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The writer is a part -time researcher at the Global Energy Policy Center at Colombia University and the Crystal Energy Advisory Committee.
At the beginning of the year, the US government, which retired, issued a final sanctions package against Russia and imposed a new layer in the oil sector in the country. In contrast, the new administration frames pure negotiations between Russia and Ukraine, based on purely military power and territorial interests. In this story, Russia is dominant. Its power slowly crushes a self -declared new border. However, there is a way to approach negotiations without denying this war much more. To see it, it is necessary to connect two different theaters: Russian economy and OPEC oil policy.
The Russian economy stands on clay feet. It is smaller than Italian, and fuel is supplied by military production, state procurement, and ordered credit. Inflation is 9.5 %, the central bank’s policy rate is more than 20 %, and the rubles float near the historic low price. It is held together by the Ministry of Finance and the central bank’s abilities (and reasonably free hands), but it is the foreign currency revenue that is actually doing it.
In this regard, the Western economic war failed. Russia escapes the economic impact of sanctions on oil. Each step toward the construction of an effective sanction system -directly banned the import of oil, restricted maritime and financial services, and even for the upper limit of prices, the escape route was greatly opened.
I know why this happened. “Group West” wants to reduce Russia’s income as Moscow is calling it, but it requires oil in the global market to avoid high prices by impairing his economy. 。 I want to eat with a cake. This is not the case where severe sanctions fail, but not so severe that sanctions can damage the Russian war economy.
On the other hand, OPEC leaders are in a narrow place. Since 2022, they have reduced petroleum production several times to keep the price tolerated. As a result, spare capacity limit export revenue. Their problem is to solve these reductions without lowering the price. Historically, the rise in demand was an answer, but this has become late in recent years. The growth of the supply of non -OPEC production is powerful and is set to become stronger. In the near future, we will respond to global demand in itself. It is trapped in OPEC. Increasing production will decrease, but otherwise the market share of the cartel will be lower.
Enter Donald Trump. The new US President was able to call OPEC. He can swear to sign up for a point to make oil sanctions in Russia deeper and sharper. These target not only producers, but also pursuers, ports, insurance companies, and shadow fleets. He can also apply more political pressure by China, India and Türkiye to support compliance.
The impact on Russia’s export revenue is devastating, as in market turmoil. Therefore, the president asks if OPEC is ready to step up and play a traditional role in the market stabilizer. Today’s preliminary capacity of OPEC is about 5.5 million barrels per day, but Russian export is about 3.5 million B/D and 2MN B/D petroleum products. These flows must be synchronized to replace one with the other.
Will it work? You can do it. OPEC may be ALK. After all, the contract is at risk of OPEC+, a larger producer association. However, OPEC is an advanced partner and has 90 % of the world’s spare capacity. The political interests of supporting the ambitious and external agendas of the main Gulf economy are useful. It is unlikely that loyalty will change the calculation.
China may resist sanctions, but this is part of a big game. In terms of technical aspects, sophisticated abilities can be used around the world, the quality differences between Russia and the Middle East are easy to manage, and increasing production helps OPEC out of its deadlock. Switch is possible.
It soak in the appropriate candidate. The Western Alliance will continue to benefit from the well -provided oil market and stable prices. OPEC will step in to control from a pagoda that was discovered by himself. When the pressure on inflation and exchange rates increases, Russia is in danger of financial disorder. If it is true that President Vladimir Putin is afraid of political anxiety at home, this approach is more likely to take him to a negotiating table than previously tested.
The new US administration needs to strengthen Joe Biden’s sanctions and execute it with that idea. They may enjoy the success that no one expects anymore.
