Newspaper article The Evening Standard (London, England)

Russia Has Long-Term Oil Scheme in the Pipeline

Newspaper article The Evening Standard (London, England)

Russia Has Long-Term Oil Scheme in the Pipeline

Article excerpt

Byline: ANTHONY HILTON

YOU only have to travel to Moscow to see what a difference two years of expensive oil has made.

At the end of the 1990s, in the wake of the 1998 debt default, the country was a basket case. But when the oil price tripled from $10 to $30, Russia took full advantage of the opportunity.

Prime Minister Vladimir Putin put his own men into the ostensibly private oil companies and they turned the taps full on. The oil poured out and the money poured in. Russia's economy revived, the goods returned to the shelves in the shops in Moscow and St Petersburg, Putin's grip on power was consolidated and the whole geopolitical position of Russia in the world was transformed.

These are big gains, and ones which Putin does not want to see disappear.

So logically Russia, running neck and neck with Saudi Arabia as the world's biggest producer,

has the same interest in higher oil prices as do the Opec nations - a greater interest, in fact, as Russian production costs are higher and it is therefore less able than Saudi Arabia and Iran to live with low prices.

But despite the slide in the oil price from more than $30 just after 11 September to below $18 for Brent crude in London today, Russia is refusing to play its part in curbing supply.

If this is an economically irrational decision, the motivation has to be pragmatic or political. Pragmatic because Putin may have taken the view that, with the world heading into recession, demand for oil will fall so much that prices will plunge no matter how much supply is curbed. Political because he may think maintaining supply can only strengthen his ties with the United States.

President Bush needed Putin's help to get the use of those military bases in the former Soviet republics bordering Afghanistan.

Who knows what aid or concessions might be wrung from a grateful President if he also keeps the oil flowing? …

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