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OPEC offers Russia closer cooperation

OPEC offers Russia closer cooperation (Egorov Artem / Shutterstock)

The Organization of Oil-producing Countries (OPEC) tries to convince Russia to a closer cooperation. For this reason, Saudi Arabia proposed granting Russia observer status. A Russian representative confirmed the offer to the press: "This option exists and is under consideration. We are currently studying this question carefully," said the confidant of Russian President Vladimir Putin.

The two major players Saudi Arabia and Russia agree on many issues in this regard, this became clear on Saturday at a joint OPEC press conference. In Vienna, Austria, the so called OPEC+ had decided to increase oil production by one million barrels (159 liters) a day. OPEC+ includes the 14 original OPEC Countries and furthermore 10 associated non-OPEC countries under leadership from Russia. The alliance intends to produce a total of 32.5 million barrels a day in the future.

Cooperation between OPEC and Moscow had intensified significantly in the past two years. The cutback in oil production decided at the end of 2016 had brought the hoped-for turnaround to the market after the fall in prices. Rising commodity prices have made budgeting much easier for the Kremlin. Despite the publicly announced restrictions, Russia even increased its petroleum production slightly to 546.8 million tons in 2017. With 10.5 million barrels a day, it has even overtaken Saudi Arabia in terms of oil production.

However, there are reasons for Russia not to be engaged in a closer relationship with OPEC or even become a full member, as Aleksey Turbin, publisher of the Russian edition of Pipeline Technology Journal and former advisor to several Russian energy ministers from 2001 to 2018 says: "Russia is in a very favorable position: On the one hand, we can conclude bilateral agreements, but we are not bound by agreements within the cartel,". Moscow will certainly not want to give up this independence, suspects the expert. OPEC itself does not expect Russia to become a member of the oil cartel quickly either. Discipline among the 14 member states is already difficult to establish.

The future for the OPEC+ joint venture on the other hand looks bright: Russia's market power is enormous. In order to effectively influence prices on the world market, OPEC needs cooperation with Moscow. Since the cooperation is also in Moscow's interest to keep prices stable, it is to be expected the current constellation of OPEC+ will continue for a while.

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