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Russia and OPEC to join forces?

By STEFAN NICOLA, UPI Germany Correspondent   |   Sept. 12, 2008 at 3:04 PM   |   Comments

BERLIN, Sept. 12 (UPI) -- Russia has courted OPEC with a memorandum to forge closer ties, a move that, if realized, would increase the power of oil-producing nations and further weaken importers in Europe, observers say.

Observers at the most recent meeting in Vienna of the Organization of Petroleum Exporting Countries said the Russians were the biggest delegation ever from a non-OPEC country: Together with 20 high-ranking officials from Russia's economic and political scene, Igor Sechin, Russia's deputy prime minister, delivered a memorandum to the conference.

"OPEC is Russia's key partner on the global oil market," Sechin, who also chairs Russia's largest oil company, Rosneft, was quoted by RIA Novosti as saying. "We are putting forward an initiative to establish a regular energy dialogue between Russia and OPEC, the main goal of which will be to contribute to providing sustainable stability on the oil market in the interests of all participants."

Russia is also interested in a "mechanism for regular coordination, information exchange and market analysis and forecasting" with OPEC, Sechin said.

OPEC said it was willing to review the memorandum and look for ways in which cooperation could be increased. Including Russia would boost OPEC's profile, as Russia has the world's eighth-largest crude reserves.

OPEC's secretary-general, Abdallah Salem el-Badri, will travel to Moscow to discuss with Russian leaders further details of the intensified cooperation; he has promised, however, that a decision won't affect the consumer at all.

Experts are not so sure about that.

Russia would increase its clout, once tied to OPEC, and consumers in Europe may suffer as a result, said Stefan Meister, Russia expert at the German Council on Foreign Relations, a Berlin-based think tank.

"For importers in Europe, it could become harder to find alternative suppliers or to have an influence on prices," Meister told United Press International in a telephone interview. "Russia certainly wants to increase its energy leverage."

OPEC has 12 member states: Algeria, Angola, Venezuela, Iran, Iraq, Qatar, Kuwait, Libya, Nigeria, United Arab Emirates, Saudi Arabia, Ecuador. Another OPEC country, Indonesia, will be suspended from the group Jan. 1, 2009. OPEC accounts for roughly 40 percent of the world's oil production. Russia, with 12 percent, is the world's biggest non-OPEC producer.

An OPEC that includes Russia would control more than half of the world's crude output, a thought that worries most observers in Europe.

Russia's image in the West has been tarnished since the recent Georgia crisis, although energy exports to Europe have been reliable over the past decades.

Moscow has long threatened to look for alternative export routes, as much as European politicians, mainly in Britain and less so in Germany, have called for a diversification of import sources to reduce dependence on Russia as a supplier. Already, the European Union imports almost half of its natural gas and 30 percent of its oil from Russia, with exports doomed to rise as domestic resources dwindle.

Yet neither Moscow nor OPEC said Russia would coordinate its oil production or exports with the cartel, and Russia hasn't cut production levels in accordance with OPEC over the past years.

Russia may not be willing to have its output influenced, nor will all OPEC members be excited about Russia's advances. Saudi Arabia, a staunch ally of the United States, will be less optimistic toward having Russian influence on the organization than Iran or Venezuela, countries that already are forging closer ties with Moscow.

Including Russia also could mean inviting in trouble, observers say.

"Russia, to put it mildly, is not known for being focused on consensus," Meister said. "So it may become more difficult to find common ground within OPEC in the future."

Russia nevertheless hopes for a positive answer at an OPEC meeting next month in Moscow.

--

(e-mail: energy@upi.com)

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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