Streetwise Professor

September 15, 2014

Russia to OPEC: Stop Me If You’ve Heard This One Before. OPEC: Believe Me, We Have

Filed under: Economics,Energy,Politics,Russia — The Professor @ 3:00 pm

This is so amusing, because it is so typical:

Russian Energy Minister Alexander Novak will meet OPEC officials on Tuesday in Vienna, his spokeswoman said, as oil’s price fall piled pressure on Moscow’s budget.

The annual meeting had been planned long before oil fell below the $100 per barrel level critical for Russia’s oil sales which account for 40 percent of state budget revenues.

Russia suffered from a decline of oil production and prices this year and has cut its outlook for oil output as core western Siberian fields become more depleted.

The spokeswoman said that Novak and the officials from the Organization of the Petroleum Exporting Countries had not planned to discuss the prices of oil, which hit 26-month low for Brent crude on Monday.

However, a government source said the measures to prop up the prices have long been discussed at the ministry.

“The talk of closer cooperation with OPEC on prices have long been there,” he said.

So far, Russia, the world’s top producer of conventional oil, has ruled out coordinated action with OPEC to halt the price decline.

Yeah. Novak is scurrying to Vienna, but he’s not going to talk prices. Sure. Tell me another one, but not so funny as I just busted a gut reading that and can’t take too much more.

Putin, Inc. is no doubt in a mild-to-moderate panic at present because Brent has breached $100, and Urals is below that, in the low $90s. Russia needs Urals in the $104 range to meet budget targets, and that’s not counting Crimea or especially a war that doesn’t officially exist but which costs real money to fight.

So off Novak runs to Vienna, in an attempt to get OPEC to prop up the price. Not that Russia will do anything to help, mind you. It’s MO has long been to demand, beg, cajole OPEC to cut output to support prices, while Russia produces to capacity. That’s what Russia did in 2009 when prices cratered into the $30s. OPEC was not amused then, and they won’t be amused now.

If anything, geopolitical considerations, namely Russia’s support of Assad and cooperation with Iran, will make the Saudis in particular even less generously inclined towards Russia.

Meaning that Novak’s mission to Vienna will accomplish nothing, except to provide an entertaining example of Russian all take, no give negotiating style.

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  1. The oligarchs are fighting each other again:

    I wonder once again how stable and firm Putin’s control over the oligarchs are (and vice versa).

    Comment by Blackshoe — September 16, 2014 @ 1:52 pm

  2. It’s not oligarchs fighting each other. It’s the Russian state about to gobble up another well-run private oil company. Much like the Yukos affair.

    Comment by Alex K. — September 16, 2014 @ 11:19 pm

  3. The few ‘Medvedev’ oligarchs, ie, the people who arent pure mindless knuckledraggers like Sechin and Yakunin are getting purged for not being pure enough in their Putinism.

    Comment by d — September 17, 2014 @ 1:46 am

  4. @Alex & @Blackshoe. It depends on whether you consider Sechin an oligarch or not. This is clearly to benefit Sechin/Rosneft at the expense of an oligarch.

    The ProfessorComment by The Professor — September 17, 2014 @ 4:06 am

  5. Terrorussia went crazy. It does not work though. After 1.2% BRENT price jump since yesterday’s Novak to OPEC visit, today’s price felt back 0.35%.

    Comment by Europeo — September 17, 2014 @ 2:29 pm

  6. I think we might be witnessing a step-change here. Khodorkovsky showed that a step change had taken place around 2004-2005, whereby if you were powerful and moving against Putin you would be thrown in jail. Perhaps now being powerful and merely criticising Putin will get you thrown in jail. My take is that Yevtushenkov has criticised Putin – either directly or indirectly, but not publicly – by revealing the likely economic effects (not least to his own businesses) of Putin’s increasingly pointless adventures in Ukraine. In the current climate I can imagine “you’re either with us or against us” is the order of the day amongst the oligarchs (and other sections of the country), and if somebody speaking out also has a juicy oil company that can be appropriated by Putin’s chief knuckle-dragger then so much the better.

    I don’t know anything about Bashneft, but I always thought that the Russian mobile companies – MTS, Beeline, and Megafon – were rare examples of companies being run like a western outfit, at least from the perspective of the consumer. I expect this was the case because, like in so many other countries, there was no mountain of legacy bureaucracy to negotiate with mobile phone networks. In Thailand, for example, you can get a mobile SIM over the counter but a fixed line requires mountains of papers and months in waiting time.

    Comment by Tim Newman — September 18, 2014 @ 1:24 am

  7. Novak’s intervention half-life had just expired. Brent price is -1,03% as of the moment of writing this comment.

    Comment by Europeo — September 18, 2014 @ 10:06 am

  8. @Tim-I think you’re right. The permitted scope of dissent/criticism is becoming narrower and narrower. This reflects many things, no doubt, but most notably the paranoia and isolation of Putin & his small circle of mouth-breathers.There is also almost certainly a mercenary motive here, fed by desperation. Rosneft appears to be reeling, and getting some assets on the cheap (as well as some state funds) has a great appeal for Sechin.

    Dictators tend to become progressively more and more isolated and reliant on sycophants, especially when involved in wars or civil strife. They become disconnected from reality as a consequence. Those who are grounded in reality, and Yvetushenkov almost certainly is, are especially frightening to someone like Putin. He threatens Putin’s constructed reality. Dissent cannot be tolerated.

    The ProfessorComment by The Professor — September 18, 2014 @ 12:04 pm

  9. Whether Sechin should be counted as an oligarch or not, the whole force of the state’s legal, or shall we say repressive, apparatus has been brought down on Sistema, including the Investigative committee, the Prosecutor-general’s office, and the Moscow court that is the usual venue for Kremlin-directed prosecutions. All in all, it looks like the state is seizing the best-run private oil company through a legal process.

    Comment by Alex K. — September 18, 2014 @ 11:39 pm

  10. @Alex K-The fact that the Investigative Committee *and* the Prosecutor General’s Office are both after Sistema is very ominous. They are often at loggerheads, and serve different factions. To have both after the same target is uncommon, and basically a harbinger of doom.

    I actually think that Bashneft is good at what it does is precisely what poses a threat.

    The ProfessorComment by The Professor — September 19, 2014 @ 1:32 am

  11. LJ-user ivand (

    “Кот, радуясь, что все идет, как он задумал, весело побежал перед каретой. По дороге он увидел крестьян, косивших на лугу траву.
    – Кому принадлежит этот луг?
    – Старому олигарху, который купил его у каких-то башкир, – ответили косари.
    – Сейчас сюда приедет король, — крикнул кот, – и если вы не скажете, что этот луг принадлежит Игорю Ивановичу Сечину, вас всех изрубят на мелкие кусочки!
    Тут как раз подъехала королевская карета и король, выглянув из окна, спросил, кому принадлежит этот луг.
    – Игорю Ивановичу Сечину! – ответили в один голос косари, испуганные угрозами кота. Король остался доволен и сказал:
    – Игорь Иванович! У вас замечательный луг!
    А между тем кот бежал все дальше и дальше, пока не увидел жнецов, работающих в поле.”

    Translated w/additions in bold:
    “The cat, quite overjoyed to see how his project was succeeding, ran on ahead. Meeting some countrymen who were mowing a meadow, he asked them whom the meadow belongs to. “To an old oligarch who bought it from some Bashkir men”, said workers. Cat yelled at them, “My good fellows, if you do not tell the king that the meadow you are mowing belongs to my Lord Igor Ivanovich Sechin, you shall be chopped up like mincemeat.”

    The king did not fail to ask the mowers whose meadow it was that they were mowing.

    “It belongs to my Lord Igor Ivanovich Sechin,” they answered altogether, for the cat’s threats had frightened them.

    “You see, sir,” said the IIS, “this is a meadow which never fails to yield a plentiful harvest every year.”

    The master cat, still running on ahead, met with some reapers…

    Comment by ETat — September 20, 2014 @ 8:28 am

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