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Reason why Russia should not join OPEC Oil cartel?
By Amarendra Bhushan for CEOWORLD Magazine Updated:December 17, 2008
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As OPEC is getting ready for a huge decrease in production and they realize that they need Russia (the world’s largest oil producer and second largest exporter) to help out. OPEC has invited Russia to join. The Kremlin will risk throwing away its membership of the G8 group of leading economies by acting with the oil cartel in reducing supplies.
Russia has been under pressure from Opec to cut as many as 300,000 of the 9.75 million barrels it produces each day to help maintain prices. Analysts warn that Congress could lead a campaign to have Russia thrown out of the G8. It would jeopardise Russia’s position in the G8 for sure. Yet for Russia, the risks of international isolation are less important than the consequences of oil prices remaining low.
The 12 members of Opec, or the Organization of Petroleum exporting countries, account for 36 per cent of world oil production. Russia is increasingly making it clear that it views itself as a strategic competitor to the United States rather than a strategic partner. Aligning itself with Opec may seem an attractive option for Russia in the short term but there will be costs. I would not be surprised if Congress decided to take action because Russia is not behaving like a responsible member of the community of nations.
Flash Points:
- Russia may cut oil production by 200,000-300,000 barrels a day
- Russia and OPEC together account for more than half of global oil production.
- World oil prices have fallen by more than 60% from a record high of $147 per barrel in July to under $50.
- In 2008, Russia has so far produced an average of 9.5 million barrels a day.
- OPEC expects Russia to cut output by 200,000-300,000 barrels.
- To rid itself of dependence on other world energy producers’ policies i.e. those of OPEC member states, who are able to counterweight Russia’s oil geopolitics at any time;
- To indicate a monopolization privilege course in world economic affairs and change its geopolitical missions into geoconomical ones
- To try to prevent the financial crisis having an influence on the Russian energy industry and thus improve its local investment image at international level.
- To balance and reduce US domination of OPEC member states, specifically destroying the so-called “linkage” between Saudi Arabia and the USA.
- To regulate oil extraction volume at national level and thereby give itself additional leverage to impose Government restrictions on private energy companies, like ROSNEFT, LUKoil etc.
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