Russia Mulls Energy Cartels With Venezuela, Iran
September 29, 2008 - 4:21 AMEnergy-rich Russia is pushing for closer ties with other key producers, boosting interaction with OPEC while advocating the creation of an OPEC-style gas cartel.
In its latest move, Moscow clinched a deal with the leading Latin American energy producer, Venezuela.
During his second trip to Moscow in as many months, Venezuelan President Hugo Chavez discussed both weapons deals and plans to set up “the largest petroleum consortium” in the world.
Russia is the world’s leading natural gas supplier and second biggest oil producer; Venezuela is the fifth largest oil exporter and has the biggest proven gas reserves in Latin America – the ninth largest in the world.
The two governments agreed to create a joint energy consortium that would become a leading player in global energy markets. Chavez said the state-run Petroleos de Venezuela (PDVSA) would team up with Russian companies to form a global energy “colossus.”
Russia’s top energy companies Gazprom, Rosneft, TNK-BP, Surgutneftegaz and LUKoil, will represent Russia in the consortium, due to be set up next year.
Gazprom CEO Alexey Miller said cooperation with PDVSA would go beyond Venezuela, adding that Chavez and Russian President Dmitry Medvedev had also discussed the creation of an international gas cartel. He did not reveal more details.
Russia first proposed the concept of a “gas OPEC” in 2002. Although in the years since it has denied plans for a gas cartel, Medvedev said in July that it remained on the agenda..
Iran, which boasts the world’s second-largest reserves, supports the idea of turning the existing Gas Exporting Countries’ Forum (GECF) into a more powerful entity.
Shortly before Chavez’ visit, Miller of Gazprom met with Iranian oil officials in Moscow to discuss joint gas projects, as well as an upcoming GECF meeting, planned for Nov. 18 in Moscow. The two sides reportedly pledged to continue bilateral long-term energy cooperation.
Set up in Iran in 2001, the GECF still does not have an official charter, although one reportedly is being drafted. It has held half a dozen ministerial meetings, with around 15 countries taking part. Russia wants the headquarters to be located in Moscow.
After a meeting with Iranian President Mahmoud Ahmadinejad in July, Miller said both sides advocated GECF evolving into a permanent international organization.
Last April, then President – now Prime Minister – Vladimir Putin visited Libya where he discussed the gas OPEC idea, although no firm decisions were announced. Libya is has the fourth largest gas reserves in Africa, after Nigeria, Algeria and Egypt. All four have attending GECF meetings.
Western governments are wary of the idea of a gas exporters’ body that may manipulate prices and could threaten security of supplies. The involvement in such an entity of volatile or hostile countries would deepen the concerns.
Meanwhile, in the wake of the Georgian crisis in August and the resulting deterioration of relations with the West, Russia is also looking at strengthening its ties with OPEC, and boosting OPEC’s global clout.
Moscow’s past cooperation with the cartel has been low-key, but that policy appears to be changing. Deputy Prime Minister Igor Sechin attended an OPEC session on Sept. 9 and urged greater collaboration between the cartel and Russia.
And ahead of Chavez’ visit, Energy Minister Sergei Shmatko also signaled that Russia aimed to influence global oil prices by publishing output forecasts and delaying the development of oilfields.
Meanwhile, bilateral military and other ties continue to grow. Between 2005 and 2007 Russia and Venezuela signed 12 arms supply contracts worth a total of $4.4 billion.
Venezuela is keen to buy 20 Tor-M1 air defense missile complexes and three diesel submarines, and during his visit, Moscow offered Chavez a $1 billion loan for arms purchases.
After their meeting in Moscow, Putin also said he was ready to consider helping Venezuela develop a nuclear energy program.