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. Last Updated: 07/27/2016

Russia's Stance Unclear on OPEC Talks




Recent Cabinet posturing suggests there is no consensus about Russia's position.


A Russian delegation led by Deputy Fuel and Energy Minister Yelena Telyegina will attend next week's meeting of the Organization of Petroleum Exporting Countries, but analysts say Russia is unlikely to commit itself to significant cuts in output or exports.


Posturing by senior members of the government in recent days suggests that there is no consensus within the government about the position Russia should adopt, or even if it should attend.


"There's a dichotomy of view within the government as to whether they should be stepping in and working with OPEC," said Stephen O'Sullivan, co-director of research at United Financial Group in Moscow.


Russia is attending the meeting as an observer, for the first time since 1993.


Deputy Prime Minister Boris Nemtsov agreed that Russia would take part following a visit to Moscow last month by OPEC Secretary-General Rilwanu Lukman.


The decision came against a background of falling prices that have proven disastrous for Russia -- a country that is heavily dependent on exports of oil and gas, which have already seen its budget revenues severely cut this year.


O'Sullivan pointed out that Nemtsov himself was reported as saying Wednesday that Russia was prepared to consider further cuts to oil exports, over and above the reduction of 61,000 barrels per day promised from July 1.


"It is possible that we will be ready to move in the same direction as other oil-exporting countries if they make a decision in solidarity," he was quoted as saying.


By contrast, the newly appointed fuel and energy minister, Sergei Generalov, stated defiantly last week that Russia should not cut exports.


"Personally, I am categorically against cuts, as they will increase the threat of social tension," he said.


And Yevgeny Morozov, one of Generalov's deputy ministers, took a different tack altogether and told reporters earlier this week that Russia has already made big export cuts of 3 million tons -- some 360,000 bpd -- in April and May alone.


"We find this odd, because figures published by Transneft, the state-owned pipeline operator ... would not appear to support Mr. Morozov's statement," said analyst Ken Kasriel of Flemings Research in a research note.


Kasriel pointed out that the Transneft data showed that exports then were in fact up 156,000 bpd over February and March, and that in the year to May, exports outside the Commonwealth of Independent States have risen by a substantial 8.4 percent over the same period in 1997.


"Russians are unlikely to willingly reduce their world exports ... since these sales are essentially their sole source of promptly paid hard-currency income," the note added.


Equity analyst Ruslan Nickolov of Nomura International said if Russia offers to cut production at or following the OPEC meeting, it will likely be symbolic.


"What's been promised so far is well within the bounds of shutting down unprofitable wells, and there's still some room for maneuver in terms of cutting off exports which are not profitable," he said.


Nemtsov promised to cut exports by 61,000 bpd in early April following a coordinated attempt by a wide group of OPEC and non-OPEC countries to cut production to boost prices. The group originally hoped that Russia would cut output by 100,000 bpd.


Nickolov pointed out that although Telyegina is a deputy minister rather than a full minister, she may be a "more impartial" choice to lead Russia at the talks than Generalov.