14 March 2025

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WILL OPEC GET A "BROTHER"?

The expediency of setting up an international gas cartel is being questioned

Author:

01.03.2007

The idea of setting up a so-called "gas OPEC" is not new. Russian President Vladimir Putin expressed it during the Caspian summit in Ashgabat in 2002. He proposed to the Central Asian republics setting up "a Eurasian gas alliance" together with Moscow. It would include not only the countries producing "blue fuel", but also the countries transporting it. Of course, a lot has changed since then, but the "gas idea" continues to be discussed from time to time by politicians and experts from the presumed member countries of the cartel.

 

There is something to think about…

A new impetus to talks about this subject appeared after Vladimir Putin's recent visit to the Middle East. One of the states that he visited during his "Arab tour" was Qatar - the third natural gas producer in the world after Russia and Iran, which produces 15 per cent of all gas in the world. Coordination of activities between the Russian Federation and this country in the gas sphere was declared the main purpose of the negotiations in Doha. At his final press conference, Vladimir Putin stated that Russia has not yet rejected the idea of setting up a "gas OPEC". However, the further words of the president sounded a bit vague: "this is an interesting proposal, but whether we need the cartel and are going to set up such an organisation is a different matter. Of course, we have to coordinate our activities." The Russian president added that he and his Qatari counterpart would like to avoid mistakes "in terms of other cartel-type organisations". As for the emir of Qatar, Sheikh Hamad ben Khalif al-Tani, in his opinion, the difference between OPEC and the possible "gas cartel" will be that OPEC itself regulates oil prices, while the price of "blue fuel" has been calculated for 20-30 years.

In any case, even before Putin's visit to Qatar, the spiritual leader of the Islamic Republic of Iran, Ayatollah Ali Khamene'i, recalled the possibility of setting up a union of gas producers. This happened during the visit to Tehran by the secretary of the Russian Security Council, Igor Ivanov. "Our countries can set up a structure similar to OPEC. Half of the world's natural gas reserves are in Russia and Iran," Khamene'i said, stressing that "apart from the economy, the Russian Federation and the Islamic Republic of Iran could become complementary partners in the political sphere, as well as in regional and international issues." Thus, it turns out that Khamene'i's proposal was in fact continued in Qatar.

Algeria is regarded as another likely member of hypothetical "gas OPEC". Last summer, Russia's Gazprom and the Algerian state oil and gas corporation Sonatrach signed a memorandum on mutual cooperation in the oil and gas sphere. At the beginning of 2007, Gazprom presented Algeria with four gas extracting facilities and in return, was given access to deposits in Central Africa.

In experts' opinion, the cartel can also be joined by Libya and Central Asian states. In this light, the opinion of the Gazprom boss, Aleksey Miller, is of special interest. After his return from Turkmenistan where he attended the inauguration ceremony of the new president Gurbanguly Berdymukhamedov, he said that in conditions where the struggle for access to energy resources is becoming more active all over the world, "major gas producers are no longer rivals, but allies". For the Russian Federation, of course, it is very important that Ashgabat confirms its allegiance to the implementation of the contract on Turkmen gas supplies to Russia by 2028. It is curious that Miller's statement about "gas OPEC" almost coincides with the position of President Putin and Sheikh Hamad ben Khalif al-Tani expressed in Doha. "The organisation that will unite gas exporters cannot be the same kind of cartel as OPEC. The mechanism of coordinating activities is necessary, of course. Major gas producers are interested in coordinating long-term strategies in the sphere of gas exploration, extraction and export and in improving investment programmes so that supply always accurately meets the demand," the Gazprom boss said.

 

"If they do not pay, we will cut off the gas!"

It is natural that all these proposals and statements cause serious concern in the West. If such a union really emerges (there are assumptions that it might happen on the basis of the forum of gas exporting countries (FGEC) set up in 2001), its members will be able to control a significant part of the European market of gas consumers, and not only the European market. For example, Algeria exports up to 30 per cent of gas to the EU market and another 40 per cent comes from Russia. In view of the increasing demand for this type of fuel (just look at the fastest growing economy of China) and the oil prices that break all records all the time, it is not difficult to imagine what sort of geopolitical dividends members of "gas OPEC" would be able to derive from the alliance. According to experts' estimations, the share of natural gas in the planet's energy balance will account for 26 per cent in 2030. The extent and US and EU anxiety is graphically demonstrated by a report of NATO experts who warn that Russia will probably try to set up an international cartel soon in order to exert pressure on Europe. The document that was published last autumn directly says that the aim of "gas OPEC" "will be the use of the energy policy to achieve political goals". This statement probably made the head of the US Senate Committee on Foreign Relations, Richard Lugar, so anxious that he immediately suggested turning NATO into an alliance of energy consumers to counter Russia. "In the next few decades, the most likely source of armed conflicts in Europe and surrounding regions will be a lack of energy and manipulations with it. Having blocked energy supplies to Ukraine, Russia demonstrated how enticing it is to use energy to achieve political goals," the US senator said. The international consultancy company Control Risks holds a similar view. Its experts are sure that Moscow is becoming more and more persistent on its path of turning its energy resources into "an effective political weapon". All these predictions and statements were made before Vladimir Putin's trip to Qatar.

In any case, the Kremlin flatly denies all accusations of the sort. The Russian president seems to be sincerely surprised by comments made by Western experts: "If hydrocarbon consumers coordinate their activities, for example, in the International Energy Agency and in other organisations, what stops producers from coordinating their activities?" Every time he talks about the need to draw up common approaches to the creation of single conditions for gas producers, Putin patiently adds that this coordination "will not be aimed at undermining energy security, but on the contrary, will be aimed at strengthening the international energy market". But for some reason, no-one really believes him. The most suspicious people even predict that after resigning from the post of president in 2008, Vladimir Putin will become head of the international gas cartel.

 

There is no need to worry

At the same time, a number of experts see in statements about the establishment of "gas OPEC" only Russia's desire to demonstrate once again its role of an energy giant, which, of course, implies a great political weight. A number of experts think that the cartel itself is very unlikely to appear because from a purely economic point of view, it will be of no benefit to its members. For example, the same OPEC is having to reduce oil extraction all the time in order to keep the prices high. As a result of all this, the share of this organisation on the world market is steadily shrinking. In turn, this causes increasing demand for gas. What is more, if "gas OPEC" artificially increases the price of "blue fuel", it will inevitably start going up on the domestic markets of the member countries of the cartel as well, which will have an extremely negative impact on the national economies. Specialists in this sphere also say it is necessary to keep in mind that in fact, there is no "world gas market" and that trade in "blue fuel" is carried out, as a rule, on a long-term and bilateral basis. Moreover, if Russia set up a cartel with Central Asian countries, they would get access to the European market through its pipelines. Of course, Moscow does not need this.

At the same time, it is clear that gas suppliers need to coordinate such issues as mechanisms of pricing, the implementation of joint projects, the development of the transport infrastructure, research into investment opportunities, the introduction of advanced technologies, environmental monitoring, as well as reliability of supplies. There is nothing dangerous for "blue fuel" consumers in this. In April this year, major countries producing and exporting gas will come together in Doha, probably to discuss the aforesaid aspects.

At the same time, all this talk about "using energy as a political weapon" is not groundless. But, as it were, it is already one of the well-established elements of the great geopolitical game. Gas and oil "wars" between suppliers and consumers will probably break out more than once. And the lower the total amount of hydrocarbon reserves on the planet, the tougher and more uncompromising these clashes will be. Senator Lugar is absolutely right about this.


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