a day was not well defined.

YUKOS head Mikhail Khodarkhovski belongs to those who find this OPEC request unacceptable for Russia. The main reason is the essential damage Russia is threatened with because of this oil extraction reduction. Moreover, he is sure that Russia’s partial leaving the oil market will not change the price situation, because its place will be immediately occupied by Kazakhstan and Azerbajan. However, Mikhail Khodarkhovski was especially concerned with the perspectives of YUKOS development: the company has invested big money into increasing oil extraction, so it will incur serious losses if the production is reduced. According to him, the price level of $ 16.00-22.00 for a barrel is a profitable enough position.

LUKOIL President Alekperov conversely supposes tjat the OPEC proposition should be taken to return oil prices to the 27-dollar level with joined efforts. While explaining his thoughts, his deputy noticed that if the price increases by 15 percent, it is more effective than increasin exports by five percent. According to him, it is better to reduce oil extraction, than to sell oil two times cheaper.

Gazprom head Alexei Miller also belongs to the oil magnates who support the reduction of oil extraction. At a session in the city of Novy Urengoi, he started to assure the Russian President that low oil prices could cause decreasing gas prices with all the possible negative consequences for Gazprom and for the whole country. However, Putin interrupted his explanations: “Enough of that; everything is clear.”

What will the situation look like this time? Will the united position of the government and the magnates be worked out? Now, the government cannot press down on the exporters, and, actually, it does not have to. Let us wait for the results.

Dmitry Litvinovich PRAVDA.Ru

Read the original in Russian: http://www.pravda.ru/main/2001/12/05/34541.html