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For Putin, a pawn called crude

Updated July 22, 2018


VALADIMIR Putin is playing – and playing well – to both sides of the gallery.

On one hand, he is working hand in hand with the Organisation of Petroleum Exporting Countries (Opec) to ensure that the market continues to remain firm. The partnership that matured in 2016 – as crude prices sank to 12-year lows in that year – resulted in reduced output so as to support market prices. And so it did. Prices began cropping up and up, touching almost the $80 a barrel mark earlier this year.

Keeping aside differences on a number of political fronts, Putin has also been cultivating a personal rapport with Prince Mohammad bin Salman (MBS) of Saudi Arabia — the Opec kingpin – ever since he emerged as the most powerful man in Riyadh.

And Putin’s personal relations with the prince is paying off – at least on the crude front. Many feel this would also help Putin help grow Moscow’s political muscle in the Middle East.

From a nonentity in the regional geo-politics hardly a few years back, thanks to Putin’s shrewd moves Moscow has emerged as the dominant player in the region. His ‘crude’ alliance with Saudi Arabia has definitely helped him in that direction.

Now some reports are saying a larger Opec, with Russia in its folds, could be in the making. If it happens, it could provide Moscow with still greater leverage on the crude front.

And in the meantime, Putin also continues to strive to get closer to US President Donald Trump and his administration. He is using his crude card well to facilitate the objective. During his meeting last week with President Trump in Helsinki, Putin suggested cooperation between Moscow and Washington on the crude front so as to tame down volatility in markets.

He reminded the US president: “I think that we as a major oil and gas power, and the United States as a major oil and gas power as well, we could work together on regulation of international markets because neither of us is actually interested in the plummeting of the prices.” He then added: “But nor are we interested in driving prices up because it will drain a lot of juices from all other sectors of the economy, so we do have space for cooperation here.”

Of course, this fits well into the agenda of the Trump administration. After all in a mid-term election year, with elections scheduled this November, Trump cannot afford high prices at gas stations. Crude prices have jumped about 14 per cent since April on supply concerns following Trump’s promised renewal of sanctions against Iran and outages at fields in Libya and Venezuela.

Opec and its partners in production cuts, including Russia, have agreed to boost output to alleviate tightness, but concerns remain that it won’t be enough.

President Trump has been up in arms against crude producers’.

In a series of tweets, Trump had targeted Opec. Putin was well prepared to handle the issue, not ready to give in to Trump pressures, blaming instead the US policies – especially regarding Iran – for creating the risks of a deficit in the oil market.

Earlier in the week, just days before the Helsinki summit, the Russian Finance Ministry had called the US backing out of the Iran nuclear deal, as “the decisive factor” pushing up crude prices now.

And despite offering his cooperation to tame the markets, Putin didn’t appear giving up on Iran, as Trump may have wanted him to. After all Tehran is a close political ally of Moscow. In order to coordinate their moves, in the run-up to the Putin-Trump Helsinki summit, Iran’s senior advisor for international affairs Ali Akbar Velayati went to Moscow and met Putin.

And then disregarding the US insistence to opt out of the Iranian markets, after the meeting it was revealed that Moscow has agreed to invest $50 billion in the Iranian oil and gas sector investments.

“Russia is ready to invest $50bn in Iran’s oil and gas sectors,” Financial Times quoted Velayati as saying. Russian energy giants Rosneft and Gazprom are also reportedly in talks with the Iranian oil ministry to potentially sign deals worth up to $10bn, Velayati added, while a Russian government official also confirmed to FT Russia’s $50bn investment plans. In the wake of the growing US pressure on countries to get out of Iran, this was seen as a pre-summit snub to Washington by Putin.

As the global energy chess board remains spread out, Putin seems making his moves deftly — outwitting others in the process.

Published in Dawn, July 22nd, 2018