By IPS Correspondents
MOSCOW, Mar 5 2002 (IPS)

The Organisation of the Petroleum Exporting Countries, OPEC, is pressing Moscow to extend a current oil export cut through to June, however Russia is refraining from making any promises.

Bargaining between Moscow and OPEC has resumed as the global demand falls as usual at the end of the first quarter.

In a yet another attempt to convince Russia to extend export curbs, OPEC’s Secretary-General Ali Rodriguez and OPEC President, Rilwanu Lukman, made their case to the Kremlin during a three-day visit to Moscow which ended Tuesday.

However, Prime Minister Mikhail Kasyanov has refrained from any definite pledges. Instead the Russian Premier told the OPEC mission that Russia was going to make a decision relative to export cuts “in accordance with the current state of the Russian and world economy, oil reserves and the volume of consumption.”

Kasyanov assured the OPEC officials that Russia respected the export cuts in the first quarter. Both sides “agreed to continue exchange of information,” and the Russian government press-service used a diplomatic formula, which usually hides a failure to reach any agreements at all.

Prior to the talks, Russian statements sounded promising. The result of the meeting with OPEC officials will be a declaration by the government on whether to extend the export cut, Energy Minister Igor Yusufov told reporters. Yet no such declaration ensued.

Moreover, subsequently Yusufov stated that Russia had until April 1 to announce its final decision. This statement was coupled with the lukewarm remark that Russia would look after “its own interests.”

Yusufov also said that he would not be able to attend OPEC conference on March 15.

Although Russia exports more than 100 million tons of oil yearly, and oil revenues account for 40 percent of the country’s hard currency, Moscow has been declining to join OPEC. Moreover, Moscow wanted to maintain good relations with major buyers of its oil and gas hence Russia was reluctant to join the OPEC output cuts unconditionally.

OPEC will continue discussions with Russia so as to convince Moscow to keep oil export cuts, Rodriguez told journalists in Moscow on Tuesday. Russia still has time to analyse market situation once again, he stated.

Algerian Energy and Mines Minister Chakib Khelil is due to visit Moscow on March 10, while his Venezuelan counterpart is expected here on March 11 in two separate visits ahead of OPEC’s Vienna date. They are due to seek more coordination with Russia, according to RIA.

Prior to the OPEC mission there have been media speculations that OPEC officials were to discuss a Russian oil production cut. For instance, the official Algerian news agency APS said “the visit will focus on discussing with Russian officials the issue of the Russian oil production reduction.” But no discussion on new output cuts took place in Moscow.

Arguably, OPEC now relies of soft diplomacy with Moscow rather than threatening oil price war. OPEC is unlikely to change oil export quotas at its next ministerial meeting on March 15, Rodriguez told journalists in Moscow. It is understood that in response Russia could simply promise OPEC not to declare a formal end to the cut so as not to undermine quotas deal between the cartel and other non-OPEC members.

Last November OPEC announced that it would withdraw 1.5 million barrels per day from the market from January, but only if major exporters Russia, Norway, Mexico and Oman came up with a combined 500,000 bpd cut.

Russia first offered to reduce oil production and exports by 30,000 and then 50,000 barrels a day. Only after OPEC threatened a price war, Russia announced that it would reduce oil exports by 150,000 barrels a day beginning Jan. 1.

Since then, it has been argued that Russia has maintained the reductions on paper, while declared cuts have had little impact in reality. In fact Russian oil output is said to have been growing dramatically. In January and February, Russia’s crude output was up by 8.7 percent (or by 4.7 million tonnes) hence reaching 58.4 million tonnes. It is understood that exports have also been up although the Russian government would not admit it.

Furthermore, it has been understood that Russia’s pledge to cut oil exports by 150,000 barrels a day were not really cuts as the country’s exports through ice-bound northern ports usually drop by around 200,000 bpd during January and February due to frozen ports in the north and higher energy demands at home.

Moreover, in recent months Russia added the 400,000 bpd in export capacity by launching the Caspian Pipeline Consortium and the Baltic Pipeline System.

On the other hand, Russian oil export cuts entailed an oversupply of crude on the domestic market, forcing prices down and causing a drop in revenue for producers and tax receipts for the government. Not surprisingly, Moscow now wants to capture greater world oil market share.

Continued Russian oil export cuts in the second quarter could entail economic slowdown, President Vladimir Putin’s economic advisor Andrei Illarionov warns.

He told the journalists on March 4 that if Russia continues cutting exports, its place on the world market could be captured by Kazakhstan and Azerbaijan. He estimated Russia’s current world oil market share at seven percent, while it reached 12 percent 15 years ago.

Russia needs to re-capture its previous position, Illarionov said. Russia has no obligation to follow OPEC’s advice and should not reduce oil exports, Illarionov said on March 4.

Last month Illarionov stated that the size of Russia’s energy exports was changing the traditional view of the world energy market. Illarionov commented in particular that the world “has suddenly realised that Russia is becoming not only the second largest oil supplier in the world after Saudi Arabia, but also, if one takes into account its gas exports, the world’s leading exporter of energy resources.”

Therefore, analysts say, OPEC now increasingly faces a prospect of having a major exporter siding with the consumers.

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