Will Russia End Up Controlling 73% of Global Oil Supply?

Tyler Durden's picture

Submitted by Rakesh Upadhyay via OilPrice.com,

Russia has played a master stroke in the current oil crisis by taking the lead in forming a new cartel, but it’s a move that could spell geopolitical disaster.

The meeting between Russia, Qatar, Saudi Arabia and Venezuela on 16 February 2016 was the first step. During the next meeting in mid-March, which is with a larger group of participants, if Russia manages to build a consensus—however small—it will further strengthen its leadership position.

Until the current oil crisis, Saudi Arabia called the crude oil price shots; however, its clout has been weakening in the aftermath of the massive price drop with the emergence of US shale. The smaller OPEC nations have been calling for a production cut to support prices, but the last OPEC meeting in December 2015 ended without any agreement.

Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices.

Saudi Arabia has been a long-time U.S. ally, but that, too, is changing. Charles W. Freeman Jr., a former U.S. ambassador to Riyadh, recently noted that “We've seen a long deterioration in the U.S.-Saudi relationship, and it started well before the Obama Administration.”

U.S.-Saudi relations further soured due to the Iran nuclear deal that ended in January with the U.S. lifting sanctions—a move the Saudis vehemently opposed. The Saudis had to look for a new ally to safeguard their interests in the Gulf, considering the threats they face from the Islamic State (ISIS) and Iran. Though both Russia and Saudi Arabia are on opposing ends in Syria, with Russia supporting Syrian leader Bashar al-Assad and the Saudis supporting the Sunni rebels, the large drop in prices seems to have opened a window of opportunity for Russia to ally with Saudi Arabia.

This is not the first time that Russia and Saudi Arabia have sought a close partnership. Even in 2013, The Telegraph had reported an attempt to form a secret deal, which did not go through. Iran has been a trusted ally of Russia for a long time, and if Russia can broker a deal between Iran and Saudi Arabia, it can also push through some sort of secret OPEC deal.

The production freeze to January levels that was bandied about last month carries no significance in concrete terms because Russia, Saudi Arabia and most other nations on board are pumping close to their record highs. Barclays’ commodity research chief Kevin Norrish said it was “vital to note” that there was not much incremental production expected from Russia, Qatar or Venezuela this year anyway. It was the Saudi’s that really mattered, as reported by Forbes.

Though Iran hasn’t committed to a production freeze, since it wants to ramp up production to pre-sanction levels, Russian Energy Minister Aleksander Novak has noted that "Iran has a special situation as the country is at its lowest levels of production. So I think, it might be approached individually, with a separate solution."

With all the major Gulf nations agreeing, Iraq, which is without a credible political leadership, will also likely follow suit if Russia assures them of stronger support against ISIS.

If the above scenario plays out, Russia will emerge as the de facto leader of the major oil producing nations of the world, accounting for almost 73 percent of the global oil supply.

Along with this, Russia has been in the forefront of plans to move away from Petrodollars, and Moscow has formed pacts with various nations to trade oil in local currencies. With this new cartel of ROPEC (Russia and OPEC nations), a move away from petrodollars will become a reality sooner rather than later.

Russia is smart. Vladimir Putin is genius. Moscow senses the opportunity that is almost tangibly floating about in the low crude price environment and appears to be ready to capitalize on it in a way that would reshape the geopolitical landscape exponentially.

Though a solution in Syria is welcome, a large cartel of major oil producing nations of the world with Russia as the head would be a major upset to the current balance of power. With this potential in mind, the mid-march meeting should be very interesting for the global oil patch—well beyond talk of production cuts and supply gluts.

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wildbad's picture

couldn't happen  to a nicer bunch oguys...and babes

Argenta's picture

That's the real take-away from this article, isn't it?

-Argenta

SWRichmond's picture

"Please understand that I can be more flexible after the next election."

Bumpo's picture

Not sure how this article can have it both ways. Saudi Arabia is defending itself against ISIS, while supporting the Suni Rebels? This is all about money and selling oil, not politics. Putin is a businessman, and the US handles its business like a reckless street pimp.

justdues's picture

Yeah I spotted that inconsistency too. How do you get articles published when regular Joe,s like you and me immediately spot glaring flaws in the narrative.

rejected's picture

Paradigms change and sometimes rapidly. Many are be blinded by the bright lights of MSM and promises of politicians.

Money Boo Boo's picture

What if it's Iran that holds the vast majority of remaining oil reserves and NOT Saudi Arabia who have been lying about their reserves for decades? Just askin.....

Surviver22's picture
Surviver22 (not verified) Money Boo Boo Mar 7, 2016 11:48 AM

Obama will not finish his second term!  This will scare millions! 

http://motivationdose.com/is-america-babylon/

Tao 4 the Show's picture

The race to the bottom is on (for absolute zero of corruption/population sell out):

 

http://russia-insider.com/en/politics/american-prime-minister-poroshenko...

Ukraine to consider U.S. candidate for Prime Minister.

eatthebanksters's picture

Another reason to vote for Trump...POTUS and his brilliant sidekicks didn't see this coming?  Or maybe they wanted it this way to force the US off oil...fucking brilliant...NOT!!!!

WTFRLY's picture

Another Trump zombie, awesome.

sandman.s's picture

What are you going to say if he does finish his second term?  Just curious...

Normalcy Bias's picture

...the US handles its business like a reckless street pimp.

There's no need to denigrate reckless street pimps in such a way.

Freddie's picture

Go to Gazprom's web site and check out the pipeline maps.  Staggering.  They connect everywhere.

While the Chinese were building ghost cities and the USSA was bombing people, overthrowing govts and building the junk F-35 for $2 trillion - Putin and Russia were building pipelines to everywhere.

Meanwhile - the GOP-e and Dem are demonizing Trump and American voters and pushing Cruz-Bush the NeoCon.  They are gonna steal it from trump.

Troy Ounce's picture

 

Petro Ruble. Nice guy. Lives around the corner.

Bollixed's picture

And Hillary's emails gave the whole world the USSA game plan...

onewayticket2's picture

"fundamentally change America"

Dubaibanker's picture

America is unable to decide whether to move forward or backwards.

My way or the highway approach still lingers on which has created America to be an island in itself and the entire world stand on the other side. They signed a deal with Iran and now place new regulations on Chinese (of all the people) as a penalty. Incomprehensible!

Are they signinig a deal with Iran or rescinding?

More companies would rather not do business with America than with them.

No wonder Russia is creating a new system of dealing in oil and gas with the rest of the world and increasing it's power while US keeps dancing like it's the 19th century!

U.S. slaps export curbs on China's ZTE over alleged Iran scheme
kikk's picture

U.S. slaps export curbs on China's ZTE over alleged Iran scheme

And right there is one major problem.

Who the fuck are the US government to decide what China can sell  and who they can sell it to ?

 

Edited for spelling

monk27's picture

Sorry mate, America started moving backwards a long time ago (about the time Clinton started to bomb Serbia). It's you, people living on the outside, who don't see it or, much worse, even if you see it you don't want to believe it...

Miles Ahead's picture

"about the time Clinton started to bomb Serbia"

Now THAT, was funny.  That's genius being able to pinpoint such a milestone with such precision. 

How about, about the time Reagan... excuse me Nixon, I mean Johnson took office after the coup d'etat.  I think that's a bit more realistic.  

But honestly, it really dates back to shortly after the passing away of the last of the founding fathers.  In the end, you can hardly blame it on Slick Willie.  Serbia... my God, more important than 5 million in S.E. Asia?

Miles Ahead's picture

Oh I forgot... S.E. Asians were mostly brown... Serbs... not so much

assistedliving's picture

More companies would rather not do business with America than with them (Iran).  

pathetic...but what can u expect from a carpetbagging money launderer.

Max Steel's picture

And What can you expect from a troll resorting to name calling. Oh thats how Muritards think. Pathetic. 

Kirk2NCC1701's picture

Hello Petrograd Ruble. 

Backed by Oil, Gas, container loads of AK-57s and a global network of U238 mines (that feed its reactors and nukes).

IOW, backed by Assets, Faith and Guns. That'll do it.

F0ster's picture

Why do you think the richest people on earth (the Saudis) are issuing bonds for tens of billions of dollars, could they be maxing out their credit cards before a planned default?

RattieNomNom's picture

Ya ;P

Will be such a show! When Vladimir nuqes Saudia!!  :D

Demdere's picture

Must be awesome to be lead by someone who grasps positive-sum games.

More proof of Discordianism, the only empirically-validated religion.

JRobby's picture

Or, how long will the ground that 73% of the global oil supply is under will be radioactive for ?

DeadFred's picture

No worries, they can redrill through the glass and the oil itself won't be affected. It would kinda suck to be the guy in the rad suit working the drill rig when it's 120 in the non existent shade.

JRobby's picture

Junk Trolls Blow Monkeys

Caleb Abell's picture

About as long as the ground betwen LA and NY.

epicurious's picture

All they have to do is wait a little longer until all those high yield bonds from the fracking patch unravell and then watch the dollar fall apart.  What a bunch of morons we have running the USA with the neocons in the state department and MIC.

Infield_Fly's picture
Infield_Fly (not verified) Mar 7, 2016 10:39 AM

Russia already owns 73% of the porn industry, so why not?

DeadFred's picture

In Russia they prefer to call it the 'service industry'

oddjob's picture

Reuben Sturman, the grandaddy of pornography, sounds distinctly not Russian.

Killdo's picture

the US leads the world in vaginal rejuvenation and sex-change

Lea's picture

"Russia already owns 73% of the porn industry, so why not?"

Actually, the USA produce 89% of the porn, worldwide.
http://www.canadianbusiness.com/blogs-and-comment/u-s-leads-the-way-in-p...

 

Freddie's picture

San Fernando Valley a few blocks west of vile Hollywood.

flaminratzazz's picture

Infield_Fly wtf? Are you trying to deflect the truth about your masters? fvking troll.

o r c k's picture

 Radioactive?  No, I listen to one station at a time.

Demdere's picture

No Locomotives for switching?

dsty's picture

Russia floats baloons at ZH

a friend in deed.

for those who smoke weed.

LasVegasDave's picture

1000 years from now, scholars will be scratching their heads as to why the USA, with all its military advantages didnt just take all the oil and kill any protestors