OPINION: Russian authorities have shifted this week to a familiar tactic of using puns to fuel hopes of removing excess oil from the world market and stopping oil prices from falling in Europe and the United States .
Following his conversation with US President Donald Trump earlier this week, President Vladimir Putin said that the Kremlin “must work out such solutions with the major [global] producers and consumers who will alleviate the situation on the [energy] Marlet”.
Novak takes to the air
This call was heard by Russian Energy Minister Alexander Novak, who was suddenly made available for televised interviews in which he revealed his almost 24-hour communication with members of OPEC and other oil-producing countries.
However, the minister and the Kremlin strongly denied a suggestion made by Trump in a Message on Twitter Earlier this week, Russia and Saudi Arabia were in direct talks to act jointly to reduce oil deliveries to the already saturated global energy market.
Novak has made it clear that while the Kremlin is keen to discuss “the situation with the price of oil” with as many parties as possible, it does not want to make any commitments until the world passes the peak of the Covid pandemic. -19 and worldwide. demand is showing the first signs of recovery.
In his last interview with state television channel Rossiya24, he reaffirmed that Russian oil companies have “competitive advantages” over high-cost producers elsewhere in the world.
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The “comfortable” Kremlin with low prices
Industry watchers in Moscow believe that in the short term, the Kremlin is comfortable with oil prices in Europe hovering between $ 20 and $ 30 a barrel, to avoid having negative net returns on the market. conventional oil developments in Western Siberia where, according to Novak, production costs hover between $ 3 and $ 7 a barrel.
While such prices leave little revenue for the Russian budget, they can maintain sufficient operating margins for the country’s major oil companies, including its largest producer, Rosneft, run by Putin’s longtime partner, Igor Sechin.
The country’s second-largest producer Lukoil on Friday called for immediate joint action by Russia, Saudi Arabia and the United States to reduce their total production from 8 to 9 million barrels per day. However, analysts expect strong opposition to any reduction in Sechin.
Sechin has repeatedly advocated for the removal of all production restrictions to lower the price of oil and thereby push high-cost shale oil producers in the United States into bankruptcy.
Yukos’ former boss speaks up
According to Mikhail Khodorkovsky, the former managing director of what was once Russia’s largest oil producer, the late Yukos, the Kremlin will not be ready for any action in the global energy market until Putin and Sechin realize political and personal gains in the price of oil. Covid-19 crisis and pandemic.
Nationwide work restrictions – extended Thursday until the end of April in response to Covid-19 – are expected to drive millions of Russians into poverty and lead to the closure of small and medium-sized private businesses.
Opposition leaders in Moscow believe the restrictions and the economic downturn will work well for Putin, whose popularity is waning, as more people in Russia will depend on direct financial support from the authorities and may feel pressured to vote for Putin’s plan to remain the first Russian leader. until 2036.
Meanwhile, some observers note that Sechin took the opportunity to strengthen its grip on Rosneft, as the Russian state saw its majority stake in the oil producer drop to just over 40% after splitting from a stake. of 9.6% in Rosneft in exchange for its holdings in Venezuela.
Over the past two weeks, one firm’s subsidiary, RN-Capital, has also bought millions of cheap Rosneft shares from the market to place them under management control.
American and European politicians and producers, arguing for the benefits of a higher oil price, would be well served not to be overly hopeful that Russia will readily agree to reach out by agreeing to a significant cut in production.
After five years of sanctions against the country, the Kremlin may well believe it has good reason not to respond to the call.
(This is an upstream opinion piece.)