Author`s name zamiralov tech

Russian Oil Attractive for Saudis

But Russian oil reserves will be enough for 22 years only
Russian-Saudi contacts became particularly active before the Iraq war and they are highly likely to have a successful continuation and good results. Until recently Russia and Saudi Arabia have been the key rivals on the oil market. What is more, Russia has practically caught up with Saudi sheikhs in oil production. However, within the past year the relations between Saudi Arabia and the USA have aggravated even more, and the Iraqi occupation didn't bring effective results to the US military and American allies. Oil is steadily rising in price on the world market which in its turn has an effect upon the economic situation in the world's largest countries. Obviously, under such unstable conditions rivals need to develop a well-coordinated strategy.

The Russian mass media are reporting again that Russia and Saudi Arabia may soon conclude an agreement on closer cooperation in extraction and sale of hydrocarbon raw materials. Experts have different points of view upon this form of cooperation. It should be mentioned here that high-ranking politicians of both countries permanently maintain contacts.

The Wall Street Journal reports that closer cooperation may first of all concern mutual investing of the oil industries of both countries. It is highly likely that the prospective agreement will be focused on this issue. The newspaper supposes that the agreement may be signed during an official visit of Saudi Prince Abdullah to Moscow in September 2003.

It should be mentioned that Russia's oil industry is not ready for large-scale investments in Saudi Arabia, even despite of the excess of petrodollars that are abundant in the country. Russian oil companies rather want the Saudi ruling dynasty to let them participate in the running projects and in development of new oil and gas fields. For the beginning Russian oil oligarchs would be even quite satisfied with playing the role of contractors or subcontractors. They aim at obtaining firm positions on the Arabian oil fields now. This is because it is quite obvious now that Iraqi oil fields won't be available for Russian companies.

What is more, all Russian oil companies need large-scale oil investments that they still cannot obtain. The problem is getting more complicated because of the position of the Russian authorities on the problem. The authorities say that they welcome investments, but at the same time they insist that oil companies and their oil fields mustn't be controlled by foreigners. And confronted with such strict conditions, large international oil companies are rather cautious with making investments in Russian oil companies. The scandal about Yukos has made them even more cautious.

Some anonymous sources in the Russian government suppose that Saudi investment proposals are even more attractive for Russian officials in this respect. Indeed, Arabs don't want to obtain an absolute control over the Russian oil industry, but at the same time they are ready to make large investments into the oil sector of the country.

In spite of the plans of closer cooperation in the future, last year OPEC's leader Saudi Arabia made several attempts to press Russia to change its oil exporting policy. And it is quite understandable: the sweeping increase in the export of Russia's oil troubled the largest members of the world oil cartel. However, the pressure upon Russia had no effect. Especially that at that very period the Russian authorities and owners of the largest oil companies of the country were actively negotiating beginning of mass oil supplies to the USA. The negotiations in fact resulted in nothing: the US financial circles refused important investments to Russia; however the pressure of the Arab nations upon Russia had no effect either. Finally, the oil export from Russia and former Soviet countries increased from 4.75 million barrel per day to 6.95 million barrel per day within 2001-2003. Russia has strengthened its leading positions among oil exporters. Within the same period the oil supplies to the international market from OPEC countries and Saudi Arabia first of all reduced to less than 30 million barrel per day.

In spite of this, the official Er Riyadh doesn't give up the idea of signing an agreement on investments into the oil sector of its immediate rival. Why do they need it?

The seriousness of the intention is proved by numerous statements of Yevgeny Primakov, the head of Russia's Chamber of Trade and Industry, who is known as a rather influential figure in the Middle East. The man is responsible for coordination of informal contacts between Russian oil companies and Saudi officials.

Being a very experienced politician, Yevgeny Primakov speaks openly just about few things; but even judging from his reserved statements we can see that the negotiation process between Russia and Saudi Arabia is in full swing. The negotiations are devoted to participation of Russian companies in the economic activity of Saudi Arabia. These are ecological and transport projects on the Saudi territory: clean-up of oil spillages, utilization of oily water and restoration of territories polluted with oil. Yevgeny Primakov says that Saudi Arabia would like to use Russia's considerable experience (and low cost of Russian experts) in such spheres as the mineral resource industry, railway and city transport. In the framework of the negotiations the parties are discussing the prospects of construction of the underground as gorgeous as Moscow's in one of the Saudi cities.

In return, Saudi Arabia would like to attain an implicit but serious access to Russia's oil industry. No doubt that even without open purchase of Russian companies Saudis will have methods to control sectors of the Russian oil production. The experience of Russia's most active oligarch Boris Berezovsky has demonstrated that it is not necessary to buy large share holdings of companies to control their finance. The Russian authorities do not consider that purchase of top managers of companies poses a threat to the national security and requires no response measures.

Meanwhile, the Russian oil reserves are not that great. According to researches conducted by British Petroleum, if the present-day rate of oil extraction and development is preserved, the oil reserves of Russia will be enough only for 22 years. In its report Statistical Review of World Energy 2003, British Petroleum reports data about oil production and consumption, about the developed oil reserve in the world. The report says that Saudi Arabia is holding the biggest oil reserve in the world, 262 billion barrel, which is one forth of the world reserves.

If we take into consideration that fact that no oil development has been carried in the country since the Soviet era, then we'll see that the oil export potential of Russia is rather modest (although the authorities encourage increase of oil production and export). If Saudi Arabia failed to get rid of Russia's serious competition on world oil market, why not help the rival quickly extract the whole of the oil reserve and sell it out. If you cannot get rid of a rival go shares with him, this is the indisputable law of the market economy.