Russian state revenue may slump as the price of oil
Russia may build a margin of spare oil production capacity as a means of influencing prices and won't cut output with the Organization of Petroleum Exporting Countries, Deputy Prime Minister Igor Sechin said.
Maintaining extra output capacity may allow Russia to produce oil ''at a volume that would allow more effective price parameters to be reached,'' Sechin told reporters today.
''Oil has become more of a financial instrument than a commodity.''
OPEC Secretary General Abdalla el-Badri said earlier that he plans to meet with Russian President Dmitry Medvedev to discuss the situation on the world markets. OPEC won't ask Medvedev to cut Russian oil output, el-Badri said.
Russian state revenue may slump as the price of oil, the country's biggest export, plunges and capital flight accelerates on concern the global economy will enter a recession. The price of the Urals crude, Russia's export blend, fell to $66.16 a barrel today, the lowest this year, after peaking at $142.50 in July, Bloomberg data show.
''A fair price should include consideration for the expenses of producers,'' Sechin said, adding that Russian oil producers face 'huge capital expenses' in places like eastern Siberia.
Russian President Dmitry Medvedev sent Sechin to OPEC's meeting in Vienna on Sept. 10 to forge closer ties with the producer group and offer to sign a memorandum of understanding.
Sechin, who is also chairman of OAO Rosneft, the country's biggest oil producer, said at the time that ''extensive cooperation with OPEC is one of Russia's priorities.''
''I've always been skeptical of Russia-OPEC cooperation, but now Russia's got a triple-whammy: falling oil prices, a declining production profile, and the global crisis,'' Eurasia Group Director for Europe and Eurasia Cliff Kupchan said by e- mail from Washington DC earlier this week.
''At least a loose, coordinated price-defense strategy is now more likely than before.''