Anyone Still Think Russia Will Cooperate with OPEC?

Old hat to SWP readers (I wrote about this repeatedly from last December through March), but apparently “news” to the NYT:

While OPEC members limped through a period of painful production cuts this year, Russian oil companies enjoyed an extraordinary run.

The year that has gone by since Russian officials floated — and then retracted — a proposal to coordinate production limits with the Organization of the Petroleum Exporting Countries illustrates why the Kremlin is unlikely ever to actually do so.

Already the world’s largest oil producing nation, Russia, pumping prodigiously through the downturn, this summer passed another milestone. As Saudi Arabia tightened its belt to live by OPEC cuts, Russia surpassed it to become the world’s largest exporter.

. . . .

Improbably, the once-neglected oil sector has emerged as one of Russia’s few growth industries, helped by the tax cuts, a devaluation of the ruble that aided exporters and a change of policies that may invite foreign companies back into the sector.

“OPEC made a concerted effort to stem its exports,” said Alex Fak, an oil analyst at Troika investment bank in Moscow. “The result of that action was higher oil prices. So Russia was encouraged to produce more and sell more. Which is what it did.”

Yet, for a time, officials had seemed ready to revise the long-held axiom that Russian national interests were not served by cooperating with OPEC. Sharp price declines had turned Russian oil companies, just a few months earlier seen as money printing presses for the government, into money losers. Far from propping up the Russia government, which relies on oil exports for about 40 percent of its budget, they needed help themselves.

Anyone who really believes that Russian officials were ready to cooperate with OPEC is incredibly credulous. The Russians are notorious for playing double games, and for double crossing. I just wonder if OPEC was as credulous as the New York Times.

Comments

[Ferdinand E...:]

They may call it "double crossing" in some London or New York wine bar, but at Stanford and Harvard it's called business. And incidentally, cooperation between OPEC and the Russians can take place without a word being spoken.

Oct 21 09:35 AM

[Steve in Gr...:]

When it comes to being unwilling to see economic reality (particularly when it conflicts with their preferred narrative), nobody beats the NYT.

Oct 21 09:38 AM

[Dave Wrixon:]

Well you must be incredibly credulous to assume that Russia's interest align more closely with those of the US than their export competitors. The Russian will simply do what they need to do to maximize their oil earnings. That means that they can join the cartel, or enter into contracts that effectively tie the buyers to a single source, or simply let the market take its course. The one they ultimately choose will be the most beneficial for them, and least favourable to the US. This is no time to get smug.

Oct 21 10:46 AM

[tripleblack:]

Even if Russia ever joined OPEC (something which would be difficult to fit with the views of their more strident nationalists), they would also joing the majority of OPEC members who routinely agree to the consensus limits - and then promptly cheat as they see fit.

It reminds me of the "Pirate's Code"...

"...more of a guideline than a rule".

Oct 21 01:28 PM

[JohnDough454:]

Russia is no different than Iran or Venz or Nigeria in this calculation. They all need all the revenue so they produce as much as they can until the Saudis open the taps and hose them on price.

As long as WTI is $70+, and their own production remains high the Saudis will do nothing. No one else in OPEC matters squat.

Oct 22 03:03 AM