RUSSIA GOING TO OUST OPEC FROM MARKET, US EXPAND OIL EXTRACTION Sensation: oil products as well as energy market will not be needed soon

Dr. Emzar Djgerenaia

T he American, Arthur Clark thinks that new devices will come on market in 2002. They will produce ecologically pure energy by means of low-temperature nuclear reactions. In his opinion, the era of oil minerals is coming full circle.

Therefore, the country and economy built on oil will soon have to encounter problems. At the end of February, there was a hearing in the congress of the USA about energetic strategy prepared by the Bush administration.
The President suggested that oil production should be expanded in Alaska so that the country would not be dependent on energy safety of the Arabian countries.
The President repeated it in his speech on radio on February 26. He said that demand for oil in the USA would increase by 40% in the nearest 20 years. In his opinion, the main danger comes from foreign importers. Thus, an important thing for the country is have its own resources. Bush offered the Americans a plan of 5 items, including decrease of energy consumption, optimization of transport communications, assignment of funds for the invention of H-bomb, etc.
Analysts think that the President is preparing for the war with Iraq. Besides, on 15 March at the meeting of OPEC countries he exerted pressure on them so that to prevent cartel countries from increasing price on oil because it would have a bad effect on the economy of America that is now going through recession. Russia supports America in its struggle with OPEC. As experts say, Bushed determined the tactics of the struggle in January during Kasyanov’s visit (prime-minister of Russia) to economic forum in New York. Similar to America, Russia begins to create state oil reserves. In this difficult time for oil business (low level of prices), Putin decided to purchase oil at a cheap price and later resell it to the West at a higher price. Thus, Russia is acquiring a great role in the oil market.
Added to this is the fact that American corporation USEK and Russian “Technabexport” conclude a 13 year long contract about the purchase of uranium that was produced by means of demounting nuclear weapon for powerstations. Cost of the contract is 2,5 US dollars.
At the same time Russia interferes with the issue of parcelling Caspian Sea where it has more followers than opponents. As far as we know, there are two approaches to this issue: 1) Equal parcelling (which is mostly suitable to Azerbaijan) and 2) parcelling proportionate to the length of sealine. Russia, Iran and Kazakhstan keep to this approach. Russia will secure a grip on large oil deposits even in this case. One more thing – construction of pipeline will soon come to its end. After this 70 tons of Caspian oil not to mention gas will pass through Russia to the West. Russia is in disagreement with OPEC on the issues of energy resources so that it becomes an ally of the West. The situation in OPEC is also very accelerated. Instability of oil prices and incoherence of many world oil exporters’ actions brought about confrontation between the largest suppliers of raw materials, which is likely to cause market sharing. The other day a research of OPEC was published. According to it, share of this organization in the world market will be 50,5% by 2020 up from 39,5% in 2000.
Talking about the perspectives of cartel minister of oil industry in Iran said that members of OPEC thought that reduction of oil extraction in the second quarter of 2002 would be inexpedient. According to them, prices for OPEC in the whole world should be determined by demand; demand should regulate the market, but not OPEC”. This change of OPEC strategy can be viewed in different ways. Perhaps, it is a fear to lose part of the market because of reduction in their share of export. In fact, OPEC was the only supplier of fuel to take some measures for preventing reduction in prices. The rest oil producing countries were reluctant to decrease production volume. They said that they were intending to expand market in the future. On the other hand, OPEC might take this risky measure that will cause price reduction. The cartel will have to increase the level of fuel production with the purpose of winning additional part of the market. Due to the fact that cost price of oil in OPEC countries is very low, supply of large amount of cheap oil will cause supply glut and will oust rivals with their expensive production.
There have lately been some loud statements in Russia about reducing oil export from the country and about the situation with low oil prices.
Andrey Illarionov, counselor of the President of Russian Federation on economic issues, thinks that “dampening of export and oil production is a suicide policy”. Russia has to put up with the existing prices because under these circumstances it can not influence them At the same time, he accentuated the fact that “low prices on oil are strategically suitable to Russian economy”. The assertion that high prices on raw materials have a positive influence on the development of the country has long turned into a myth.
The World Bank takes sides with Russian officials. It stated the other day that Russia would not face economic crisis even in case of decrease in oil price. Such development of events will, certainly, bring to quick devaluation, which will effect incomes and consumption of oil by the citizens. According to experts, low prices will cause reduction of home production costs.
We should note stress the fact that the West and, particularly, the USA tries to alienate Russia from OPEC by means of supporting measures of the Russian Government in regulating oil prices. Prominent persons in Russia pursue their policy by using this support. They state that Russia is not afraid of low prices on raw materials. According to them, the prices will by no means influence budget implementation and payment of debts. It even came to this that Juri Jusufov, minister of energetic of Russian Federation forecasted that Russia would play a leading role in the world market and will oust OPEC in the future. This position is suitable to the USA that needs low oil prices for coming out of the recession.
Thus, Russia is the only one to help America in its struggle with OPEC.
Victory of America in this branch would be the only way to salvation for the economy of Georgia that is now in deep crisis. Given the fact that the country lives on 100% import (annual import of oil products in Georgia makes up approximately 1,4 million tons), victory of America will make it possible for Georgia to regulate inflation and to decrease payments deficit. Besides, the Georgian Government must settle social situation as soon as possible and develop a real economic program for averting a crisis in 2002-2003 by taking advantage over the situation in the world business.