“PUTIN IS NOW THE WORLD’S ENERGY CZAR”

“PUTIN IS NOW THE WORLD’S ENERGY CZAR”

25.11.2017

Organization of Petroleum Exporting Countries’ most powerful internal alliance, bringing together the oil producer group’s Gulf members, is disintegrating fast. As a six-month-old spat between Saudi Arabia and Qatar deepens, the organization’s Gulf ministers will have to scrap their tradition of meeting behind closed doors to agree policy before OPEC holds its twice-yearly talks, OPEC sources say.

“We used to have a WhatsApp group for all ministers and delegates from the Gulf. It used to be a very busy chat room. Now it’s dead,” said a senior source in the Organization of the Petroleum Exporting Countries.

Four other sources told Reuters that there had been no official contact on oil policy between the Gulf Arab nations, in a grouping known as the Gulf Cooperation Council (GCC).

The GCC includes OPEC members Saudi Arabia, the United Arab Emirates, Kuwait and Qatar and non-OPEC Oman and Bahrain. OPEC meets on November 30 in Vienna to decide whether to extend global output cuts beyond March. Saudi Arabia and the UAE cut ties with Doha in June, saying Qatar backed terrorism and was cozying up to rival Iran. Qatar rejected the accusation.

“The ministers can’t meet,” another OPEC source said. “They may relay the message through the Kuwaiti or the Omani oil ministers, but Saudi and the UAE cannot meet publicly with the Qataris.”

Kuwait and Oman have refrained from taking sides in the dispute, over which Kuwait’s Emir Sheikh Sabah has led regional mediation.

None of the OPEC sources suggested the Qatar crisis would derail a widely expected decision by OPEC to extend price-boosting output cuts until the end of 2018, as almost all producers agree on the need to maintain policy. But dialogue within OPEC is likely to be complicated as the stand-off strikes at the heart of OPEC’s efforts to form a united front to stabilize a fragile oil market. It may also weaken the group’s Sunni faction at a time when predominantly Shi‘ite Iran and Iraq are raising their game.

”If the GCC is dead politically, then it will certainly have implications for OPEC policies. Not that it will necessarily disrupt decision-making, but it is making it more challenging and complicated,” the senior OPEC source said. “Qatar is not talking to the Saudis or the UAE, so OPEC’s Sunni wing is weaker. On the other hand you have the rapprochement between Iran and Iraq, a Shi‘ite alliance long in the making,” the senior source added.

As OPEC president in 2016, Qatar was instrumental in bringing together oil producers — including non-OPEC Russia — to agree to the supply-reduction deal. Since engineering Russia’s pact with the OPEC to curb supplies a year ago, Putin has emerged as the group’s most influential player. As one senior OPEC official put it on condition of anonymity, the Russian leader is now “calling all the shots.”

“Putin is now the world’s energy czar,” said Helima Croft, a former Central Intelligence Agency analyst who directs global commodity strategy at RBC Capital Markets LLC in New York.

The current prices and geopolitical realities suggest the accord will be rolled over, according to Edward C. Chow, a fellow at the Center for Strategic and International Studies in Washington and a former Chevron Corp. executive.

“It’s mutually beneficial,” Chow said. “The Saudis need a large oil-producing partner to effectively influence the market and the potential for a greater geopolitical and economic role in the Middle East for Russia makes compliance with production cuts an expedient move for Moscow.”

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