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Russia pushes an 'OPEC' for natural-gas nations

The world's biggest suppliers will meet in Moscow on Nov. 18 to finalize plans for a cartel to control gas prices.

By Correspondent of The Christian Science Monitor / October 30, 2008

Scott Wallace – Staff



The nations with the world's three biggest reserves of natural gas – Russia, Iran, and Qatar – are quietly moving ahead to form a "gas OPEC," an organization modeled after the oil cartel.

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In Tehran last week, representatives of the Russian natural-gas monopoly Gazprom met with counterparts from Iran and Qatar and agreed to create "a big gas troika." The group will meet quarterly to discuss pricing and supplies. Between them, these three countries hold an estimated 55 percent of known global gas reserves. The possibility of a cartel has long been opposed in Washington and European capitals.

The new cartel plan may be finalized Nov. 18, when Russia hosts a forum of gas-exporting countries in Moscow, including possible additions to the group such as Algeria, Indonesia, Libya, and Venezuela.

For Russia, which blames the US for causing the current global financial crisis and the attendant collapse of oil and other commodity prices, forging new energy-based international relationships holds political promise. "There is a clear desire in Moscow to work toward breaking what it perceives as US dominance of the world economy, but it's way too soon to predict where this global crisis is leading," says Masha Lipman, an expert with the Carnegie Center in Moscow. "If the US should really go into decline, I suppose we shall see new groups of states, and new contenders, come forward."

As global energy prices plunge, cooperating with the Organization of Petroleum Exporting Countries (OPEC) to stabilize markets has gained fresh traction in the Kremlin while the long-discussed idea of creating a "gas OPEC" of leading producers is suddenly getting a big push from Moscow.

Russia has earned huge profits in recent years amid soaring prices for its key exports, mainly oil and gas, which have enabled the government to accumulate significant currency reserves, now at $530 billion. Russia is one of the world's largest oil exporters, accounting for about 12 percent of the global supply. But even before prices began tumbling, Russian oil production was stagnating at under 10 million barrels per day, raising doubts about Kremlin claims that Russia was to become an "energy superpower."

"This is a crisis, one that's concentrating minds in Moscow," says Mikhail Krutikhin, a partner with RusEnergy, an independent consultancy in Moscow. "All Russian state budget projections are based on the assumption that crude prices will remain above $70 per barrel for the next two years, but they're already below that. It means that we'll have to tax those foreign currency reserves, and perhaps cut social spending. It's being viewed as a very serious challenge."

Perhaps that's also why Russia, which has long been cool to OPEC, now says it wants to cooperate with the 13-nation oil cartel.