With crude prices dropping, Russia, the world's No. 2 oil exporter, pledged to cooperate with the Organization of Petroleum Exporting Countries -- but stopped short of any promise to join the cartel in production cuts to support the market.
After years of often prickly relations with OPEC, the Kremlin recently has been cozying up to the cartel, raising concerns in Western capitals about closer cooperation between countries that account for about half of world oil production. But Russian officials, as well as Western diplomats and analysts, say the Kremlin's warming to OPEC seems to reflect more an attempt to intimidate Western governments in the wake of the conflict over the war in Georgia than any real desire to work with OPEC to manipulate prices.
OPEC Secretary-General Abdalla Salem El-Badri, who is visiting Moscow this week, said on Wednesday that he wasn't planning to ask the Kremlin to cut production but just wanted to discuss the situation in the market. Some OPEC members have called on Russia and other producers outside the cartel to join in cuts likely to be announced at a meeting in Vienna on Friday.
At the start of the meeting with Mr. El-Badri on Wednesday, Russian President Dmitry Medvedev said the reason for ties with OPEC "is absolutely obvious: Russia is also a large producer and exporter of oil and interested in maintaining stable and predictable prices."
The Russia-OPEC talks came on a day when oil prices clocked another steep drop. On the New York Mercantile Exchange, U.S. benchmark crude for December delivery slid $5.43, or 7.5%, to $66.75. That is down 55% from its record high of $147.27 in July.
Deputy Prime Minister Igor Sechin, Russia's top energy official, told reporters the Kremlin was considering setting up a reserve of crude that would be large enough to influence prices. Mr. El-Badri welcomed the idea, which he said could help to offset shortages on world markets.
Russian officials couldn't explain how that would work, though, and analysts said such a stockpile would have to be vast to have any impact on the global market. Production from Russia's remote Siberian oil fields can't easily be stopped or ramped up in response to the market, while production from countries such as Saudi Arabia, the world's largest oil exporter, can be. That ability gives OPEC countries like Saudi Arabia more influence.
Russian oil output, which had grown for nearly a decade, has been roughly flat this year. It was expected to slump next year even before the global financial crisis and falling oil prices led companies to consider cutting investment. The Russian government, which depends on oil and natural gas for about half of its revenue, has been scrambling to reverse the decline.
"We're not planning to reduce production, that's not rational from the perspective of the government or the industry," said Valery Yazev, deputy speaker of Russia's parliament and one of the energy industry's most prominent advocates in government, in an interview.
Russia has earned an estimated $1 trillion as energy prices have surged in recent years, providing a huge boost to its economy. But Russia's Urals crude traded below $70 this week, just under the level at which the country's budget would swing into deficit if the price persisted for a full year.
In recent years, as the Kremlin has increasingly been accused of using its vast energy resources as a political tool, Moscow has cultivated closer ties with OPEC and its members. Last month, Mr. Sechin made a surprise visit to an OPEC meeting in Vienna to talk up cooperation. On Tuesday, the chief executive of Russian state gas giant OAO Gazprom was in Iran to announce the formation with Iran and Qatar of an alliance of gas producers. Together, the three countries control about 60% of world gas reserves; Iranian officials touted the group as a "gas OPEC."
The European Union criticized the move. But industry officials said the three are unlikely to be able to agree on approaches, let alone find a mechanism to influence gas prices, which vary from region to region and are often based on decades-long contracts.