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OPEC is seeking closer and more formal ties with Russia in its oil market control endeavors, the Wall Street Journal reports, citing sources from the cartel, adding that Saudi Arabia is spearheading the effort.
The move is a logical consequence of more than two years of close cooperation between OPEC and Moscow aimed at supporting prices initially, but later transforming into a wider market-control drive aimed at curbing at least some of the rising clout of the United States as one of the top three global oil producers.
To date, according to the latest production data, the United States is already the biggest crude oil producer, which means it has increased influence on international markets and, of course, prices. In this situation, it makes sense for the third-largest producer, Saudi Arabia, to team up with number-two, to counter this rising influence of the United States.
Russia is not too fond of the idea, however. Back in December, Energy Minister Alexander Novak said, “There is a consensus that there will be no such organization. That’s because it requires additional bureaucratic brouhaha.”
However, it’s hardly just the brouhaha that stands in the way of a formal OPEC-Russia marriage. Another reason is that Russia is better positioned to survive and even thrive at lower oil prices than most of OPEC, since it is a lot less dependent on its oil revenues than Saudi Arabia or Kuwait, to mention but a couple. Yet another is the likelihood of opposition from Iran, a close geopolitical ally of Russia, but the archenemy of Saudi Arabia in the Middle East.
Other OPEC members would also be hard pressed to accept such a formalization, however slim the chance of it happening. The reason for them is that it would give Saudi Arabia and Russia effectively all the decision-making power for the whole organization.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.