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Russia cobbling a gas cartel on OPEC pattern

Within five months, Russia may join with other major natural gas producers to form a ‘gas association’ on the lines of OPEC, reports Fred Weir.

business Updated: Jan 25, 2008 21:49 IST
Fred Weir

Within five months Russia may join with other major natural gas producers to form a ‘gas association’, on the lines of the Organisation of Petroleum Exporting Countries (OPEC), the cartel that regulates oil exports, a leading Russian business newspaper has reported.

Russia and Iran are spearheading the creation of the group, which would give suppliers of natural gas a united policy on prices and production quotas for the first time, the daily Kommersant said, citing official sources.

Major importers, such as the US and the European Union, are liable to fiercely resist any move by suppliers to form a united front, which has led the Russian Ministries of Foreign Affairs to urge the Kremlin to show caution, the paper said.

But the new group's charter is almost ready and could be adopted at the June meeting in Moscow of the Gas Exporting Countries' Forum, which has 14 permanent members, including Algeria, Bolivia, Brunei, Indonesia, Oman, Qatar, Russia and Iran.

Outlines of the deal were being hammered out at a meeting of the body in Egypt this week.

"The main issue being discussed by the Gas Exporting Countries Forum is the transformation of an informal club that has no centralised organisation into a serious international organisation of gas suppliers," Kommersant said.

Between them the group's members control 73 per cent of the world's gas reserves and 42 per cent of current production, which could turn them into a formidable negotiating bloc if they join forces into an OPEC-like monopoly, experts say.

But Russian officials caution that natural gas is not as easy a commodity as oil to control, and that a gas cartel would probably have different purposes than OPEC.

"If one of OPEC's key goals is to set production volumes to influence prices, we have a different goal: to coordinate investment strategies and make sure there is a balance between production capacities and market needs in the long-term," Sergei Kuprianov, spokeman for the Russian state-owned gas monopoly Gazprom, told journalists.