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. Last Updated: 07/27/2016

Illarionov: OPEC Doomed, Ignore It

President Vladimir Putin's top economic adviser said Wednesday that Russia should resist OPEC's calls to reduce oil output as lower prices for crude, its main export, benefited the economy.

"Question: What should we do with OPEC? Answer: Nothing, because OPEC is an unreliable partner, because OPEC is a historically doomed organization, because in the price war declared against us, Russia is in a much more advantageous position than OPEC," Andrei Illarionov told a news conference.

Illarionov, who often takes strong views and has earned himself the reputation of a dissenter, is known to have the president's ear -- and Putin seems to listen to much of his advice.

Illarionov said the government should not urge oil firms, most of which are privately owned, to cut output or exports.

"Attempts by the authorities to pressure private companies on how much they produce or export are absolutely unacceptable," he said. "Attempts to interfere with their plans undermine the basis of a civilized economy."

OPEC has made a proposal to cut output by 1.5 million barrels a day from Jan. 1 conditional on non-cartel members Russia, Norway and Mexico slashing by 500,000 barrels a day.

Norway and Mexico made positive statements on the possibility of a cut Tuesday, but Russia has yet to offer more than a 30,000 barrels a day cut.

Deputy Prime Minister Viktor Khristenko has said Russia could make further steps to stabilize oil prices.

Illarionov said that if Russia cut oil exports, the volumes would be replaced by OPEC states, more dependent on oil revenues than Russia, whose economy is more diversified.

He also said any Russian cuts would only have a small impact on the market because its share was small.

"Today, when a recession has started in the United States, when a recession is going on in Japan, when recession has started in Europe, it is ridiculous to take measures to support oil prices," he said.

"High oil prices are impossible when there is recession."

He said Russia could only benefit from low prices, which create an incentive to non-oil industries to develop and helped form a broader-based economy.

He said the 2002 budget should be recalculated with $10 as the expected price per barrel, instead of $18.5 at present.

Deputy Prime Minister and Finance Minister Alexei Kudrin, however, said Wednesday that the government is not planning to revise the main parameters of the budget, Interfax reported.

He also said the government would preserve the mechanism for a financial reserve.

The government will take into account various scenarios for how the situation could develop, Kudrin told reporters after meeting with the leaders of four State Duma factions to prepare the draft 2002 budget for its third reading Nov. 30. (Reuters, MT)