Russia suggests OPEC to stabilize prices at oil market

Updated September 11, 2008

   Russia suggests the Organization of Petroleum Exporting Countries (OPEC) to join forces targeted at the stabilization of prices at the world oil market. So, on Tuesday, September, 9, Russia’s Vice Premier Igor Sechin passed the project of OPEC-Russia memorandum to the Organization’s management within the 149th meeting held in Vienna. Russia’s Vice Premier sees definite prospects in the cooperation with OPEC on the fight against the international manipulation of oil prices, and the West is suggested to discuss the issue of energy security and assets’ exchange in the energy sector.

   Russia would intensify the cooperation with OPEC within the framework of the prices’ stabilization at the oil market, as Vice Premier Igor Sechin declared in Vienna. He headed Russia’s delegation with OPEC observer status during the regular meeting of the Organization that ended on September, 10. Russia’ Energy Minister Sergey Shmatko, the heads of Rosneft and Surgutneftegaz Sergey Bogdanchikov and Vladimir Bogdanov, the head of Transnefteprodukt Sergey Maslov, the representatives of Russia’s government, the ministries and Gazprom have come to Vienna as well. On Tuesday, September, 9 the Conference decided to renew the September decisions on cutting the oil supplies at the external market by 0,52 million barrels a day, to 28,8 million barrels (taking into account the suspension of Indonesia’s membership in OPEC) that had resulted already in the growth of oil price by 1,5%.

   According to Igor Sechin, Russia’s delegation came to Vienna at the request of OPEC’s management and by the instruction of Russia’s PM Vladimir Putin. However, Mr. Sechin explained that OPEC and Russia’s interest were mutual. "We shouldn’t pretend that we don’t take part in the pricing in the world oil market, and we are a full member of this process. We have paid already for the entrance ticket to the oil market". Russia’ Vice Premier introduced the project of new OPEC-Russia memorandum to OPEC’s management. The project covers the offer on the creation of mechanisms for OPEC and Russia’s regular dialogues (Mr. Shmatko is nominated as a coordinator of Russia’s party), analytical information exchange on the oil market and joint projects to increase its transparency.

   The official in Russia’s delegation explained that the issues of provision with the operational oil supplies and mid-term reserves of the deliveries increase to the oil market were discussed mainly within the Conference. "The members of the meeting were taking much interest in the reserves of deliveries and in the possible influence of deliveries on the pricing, as well as in the opportunities of the certain players to resist the destabilization of the situation at the oil market for political purposes", he said. It is better to remind that in autumn, 2007, when one barrel of oil of OPEC’s basket crossed the $80 mark, the Organization declared about the major reduction of the influence on the pricing mechanism, and the analysts stated the same. Nevertheless, on September, 10, after OPEC had announced the decision to cut the extraction, the oil prices responded for the first time and went up. Despite Indonesia’s exclusion from OPEC from 2009, the Organization’s stake at the world oil exporting market is kept at the level of about 42% due to the entry of Angola and Ecuador in 2008.

   When Igor Sechin commented the Vienna meeting results, he restated saying that "the thorough analysis of possible manipulation of oil prices for speculative purposes" is required. He considers that the mechanism of hedging investors’ risks via the oil delivery futures "has been developed baselessly", and he speaks about the necessity "to cut the role of unfair mediators" and marks the influence of the tax policy distinctions of the counties-consumers of oil on the stability of prices. According to the data of the source, within the talks with OPEC-countries, Russia’ representatives offered to come back to the conception of the "world energy security" the country had introduced within G8 Summit held in St. Petersburg in June, 2006. This conception emphasizes the long-term direct contracts signed by the key market players, the share of the sellers’ risks between the consumers of the energy market, the mutual entry to the markets and the assets’ exchange in the fuel and energy sector, the price guarantees of recovery of expenses made by the oil producers and consumers via the mechanism of "fair prices". However, G8-countries didn’t take interest in the conception.

   Speaking about "Russia’s contribution to the stabilization" of the world oil prices, Mr. Sechin declared about the necessity to tackle the range of problems at the internal market. Among such problems, he named the issue of the monopolization of the oil services market for the first time. However, he refused to comment the possible activity of Russia’s Federal Antimonopoly Service (FAS) here and the claims to the leaders of this market in Russia, including the Russian divisions of Halliburton. The FAS’s representatives declared that the analysis of the situation at the oil services market was made within the framework of the approval of Integra Group’s deals early in this year, and the Service didn’t find any violations of the antimonopoly law.

   In addition, Mr. Sechin explained that Russia’s key activities in this area would be "the support of the market environment", the stimulation of the extraction and export growth, the differentiation of the custom and tax regulation of the export. OPEC will respond to Russia’s initiatives in October, when its management comes to Moscow.