Russia is in favor of a continued partnership with OPEC that does not need to be limited to oil production control, Russia’s President Vladimir Putin said after the BRICS summit that took place in Brazil this week.
"A constructive dialogue has been established with OPEC. We understand where this tough position [on cutting output] comes from, including the position of our friends in Saudi Arabia on Saudi Aramco IPO," the Russian President said, as quoted by TASS.
"They have their own interests, and we should respect that, which is what we are doing. When it comes to prospects for cooperation, it will not be limited to regulating output."
"The system of relations between Russia, OPEC and non-OPEC countries represents an effective instrument of maintaining the balance on the global energy market that is important for everyone, both consumers and producers," Putin added.
Russia has become instrumental for OPEC’s success in propping up prices by placing caps on production. The world’s second-largest oil producer after the United States had just the right amount of clout and direct influence on oil markets to help quench concerns about an oversupply. In fact, Russia’s role in the cuts led some analysts to argue that it is now the de facto leader of OPEC even if it is not a member and has no plans for membership. Related: Top U.S. Gas Producer Looks To Ditch Major Shale Assets
Russia’s leverage lies in the fact it can function better than OPEC members at lower oil prices. In other words, for Russia, the production cuts are not a question of life and budget deficit. Yet by joining OPEC in its production control drive, Moscow has put itself into a position where it can ask for favors in return, notably from Saudi Arabia, which has already pledged sizeable investments in Russian energy projects, including in oil and LNG.
OPEC and Russia are meeting next month to discuss the next steps in their partnership and the production cut agreement.
By Irina Slav for Oilprice.com
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Russia’s alliance with Saudi Arabia and its cooperation with OPEC in support of oil prices are enabling Russia to have a very influential impact on the global oil market and also on OPEC’s oil policies.
Russia’s leverage lies in the fact it can function better than OPEC members at lower oil prices. Russia is an energy superpower capable of living with an oil price of $40 or less whilst compared with OPEC members needing an oil price ranging from $85-$100 a barrel to balance their budgets. Yet by joining OPEC in its production control drive, Moscow has put itself into a position where it can ask for favours in return, notably from Saudi Arabia, which has already pledged sizeable investments in Russian energy projects, including in oil and LNG.
Last but not least let me correct an inaccuracy in your article. Despite excessive hype by the US Energy Information Administration (EIA) in cahoots with the International Energy Agency (IEA), Rystad Energy and BP Statistical Review of World Energy, the United States is not the world’s largest crude oil producer. Russia is at 11.24 million barrels a day (mbd) in 2019 followed by the US at 11 mbd and not the EIA’s hyped figure of 12.5 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London