Will Russia join OPEC?

Will Russia join OPEC?

Saudi Arabia and Russia are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years, Reuters reported.

Saudi Crown Prince Mohammed bin Salman said that Riyadh and Moscow were considering a deal to greatly extend a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices.

“We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” the crown prince said, adding that they have agreement on the big picture, but not yet on the detail.

The Kremlin spokesman Dmitry Peskov said that Russia and Saudi Arabia maintain ties on the issues related to cooperation on energy markets.

"Russia and Saudi Arabia are actively expanding ties on various levels - expert, top-level (ties), as they discuss different cooperation areas, including cooperation on energy markets," the spokesman said.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that that Saudi Arabia's statement should be regarded as an attempt to exert influence on traders. "Such statements will be made as long as it affects the prices. But we should not consider seriously the statement that Russia will join OPEC and that someone has an action plan for the next 20 years," the expert said. .

At the same time, he recalled that the decision to conclude the OPEC + deal was situational. "Nobody knew whether it would work or not, but after raising oil prices, they were faced with the fact that the US benefited best from this situation. The prices increased, shale deposits became profitable, and so did extraction. Therefore, in order to maintain the prices at an acceptable level, all the deal participants must constantly make such statements," a leading analyst of the National Energy Security Fund said.

In addition, he expressed doubt that any proposals in the framework of this cooperation from OPEC will be of interest to Russia. "OPEC produces about 40% of oil. In addition, we are competitors in the world energy markets. It is difficult to find any point of cooperation here. Russia was forced to agree to this cooperation. The only possible option for cooperation within the framework of OPEC + is the reformatting of output quotas. But the total oil output in the framework of OPEC + will not change," the lecturer at the Financial University under the Government of the Russian Federation summarized.

The Professor of the department of state regulation of the economy of the Institute of Public Administration and Management of RANEPA, Olga Malikova, in turn, said that the coherent policy of Russia with the largest oil-exporting countries seems rational, but not in the current conditions. "The problem is that if oil prices start rising fast, it stimulates the rapid development of alternative energy production technologies in Europe and the growth in the number of operating rigs drilling for shale oil in the US. These factors limit OPEC's impact on oil prices," she drew attention.

"In this regard, it is difficult to answer the question whether it makes sense for Russia to enter OPEC, but it is rather no than yes. I would emphasize that any sharp rise in oil prices lead to activation of shale oil producers, the growth in oil supply and the escalation of competition. In addition, the volume of energy production from alternative sources is expanding in the European market. It turns out that a coordinated policy is, of course, advisable, but in modern conditions joining OPEC does not make sense," Olga Malikova summed up.

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