Russia » Economics
Author`s name Ольга Савка

OPEC and USA Want To Win Russia's Support

Russia ranks second on the oil list, leaving Norway, Venezuela and Iran behind

When OPEC, a powerful oil cartel, gathers for a meeting in Vienna, sheikhs will not be smiling that much as they did before. The organization of oil exporters is currently suffering from two problems: the resumption of the export of the Iraqi oil and the continuing mess within the cartel.

From OPEC's point of view, the Iraqi oil is a danger, albeit an illusive one. Analysts of the cartel do not know, to which extent the prices of the world market will react to the resumption of the Iraqi oil export. At any rate, the cartel would not like Iraq as the leading oil exporter to disturb its welfare. The welfare is obvious: oil prices have been higher than $25 per barrel this year, and the last week was over with $30.17 in New York. Will the restoration of the Iraqi oil industry lead to the reduction of oil prices? OPEC specialists say it is not likely.

OPEC analysts say, Iraq will hardly be able to maintain stable deliveries of 600-650 thousand barrels a day in the beginning of August, as officials of the US-led administration in Baghdad promised. Even if it happens, the Iraqi oil will not be delivered on the American market before the middle of September. The excess will be quickly absorbed with the growing demand on winter fuel.

Another factor, which pacifies OPEC at present, is the guerrilla warfare in Iraq. When George W. Bush officially announced about the completion of the military action in Iraq, dozens of kilometers of Iraqi pipelines had been bombed, damaged and stolen. The north of the country suffered from sabotage and looting most of all. The Iraqi Northern Oil Company, which extracts 500,000 barrels of oil from Kirkuk on a daily basis, is forced to store it all in oil reservoirs - the company's pipelines are all out of order.

The officials of the Iraqi oil ministry decided to attract the local population to guard pipelines - to make something like the neighbourhood watch that is practiced in a lot of Western countries. However, the US-British coalition was gripped with horror when it occurred to them that they would have to give weapons to the guards. A guard in Iraq might become a guerrilla in a blink of an eye. The doubts about the security of the Iraqi oil export make the resumption of the export rather doubtful too.

OPEC has been tired of Baghdad's decision to shut down or to open the oil export against the background of the sanctions dispute with the UN. As a result, the cartel is drawn to have a philosophic attitude to the potential danger that the Iraqi oil poses for the world market. OPEC is used to the Iraqi abruptness.

It is harder to get used to the messy situation within the cartel, though. The situation is about the changing role of Saudi Arabia - the largest oil producer, the doubtless OPEC leader. On the one hand, the Iraqi war launched by the USA has seriously undermined Saudi Arabia's influence – a recent staunch ally of America - on Islamic members of the oil cartel. A lot of them have changed their attitude to the USA for the worse, some countries like Iran, for example, perceive the United States as an enemy. To a certain extent, those sentiments are applied to the attitude that the majority of OPEC countries have towards Riyadh.

On the other hand, the American administration is becoming more indignant about the "lack of devotion" in the conduct of the former good friend. Various terrorist activities can be traced in Saudi Arabia - it turns out that terrorists often hold Saudi passports. It is not hard to guess, why this country is turning to a shelter of gunmen. The Islamic radicalism is growing because of the public discontent with the internal economic policy, when huge export revenues are used on the top level, and common people are left to deal with what they call a drop in the bucket.

America is losing Riyadh, a tool to press OPEC with, so the USA is nervously looking for new sources of the raw material. This is the reason why the American administration is hurrying to restore the Iraqi oil industry. In addition to that, the interest in Russia - a new member on the world energy market - is growing too. The USA and OPEC are in the opposition to each other: the major consumer of petroleum products stands against the major exporter. The two of them want to win Russia's support at the moment. They have recently realized, if Saudi Arabia exports seven million barrels of oil daily, Russia exports 5.03 million, which makes it rank second on the oil list, leaving Norway, Venezuela and Iran behind.

As a result, American officials started saying that Russia should increase the oil output and play a more important role on the oil market. OPEC is inviting Russia to join the club (the organization currently counts eleven members). Russia was invited to participate in cartel's meetings in Vienna, albeit as an observer - for the first time ever. In return, OPEC is expecting Russia to play according to its rules, which implies an observation of coordinated quotas.

However, Moscow prefers to stay neutral for the time being. Analysts believe, Russia finds itself in an extremely favorable condition at present moment. It does not have to think, whether it has to increase the export for the USA, or restrict it with quotas for OPEC. There is an objective reason, though: the Russian pipeline infrastructure is not adapted very well for considerable export fluctuations. However, the Baltic pipeline system is to increase its capacity from 240,000 to 840,000 barrels of oil daily already by the end of 2005. There are other major projects in the field too, for example, the Western Siberia-Murmansk pipeline and the Russian-Chinese pipeline. Russia has time to fill its budget with petrodollars, to look around and to think of the future.