Author`s name Olga Savka

Russia Runs Sly Policy with OPEC

This policy seems to be logical and thought-out

Major companies of the oil market think of Russia only, when their positions on the market have to face a threat. The OPEC President Abdullah bin Hamad al-Attiyah has arrived to Moscow to talk Russia into acting within the framework of the coordinated policy of OPEC members. The oil organization thought of Russia in 2001, when oil prices started going down, and last year, when OPEC members considered the growth of the Russian oil export blacklegging. However, oil sheikhs, who obtained their welfare with the help of the growing demand on oil, are in need of Russia's support at the moment indeed.

OPEC countries have found themselves in a stupid situation after the sweeping beginning and end of the war in Iraq. Prior to the war, the oil was getting more and more expensive. The major consumers of oil, the United States and the European Union, exerted considerable pressure on the organization, demanding the increase of oil extraction quotas. The OPEC management offered not to fly into a passion, taking into consideration the fact that a lot of OPEC members exceeded the set quotas on oil export and extraction. However, the pressure from industrially developed countries came into the picture anyway: the quotas were raised on the threshold of the military operation in Iraq.

Now the Iraqi oil is controlled by the American and British occupation administration, whereas the USA actively tries to lift UN sanctions. No one doubts that America will eventually get what it wants. If not, then no one will be able to stop American companies from buying the Iraqi oil avoiding "morally outdated" sanctions. This way or other, but the OPEC's role has been brought to nothing in this situation. Now the Organization of the Petroleum Exporting Countries is intended to cut the quotas of its members and to persuade Mexico and Norway to do the same (they coordinate their export policy with the OPEC). In addition to that, OPEC is intended to persuade Russia to follow their example. One shall assume that this is exactly the goal of Abdullah bin Hamad al-Attiyah's visit to Moscow.

Unfortunately, Russia does not have any explicit and clear foreign policy as far as oil is concerned. As an oil-extracting country, Russia is objectively "in a boat" with oil sheikhs, no matter what the Russian government might think of that. Russia needs the oil price on the level of $22-25 per barrel, which is also an objective for OPEC. Otherwise, Russia will experience real economic difficulties. In addition to that, Russian oil oligarchs have another point of view on the matter: they see their future as a maximum cooperation with American and British oil corporations.

On the other hand, there is no need for Russia to quarrel with the cartel. In contrast to Russia, OPEC members are capable of surviving a long price reduction period. That was probably the reason why Russian Energy Minister Igor Yusufov evinced a great interest of Russia to coordinate its actions with OPEC. After negotiations with the Russian minister were over, the OPEC president told reporters that Russia was ready to support the cartel's efforts to stabilize world prices on oil. Abdullah bin Hamad al-Attiyah thanked Russia for the cooperation with OPEC. The cartel's president stated that Igor Yusufov assured him of further support.

However, both Russia and OPEC are known for keeping their promises in a peculiar way, brushing them aside easily, when they are not profitable anymore. For example, the industry cartel took certain efforts in 2001, when the cost of a barrel of oil became less than $22. Russia refused to reduce its extraction and export at that time, then it agreed to do that, although Russia disagreed with the reduction amount that would be good for OPEC. Russian Prime Minister Mikhail Kasyanov eventually put a stop to the discussion, having agreed to cut the Russian oil export by 150,000 barrels a day for the period January - June 2002. However, the Russian government lifted the oil export restriction already in March. As high-ranking officials explained, the restriction was not profitable for Russia. As a result, Russia left behind the then oil extraction leader, Saudi Arabia. Some senior OPEC officials threatened Russia with a price war.

It seems that this time Igor Yusufov, the Russian Energy Minister, uses the same tactics, the Byzantine tactics, as they call it in the West. As the OPEC president said, the Russian energy minister promised him to support all measures that the cartel might take. However, the minister preferred not to say anything definite to Abdullah bin Hamad al-Attiyah's question, who wondered if Russia was going to cut the oil extraction and export on OPEC's request. Yet, Igor Yusufov assured the cartel's president that the Russian delegation would be present at OPEC's June meeting as an observer. Well, the organization's president had no doubts about it anyway.

However, OPEC expects a certain definiteness from Russia. Russia has to choose, which side it is on: exporters' or consumers'. The world oil cartel is intended to haggle with Americans for a place under the sun. Latest changes in the cartel is another proof to that: the consolidation of major rivals for the leadership in the cartel of Iran and Saudi Arabia, the planned substitution of the OPEC secretary general (to have Iranian Deputy Oil Minister Hadi Nejad Hosseinian instead of the pro-American Alvaro Silva). The OPEC's refusal to have a meeting with Iraqi officials clearly determined the political direction of the organization in the nearest future.

Russia's participation in this peculiar anti-American alliance will probably make it more important. At the end of the day, there would be someone to blame in case of a failure. Does Russia need this, though?

It deems that the USA counts for Russia as an anti-Arab counterbalance on the oil market. It does not really matter that this counterbalance is rather weak and insecure: the political dividend is relevant anyway. Furthermore, Russia will not get any profit from the energy "cooperation" with the USA.

Experts believe that the maneuver policy will continue in this situation. In other words, Russia will try to demonstrate its interest in the energy partnership with the United States, inviting world's largest corporations to become shareholders of Russian companies, and pulling OPEC's leg, the influence of which diminishes every day. Russia will also hurry to build an oil pipeline to China, which would be capable of providing stability for the Russian oil business for the upcoming decade (this is what Russian oil oligarchs believe).

It is the USA that plays the role of the major moderator on the world market after it gained the control over the Iraqi oil. Most likely, the USA will determine the further status and opportunities of the cartel. Russia is considered to be a weak gambler on the oil market - that's a fact. This fact might be of use to this gambler: there will be some time to grow.