The risk of U.S. monopoly-related sanctions is deterring Russia from forming a permanent alliance with global oil cartel OPEC, Russian Energy Minister Alexander Novak said on Thursday, according to Reuters.
In an unprecedented joint effort to curb output and support prices, the Organization of the Petroleum Exporting Countries (OPEC) and other top oil producers led by Russia have cooperated in output cuts. OPEC and Russia jointly produce more than 40 percent of the world’s oil.
Russia’s energy ministry had said that Moscow and OPEC leader Saudi Arabia had reached a general agreement that the OPEC+ format should be “institutionalized” and extended until 2019 and beyond to monitor the market and take joint action if needed. However, Novak said such an idea has been abandoned.
“There is a consensus that there will be no such organization. That’s because it requires additional bureaucratic brouhaha in relation to financing, cartel, with the US side,” Novak told a briefing to reporters. “I think, non-OPEC (countries) will not agree as they don’t want to be hit by sanctions.”
Proposed U.S. legislation known as NOPEC could open the global oil cartel up to anti-trust lawsuits but has long laid dormant, with previous U.S. presidents signaling that they would veto any move to make it law. However, U.S. President Donald Trump has been a vocal critic of OPEC, blaming it for high oil prices and urging it to increase output.
“This won’t be an organization, this is some mechanism of cooperation: to convene, to discuss, adopt some memorandums, joint resolutions,” Novak said about future cooperation with OPEC.
Rising protectionism and trade wars and the unpredictability of the U.S. administration have greatly contributed to global oil price volatility over the past two years, the minister added.
“All these uncertainties, which are now on the market: how China will behave, how India will behave… trade wars and unpredictability on the part of the U.S. administration… those are defining factors for price volatility,” Novak said.