Russia Weighs in at OPEC Meeting

Posted by: Stanley Reed on September 09

The most intriguing aspect of the Sept. 9 OPEC meeting in Vienna was the presence of Igor Sechin, the Russian Deputy Prime Minister and Chairman of state oil giant Rosneft. Sechin, who is considered Russia’s top energy official, attended OPEC as an observer. He gave a speech, read in English by an aide, at the organization’s opening session, which is open to the press and analysts.

In the brief talk, Sechin reminded his audience that Russia was roughly tied with Saudi Arabia as the world’s leading oil producer and talked about enhanced “cooperation” with the cartel, of which it is not currently a member.

While officials from Russia and other energy producers such as Egypt, Mexico, and Norway often attend OPEC meetings, the presence of such a high-level Russian politician so soon after Russia’s move into Georgia struck analysts as unusual.

While it’s still early days, Russia’s sidling up to OPEC may sour what seemed to be a moment of triumph for Saudi Arabia and its oil minister Ali Naimi. Naimi, on instructions from Saudi Arabia’s King Abdullah, has helped sharply reduce oil prices through increasing production and promising that Saudi Arabia can produce even more oil if necessary.

Saudi Arabia's unilateral increase annoyed other OPEC members including the organization's president, Chakib Khelil, who also serves as Algeria's Minister of Energy. Naimi has been on a crusade to professionalize OPEC and depoliticize the organization's decisions, but the Saudi moves to lower prices may have struck OPEC colleagues as politically motivated, analysts say.

At the emergency energy summit that the Saudis held in Jeddah last June, Khelil openly disagreed with the Saudi moves, saying there was no need to increase oil production. He continued in the same vein on Sept. 9, blaming both the price run-up and its recent fall on the activities of speculators, the movement of the dollar, and other "non-fundamental factors."

"This explains why we were reluctant to respond to calls to increase our production when prices were rising persistently, because we knew we would be treating the illness with the wrong medicine," he said on Sept. 9.

It won't be easy for Russia to engage closely with OPEC. The Saudis and Gulf Arabs harbor strong suspicions of Russian motives and are close allies of the U.S. But greater Russian participation might be welcomed by the traditional price hawks, Iran, Algeria, Venezuela, and Libya, in part to add another element that might help balance Saudi oil power.

In what may be a sign of unease, Saudis have been questioning friends about whether the Russian intervention in Georgia should be interpreted as a sign of American miscalculation and decline. During the Cold War, Russia was a serious rival to the U.S. in the oil-rich Middle East through its close military ties to Egypt, Syria, and other countries. It's still a long way from re-establishing anything like that degree of influence in the region. But the ripples from the Georgian thrust are certainly being felt there.