Russia Seeks Ways to Influence Oil Prices

Russian media report a statement from Energy Minister Sergey Shmatko made the day before the past weekend that Russia will seek to more actively influence oil prices on the global market.

The Energy Minister stated that Russia will determine mechanisms that will allow it to become a stronger factor in determining oil prices. Today, prices depend on production in OPEC countries, financial špeculation, and oil reserves in the U.S., but with its 12% share of global production and position in the oil world, Russia can aspire to become one of those factors. This decision has been prompted by the vehement price movements in recent months. – We have not worked on this before, but now we want to devise a certain approach – said Šmatko. The minister did not mention specific mechanisms through which this influence would be realized, but one of the ways mentioned is finding reserve fields that could quickly enter production when necessary to manage supply.

He also noted that in this role, Russia will not act in coordination with OPEC. Russia has recently intensified its contacts with that organization. At a meeting in Vienna in early September, the Russian delegation was led by Deputy Prime Minister Igor Sechin, and Moscow announced that it would attend the next OPEC meeting in December in Algeria. Additionally, OPEC Secretary-General Abdalla Salem El-Badri announced a visit to Moscow in October to strengthen cooperation. This rapprochement with oil-importing countries has not been welcomed. However, oil industry analysts emphasize that Russia is already influencing global oil prices as the slowdown in production growth over the past two years has been one of the reasons for the rise in oil prices.

Some forecasts warn that this year Russian oil production could end in decline, mainly due to high tax burdens, field depletion, and increasing extraction costs. One of the levers through which Russia could influence prices is the oil pipeline from Eastern Siberia to the Pacific coast, which is under construction, but it is emphasized that it is difficult to predict what the mechanisms of price influence would look like given that a large part of production is managed by private companies. Therefore, it will be challenging to find a formula that satisfies all actors, believes Lev Snikov, an oil market analyst at VTB, the second-largest bank in Russia.     (Davorka Zmijarević)