Airstrip One

Will Russia join OPEC?

The Russian Federation is undergoing a strong period of flux as the state security apparatus (known as the siloviki) tightens its grip on the 'managed democracy' and domesticates the oligarchs. Russian economic growth is based on primary commodities, oil and gas, with some estimates stating that this amounts to a fifth of the economy.

A recent article in the Moscow Times shows that the Russian state is waking up to the power that oil can give, especially in the aftermath of the Iraqi war. Geopolitically, Russia is looking to become a swing state for energy prices, similar to the role that Saudi Arabia play snow within OPEC. In order to maintain stability in the oil market, a rapprochament is taking place between the third Rome and the cartel.

But what is emerging as a sort of "Putin Doctrine" doesn't stop there. It seems to envision Russia as the pivot around which the global oil market revolves, the power broker that can tip the balance between OPEC and the United States. And it seems to call for the rapid international expansion of patriotic companies -- both state-owned and private, energy and nonenergy.

This has had implications for the emerging Russian oil majors that now work for Putin, directing their infrastructure projects and investments:

Many analysts expect OPEC to come under increasing pressure over the next few years as instability in the Middle East grows and individual members such as Venezuela and Nigeria are pressured into leaving.

So, by reducing export growth, Russia could help the cartel survive, said Alfa Bank chief strategist Chris Weafer, a former adviser to OPEC who retains close ties to the organization.

What's more, Weafer said, by deliberately slowing down exports over the next few years, "the entire Arab world will see Russia as a significant ally and Russia's political influence in the Arab world will increase."

With huge resources, Russia is attempting to maximise its influence in commodity markets, especially energy. With our declining resources of oil and gas, the United Kingdom may be prudent in seeking non-OPEC sources of energy, alongside the United States. Their rival (and possible future partner?) in this endeavour is China.

The rest of Europe will be heavily dependent on the Middle East and Russia. Alleviation of their plight will come through furthering economic ties with the Russian sphere of influence and the Arab states. Energy security is one concern pushing Europe and the United States apart. Indeed, France, with its nuclear power stations may have more freedom to manoevre than its continental counterparts - a counter argument to those who accuse it of Arabist appeasement.

(20.19, 20th April 2004)