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The second knife Putin in the back... and oil collapsed again
Material posted: Pankratenko Igor N.Publication date: 19-04-2016
On the morning of 17 April, when representatives of 18 countries-exporters of oil, who arrived yesterday in the capital of Qatar, was sitting in a conference room of a local oil Minister Mohammed bin Saleh al-the Garden exuded optimism. And if other participants of the meeting in the format "OPEC+Russia", the hosts discuss the issue of freezing of production of "black gold", he avoided journalists, al-Garden tried to pay attention to each press representative. However, his answers to the questions of correspondents of Newspapers and news agencies were diverse. "Everything goes according to plan, the parties are committed to constructive conversation, it is not expected".

However, the difficulties began immediately after the beginning of the meeting. The Minister of oil of Saudi Arabia and head of Saudi Aramco, the world's largest oil company, Ali al-Naimi, who led the Saudi delegation, in his statement made clear because the meeting is not present Iran, and to talk about, in any "freezing" without Tehran-Riyadh isn't going to participate.

What, in General, was to be expected, because on the eve of Prince Mohammed bin Salman, part of the "big four" of the true rulers of the Kingdom, said Saudi Arabia would join the "frozen" only in the case that similar commitments will take on Iran. If not – then the Saudis will sell as much as you can without looking at the level of world prices.


This position is somewhat contrary to the fact that the representatives of Riyadh, told Russian officials in February when the talks on the reduction of volumes of production initiated by Russia, Venezuela, Qatar and Kingdom, had only just begun. But to blame the Saudis in some sort of intrigue in Moscow there are no bases. First, there are no formal obligations Riyadh didn't assume that from his side everything was arranged as an exchange of opinions, nothing more. But if Russian officials understood it as a sincere willingness of the Saudis to "freeze" the volumes – it is their Russian representatives, the problems, isn't it? Secondly, you need absolutely to break away from reality, you need certainly not notice the changes of the export policy of Riyadh in 2015, to seriously count on the Saudis in the collective struggle for the reduction of production volumes.

Features of the Royal reaction

Lower prices, of course, is a common serious problem for all States exporters. But that's the extent of the problem for each country is individual oil producer. According to the calculations of Daniel Yergin, author of the classic works on the global oil market is "Production" and recently released "In search of energy. Resource wars, new technologies and the future of energy", "in 2014, the revenues of OPEC members amounted to about one trillion dollars. Last year, they declined by about fifty percent. And three months of 2016 fell by 20%... This creates enormous difficulties for governments of these countries. Budgets require cuts, falling credit ratings, increasing the risk of social upheaval."

But you need to clarify what "safety margin" for each exporter is different. If Angola, the second largest oil producer in Africa (after Nigeria), already in talks about financial support with the International monetary Fund, then to Riyadh, with its low cost of production and the size of foreign exchange savings, the fall in oil prices – an event, of course, unpleasant, but not fatal. So after a meeting held in 2015, with the involvement of foreign experts "brainstorming" team al-Naimi suggested that a new generation of Kingdom leaders following formula export policy in conditions of rapid reduction in price of a barrel of oil: "the preservation of volumes and share in the world market is more important to keep prices". Thus, according to expert calculations, even at 30 dollars a barrel the income of the Kingdom to be missed and to maintain the same level of "social package", and for large-scale modernization of the country and on basic directions which will be announced in late April.


As a result, the interest of Riyadh in the dialogue about the "freezing" amounts initially was reduced to two points: first, to interest by their participation in this process Russia and to get "progress" in the Syrian crisis, in particular the agreement on ceasefire and cessation of activities of the Russian group. What is beneficial of course, first of all, antiacademic forces. Secondly, be involved in the process of "freezing" Iran, depriving it thereby of additional foreign exchange earnings and eliminating a competitor in Asian markets.


When the first task was completed, and second, because of Tehran's refusal, failed, Riyadh simply changed his position, because, I repeat, no obligations in the process of preparation of the meeting in Qatar have undertaken. And so now, after the Iranian demarche, and even more will not take. Nothing personal, just business...

Why Iran said no?

Categorical refusal of Tehran, not only to join the idea of "freezing" of production, but even to discuss this topic, Frank has caused irritation of Moscow. Some Pro-Kremlin commentators and media activists immediately hinted that it was "a knife in the back" is akin to Turkish. And in General, Iran, they say, doesn't behave like a strategic partner.

The question of why Tehran should behave more Pro-Russian than the Russian government, which has failed to respond adequately to falling prices, leave out of the equation. Iran's position in relation to "freezing" in General, and in relation to the Doha meeting, in particular, was clearly formulated by the Minister of petroleum of the Islamic Republic of Bijan Zanganeh on Saturday, April 16: "We came to the conclusion that Doha will meet those who are seriously willing to discuss plans to freeze oil production volumes and to sign the corresponding agreement. But since Iran is not going to sign, there is no need for the presence of our representatives at this meeting".


And in General, he said, "if Iran freezes oil production... he will not be able to benefit from the lifting of sanctions". What then, one wonders, were the years of difficult negotiations, maneuvers, and compromises on the nuclear program, if in the end neither the budget nor the economy will get much-needed funds to combat the effects of "crippling" sanctions, which, incidentally, were actively involved and the Saudis, and –albeit a little less enthusiastically – Moscow?

And Riyadh, and Moscow this year have increased oil production, the rule of "keeping the volume and share of the global market is more important to keep prices" is fully functional, and Iran with its 1.8 million barrels per day offered to participate in the voluntary restraint of those on a couple produces daily 20 million?

In understanding the positions of Tehran and that's the important aspect. Agreement, the text of which was discussed last Sunday in Doha, bears all the hallmarks of a "gentleman's agreement" when each of who joined him in the fullest sense the master of his word: as he gave, and took, as I decided to limit the extraction and unilaterally to increase. No controls, no review of quotas it does not provide.

Why to join this Covenant to Iran? For the voluntary elimination of additional income in a difficult economic situation? For a demonstration of some abstract "solidarity between regions", which is not in sight? To abandon the restoration of its position in the markets of India, China, South Korea and other countries, "pressed" in the period of sanctions?

Even when after six hours of negotiations, it became clear that no agreement on "freezing" of production in Doha will not be accepted, already mentioned, the Kuwaiti oil Minister Mohammed bin Saleh al Sada was still trying to save face, not speaking about the fiasco, and about the pause, which is necessary for the audience to deeper reflection.

It was stated that the next meeting on this issue will take place in June. But, as I think it will bring only the stock speculators, who on the background of the next rumors about a possible "freeze" again to play on the price fluctuations. The rest of the changes are to be expected. Competition for global market share does not calm down, long term agreements are unlikely, and each player desperately ready to dump, dropping the price of "black gold" below.

Igor Pankratenko


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