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. Last Updated: 07/27/2016

THE ANALYST: Algerian Should Be Named Man of the Year for Russia




Strike them all off the list. Boris Yeltsin, even though he became the first Russian leader to voluntarily resign his post; Vladimir Putin, despite appearing from out of nowhere to assume control over the country; Yevgeny Primakov, though he did keep intact a disjointed nation; and even Viktor Gerashchenko, regardless of his success in defending the national currency at a time when all the odds were against him. Though each of these individuals deserves merit, none should become Man of the Year.


Those who doubt should just study the stats. They are all there in black and white. The one person truly worthy of being named Russia's Man of the Year 1999 is an Algerian by the name of Youcef.


It's a shame only one-hundredth of 1 percent of the entire Russian population will recognize his name. For Youcef deserves both a banner in the Kremlin and a bust in the Finance Ministry. Facing one of the worst energy crises in recent memory (for energy producers, at least), Dr. Youcef Yousfi, minister of energy and mines of Algeria, better known in his capacity as president of the Organization of Petroleum Exporting Countries, last March gathered a group of 11 men from 11 different countries - some often outright bellicose to one another - convinced them to stifle their mutual distrust and, for the good of all, submit to an agreement on reducing oil production.


The task was tremendously daunting. Many observers didn't believe it could be pulled off. The Iranians, as always, were perturbed at the Saudis' quota, disproportionate relative to their population, and the Venezuelans, many thought, would be quick to break any agreement the day it became advantageous to do so. Nevertheless, Yousfi played the skilled diplomat, and reminded negotiators of the stakes. Oil prices had reached their lowest level in 13 years, and all producers - both OPEC and non-OPEC - were experiencing a great deal of financial pain. Perhaps Russia most of all. Budgets were having to be redrafted, investment projects rolled back, and social spending minimized.


Yousfi, alas, persisted, and even managed to win promises of production cuts from two major non-OPEC producers, Mexico and Norway. By the end of the summit, Yousfi, as the Russians would say, had kept the wolves full and the lambs whole.


But as oil analysts well know, OPEC agreements and OPEC compliance are often two separate realities. Yousfi's challenge, therefore, only began in March. OPEC members, which account for roughly 35 percent of the worldwide crude production, agreed to slash output by approximately 1.5 million barrels to 25.5 million barrels per day. Each country had its own reduction quota, and 85 percent compliance was needed to deem the agreement a successful one. Although getting exact data from all OPEC members is impossible, eventually the Yousfi-forged consensus registered up to 90 percent compliance. Oil prices rebounded electrically.


It should come as no surprise that Russia benefited most from Yousfi's efforts. Along with the phenomenal drop in the international community's perception of Russia after the August '98 default, the $11.8 per barrel average for Urals crude in 1998 had devastated the government's public finances. At the beginning of 1999, the country was gearing up for parliamentary and presidential elections. By the end of summer, there would be Chechnya to cope with, too. Yet there was virtually no money available, and each Russia government was having to beg the International Monetary Fund for fresh loans.


Oil saved the year. Benchmark Urals blend rocketed by 150 percent to end the year at $25 per barrel. Though it was written into the annual budget at $14.3 per barrel, Urals crude finished the year averaging $17.3 per barrel. That's three extra dollars for every barrel exported over and above original estimates; considering some 800 million barrels were sold abroad, that adds up to fantastic gains - for both the government and the oil companies.


Thus, if in "pre-Yousfi" January last year crude brought $700 million to the economy, by December it was hauling in $1.8 billion. What's more, for every dollar the price of one barrel rose, Russia's trade balance increased by almost $1 billion. For the year, Russia registered a $32 billion trade surplus, more than double 1998's level. Finance Ministry officials didn't miss a beat, and increased export tariffs four times throughout the year; by the end of the year, the government was raking in more than $2 for every barrel exported. Tax and customs collections set record highs for the entire period of reform. The elections were won by the Kremlin, foreign debts paid off, the ruble propped up, and defense expenditures increased by $1 billion.


So thank you, Dr. Yousfi. We are in your debt. Please try to assist your successor in Caracas on March 27 at OPEC's next conference meeting so that production cuts remain in force and prices stay high. After that, who knows, maybe Man of the Year 2000 will be a Qatari by the name of Abdullah bin Hamad Al Attiyah.