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Asia Times Online: Win-win opening for Russia and OPEC


Traditionally, fiercely independent Russia greatly values its freedom of action as a non-OPEC producer and has not wanted to be strong-armed into production cuts. As long as the price of oil remained elevated, these key producers (Russia and OPEC) could afford to go their own separate ways on production. Now that the situation is fundamentally changing, with oil's price collapsing, and with no lift in sight, OPEC and Russia are beginning to understand, albeit very reluctantly, how much they really need each other. That was the message of Venezuelan President Hugo Chavez's message to Russian president Dmitry Medvedev during the latter's visit at the end of November to OPEC member Venezuela - Russia and OPEC need to form a tandem on production and price, or else they're all headed for a catastrophe.

Russian leaders have apparently now figured out that Chavez is right - the pain just keeps increasing as the price of oil keeps falling. The mounting problems for Russia's currency, the drain on reserves, the capital flight and market instability are all tied directly or indirectly to the ongoing oil price crisis. The Russian budget requires an average of at least $75 for a barrel of oil this year and next year. Those prices certainly aren't in the cards unless producers quickly agree to work in tandem.

by Loefing on Thu Dec 11th, 2008 at 06:05:45 PM EST
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