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Russia promotes oil and
gas cooperation with Middle East
(Sergei Kolchin for RIA Novosti) - Russia is a major player on
the global oil market, being the world's second biggest oil
producer and exporter after Saudi Arabia. Last year, it produced
480 million metric tons of crude and exported 49% of it, or 233
million metric tons.
The main players on the Russian oil market are LUKoil, which
accounts for 19% of the country's output (or 90.4 million metric
tons), Rosneft (17%, 81 million metric tons), TNK-BP (15%, 72.4
million metric tons), Surgutneftegaz (14%, 65.5 million metric
tons) and Gazprom (10%, 46 million metric tons). The top five
producers therefore account for three-fourths of the national
Russia controls the world's seventh-largest oil reserves after
Saudi Arabia, Iran, Iraq, Kuwait, the UAE and Venezuela. Experts
estimate its proven reserves at 72.3 billion barrels. Russia is
not an OPEC member, and the organization - by mutual consent -
is not considering upgrading its current observer status.
Nevertheless, Russia closely cooperates with the oil cartel in
developing a coordinated export policy. This is becoming
especially important given the current decline in global oil
prices. Some OPEC members, notably Iran and Venezuela, have
already spoken in favor of cutting production. Russia has also
said that it might reduce its output owing to the
Russian-Belarusian oil conflict.
Yet Russia's interaction with the Middle East producers does not
boil down to coordinating price policies on the global market;
rather, Moscow is seeking full-fledged cooperation with these
countries. There are three good examples: Saudi Arabia, Qatar
and Jordan (the latter does not produce oil, but many Russian
oil companies have moved there from Iraq).
The West is very reluctant to allow Russia and Saudi Arabia to
bring their positions closer. A potential agreement between the
world's top two oil exporters is viewed as very dangerous,
despite the disagreements the two countries have now: Chechnya,
Islamic fundamentalism, and assessments of the Middle East
confrontation. It is nevertheless obvious that they have common
economic interests, notably supplying oil to consumers and
maintaining high oil prices.
companies are gradually entering the Saudi Arabian market.
LUKoil is already carrying out the country's largest gas
project, in the north of the Rub al-Khali desert. In 2004, the
Russian major signed a 40-year agreement with the Saudi Arabian
government on the development of gas and gas-condensate fields.
LUKoil plans to invest up to $3 billion in the project. Gazprom
is also showing interest in the country's projects.
Although Russia cannot hope for a major breakthrough in the oil
sector, the situation with gas is different. In 2003, the
parties began discussing a gas initiative put forth by Prince
(now King) Abdullah, which included a number of projects
designed to develop Saudi Arabia's gas sector with Russia's
assistance. The total value of all projects was estimated at
$20-25 billion, and Russia could receive a significant stake.
Also in 2003, Russia and Saudi Arabia signed a framework
agreement on oil and gas cooperation. Now it is time to make
this cooperation more intensive.
Remarkably, that same year the two countries signed an oil and
gas agreement that provided for joint control over the oil
supply in order to maintain oil prices at an acceptable level.
While Russia and Saudi Arabia have a relationship of equals,
Qatar has lower oil reserves than either country (15.2 billion
barrels, or 1.3% of the world's reserves). But this country has
a strong influence on OPEC, and Russia is extremely interested
in establishing ties and cooperation with it. The first serious
contacts between the two countries have begun only recently. In
2005, the head of the Russian Chamber of Commerce and Industry,
Yevgeny Primakov, visited Doha. In 2006, Russian Foreign
Minister Sergei Lavrov held talks with his Qatari counterpart,
Hamad bin Jasem, at which they confirmed their intention to
intensify bilateral energy cooperation. Russia and Qatar have
even more interests in the gas sector, because this Middle
Eastern country controls the world's third largest gas reserves,
11.2 trillion cubic meters. Together with Iran and Algeria,
Russia and Qatar could set up a gas OPEC that would control a
bigger share of the market than the actual OPEC's share of oil.
International experts believe that at present Russia's Gazprom
could be involved in joint gas production and refining projects
in Qatar. The two countries are also interested in coordinating
Jordan does not control any large oil or gas resources, but
after the latest war in Iraq many Russian oil companies that had
contracts in Iraq have moved there. So relations with this
country are now of special importance for Russia. Promising
areas of Russian-Jordanian cooperation include geological
exploration in the country and agreement on potential joint
development in Iraq, as well as the construction of a new
pipeline from Iraq to Jordan. Moreover, Jordan's geographical
location makes it an important hub in the zone of interests of
large Russian companies operating in the Middle East and
connected to potential markets and middlemen, with access to
Israel, Syria, Iraq and northern Saudi Arabia.
For all of the above reasons, Russia's interests in the Middle
East are obvious and must be secured, a process which is likely
to continue in the near future.
Dr. Sergei Kolchin is a senior research fellow, the Institute of
Economics of the Russian Academy of Sciences.
The opinions expressed in this article are those of the author
and may not necessarily represent those of RIA Novosti.