Russia Wants to Sever Ties with OPEC – Does Putin Want His Own Alternative?

  • Oil prices expected to drop to $30 per barrel due to market stability.
  • Russia wants to severe ties with OPEC to promote its own companies and interests.
  • The geopolitical balance could shift, if Russia creates its own alternate to OPEC.

Russia’s head of the Minenergo, Alexander Novak, recently stated the nation’s interest is to gradually severe ties with OPEC, the Organization of the Petroleum Exporting Countries comprised of 14 nations. Founded in 1960 in Baghdad by the first five members, OPEC moved its headquartered in 1965 to Vienna, Austria. The countries that joined later were:

  1. Qatar (1961)
  2. Indonesia (1962)
  3. Libya (1962)
  4. United Arab Emirates (1967) Algeria (1969)
  5. Nigeria (1971)
  6. Ecuador (1973)
  7. Gabon (1975)
  8. Angola (2007)
  9. Equatorial Guinea (2017)
  10. Congo (2018)

Minenergo is the Ministry of Energy of the Russian Federation responsible for energy policy. This ministry was created in May 2008 as part of a reorganization by the incoming government of President Dmitry Medvedev. It is headquartered in Moscow.

Russia hinted the reasons for leaving the deal is to advance Russian companies’ interests and to capture a larger crude oil segment. Alexander Novak stated that the market volatility is lower and the investments have increased. He also predicted the drop of oil prices to $30 per barrel, due to the market stability. However, there is an instability due to political turmoil within Libya, Venezuela and Iran. These nations play a vital role in the global oil market.

It is plausible to believe Russia is going to be instrumental in creating its own alternative to OPEC. The signs are there: Russia and China are aggressively entering African markets.  Russia’s strategy is to offer support for African nations and their leaders to maintain sovereignty and to avoid coups. Russia also hosted a Russia/Africa summit in October of this year.

Russian President Vladimir Putin has always been very keen to resurrect the Russian Empire and his vision of an evolved version of the Soviet Union. It is possible Russia will have BRICS nations join them in their version of OPEC. Additionally, the Russian government and the BRICS New Development Bank (NDB) have inked an agreement to open the bank’s Eurasian Regional Center in Moscow in 2020. The myriad of African nations might follow.

Russia has not reached its peak oil production output, whereas Saudi Arabia already passed theirs and no longer has the same capacities. If in fact Russia severs ties with OPEC and has its own alternative, it would significantly change the crude oil market and the geopolitical balance. The power alliances will shift.

The reason the US government has always been lenient with the Saudis, even with the murder of Amal Ahmad Khashoggi, is due to Saudis oil control and OPEC. Khashoggi was a Saudi Arabian dissident, author, columnist for The Washington Post, and a general manager and editor-in-chief of Al-Arab News Channel who was assassinated at the Saudi Embassy in Turkey. The New York Times published an article this week regarding the continuation of the Khashoggi murder cover up.

The relationship between Saudi Arabia and the US could change or even be completely broken, if in fact Russia creates an alternate to OPEC and reduces the power of that organization. Overall, the trajectory in the oil market could overturn geopolitical power plays and the current checks and balances.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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