Rossiyskaya Gazeta [Russian governmental newspaper]
September 12, 2000
[translation for personal use only]
Article by Aleksey Chichkin under the "Topic of the Day" rubric:
"Oil as a Political Category"
The current fantastic world prices for oil are such
that they could perfectly well provoke an energy crisis in the countries
of the West similar to that which occurred in the mid-seventies.
Therefore, the industrial world, which advocates the so-called free
market, craves just one thing -- stable price by any means. The
Organization of Petroleum Exporting Countries is capable of doing this.
Although not on its own, but only if other major exporters and, in
particular, Russia go along with its decisions.
And this is understandable: Russia has a 15% share of the world oil
market and, in terms of world extraction, produces roughly one-fifth of
the oil. The "Russian factor" is becoming increasingly important.
We should remember that the USSR did not support OPEC in the second
half of the seventies, dramatically increasing its oil exports at low
prices at the time, which literally saved many Western countries from the
current fate of our long-suffering northern territories, which are
freezing without fuel.
But since 1991 Russia has become far more sympathetic to OPEC's
ideas, if only because this organization establishes price bands for all
oil. And -- what is no less important -- the quotas for the extraction
and export of oil and the prices for it are determined (unlike in
previous decades) during consultations with the leading Western
oil-importing countries and companies.
Another thing is also obvious. The current world situation, which
has already raised world prices to $31-32 a barrel, is extremely
advantageous to Russia. It is this factor which has enabled the
government to build up sufficient foreign currency reserves. But there
is no point at all in driving our Western partners into an energy crisis.
This is also disadvantageous to the majority of OPEC countries and
other supplier countries.
Particularly as the world oil situation depends to a decreasing
extent on purely economic categories -- the balance of supply and demand.
This is an extremely politicized sphere. Conflicts involving Russian
tankers in the Persian Gulf, the bombing of Iraq, the growing separatism
in oil-exporting countries and regions, Islamist terror in Algeria,
and... even reports about Saddam Husayn's incurable illness -- these
events dramatically boost oil prices.
Russia spoke of the need to collaborate with OPEC for the first time
in 1998: Sergey Generalov, the then Russian Federation minister of fuel
and energy, supported on the government's behalf the idea of our
participating in OPEC's work as an associate member (six countries,
incidentally, have enjoyed this status since 1970). And then Russia for
the first time supported measures to restrain exports and particularly
extraction in order to "return" the plummeting oil prices to their former
level. The next minister, Viktor Kalyuzhnyy, enabled our country, while
not formally party to quotas or other OPEC instructions, to support the
measures to raise world oil prices (notably introducing export
restrictions, particularly on supplies to the market involved in
relatively cheap, nonrecurring deals). Other countries not
participating in OPEC -- Mexico, Norway, and a number of Arab, South
American, and African states -- acted likewise. As a result, the prices
this fall have reached a record level -- the highest in the last 15 years.
But it is this "record" which threatens to backfire on all sides.
The United States and other Western countries have even been forced to
announce that they will imminently "release" oil (their own imported oil)
on to the market if the suppliers themselves will not do so. According
to certain estimates, this will cause prices to fall by $8-10 a barrel.
This means that the execution of the 2001 Russian budget, which has a
$21-a-barrel price "factored" into it, could become difficult.
Although, according to the OECD (26 industrialized countries), a range of
$19-26 would suit Western countries. In short, the lower it is the more
reliable. In this situation Russia and other associate partners of OPEC
supported the decision the day before yesterday (10 September) to
increase the extraction of oil designed for export by 800,000 barrels a
day from 1 October, thereby warding off the threat of not only a collapse
of the world market but the freezing of many Western capitals.
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