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Press review: OPEC+ deepens oil output cut and is Russia-Belarus integration out of reach

Top stories in the Russian press on Friday, December 6

Izvestia: Moscow, Minsk cannot agree on integration issues

In the 20 years since the Treaty on the Creation of a Union State of Russia and Belarus was signed, most of the points of this megaproject have remained only on paper. Energy has been the most problematic area throughout these years, Izvestia pointed out. The inconsistency of the oil and gas roadmaps risks complicating the adoption of a new program document for the further establishment of the Union State, which the leaders of Russia and Belarus promised to sign this weekend to mark the 20th anniversary of the treaty. Experts interviewed by Izvestia believe that the chances of unifying efforts are extremely slim.

The last time the prime ministers of the two countries, Dmitry Medvedev and Sergey Rumas, attempted to agree on all the roadmaps was on November 19. However, in the seven hours of negotiations, the parties failed to find a consensus on 10 out of the 31 roadmaps.

It will not be easy to agree on oil and gas issues, Yaroslav Romanchuk, ex-presidential candidate of Belarus told Izvestia. The positions of the parties, according to him, are still irreconcilable. Alexander Lukashenko, President of Belarus, believes that first it is necessary to ensure equal managing conditions and a single energy market, and only then talk about certain supranational settings. In contrast, Russia takes the exact opposite approach. "The only thing that can be signed in Sochi is the next protocols of intent with words about friendship, fraternity and solidarity," Romanchuk noted.

One of the main stumbling blocks is the Russian tax maneuver in the oil sector, which could allegedly cost Minsk $10 bln over six years, and so Belarus insists on receiving $2 bln in subsidies for its refineries from Russia annually. Moscow dismisses talk of compensation, considering this measure an internal affair of Russia.

"The Union State should also have a single foreign policy. And Belarus, unfortunately, has recently demonstrated a discrepancy between its international position and Russia. For example, it still has not recognized Crimea’s reunification with Russia, or the independence of South Ossetia and Abkhazia," Senator Sergei Kalashnikov reiterated to Izvestia.


Kommersant: OPEC+ decides to rid market of excess oil

The biggest oil producers, members of the OPEC+ alliance, for the first time decided to tighten the deal on curtailing oil production. Russia and OPEC agreed on an additional limit to production by 500,000 barrels per day, which will begin in 2020, Kommersant wrote. New country quotas have not yet been determined, but the agreement of other OPEC+ members to allow Russia not to take into account gas condensate production in its quota gives the country some room for maneuver. According to analysts, Saudi Arabia needs to tighten its reduction the most for a successful IPO by Saudi Aramco. Nevertheless, they do not expect OPEC+ actions to lead to oil prices above $70 per barrel.

The total curtailment with regards to the level of October 2018 will increase to 1.7 mln bpd. OPEC+ has tightened the deal for the first time, which is currently set to expire in April 2020. At the same time, the monitoring committee suggested considering a further extension of the deal in March. Oil prices reacted to this decision with only a slight increase, since now OPEC+ players are exceeding their quotas by about 500,000 bpd, mainly due to Saudi Arabia. Now this "unofficial reduction" will be fixed in quotas.

For Russian oil companies, tightening the current quota of 228,000 bpd may pose a sharp change to their investment programs. Prior to this, the Russian oil industry expected a gradual withdrawal from the OPEC+ agreement in connection with the commissioning of new fields, Kommersant wrote.

The most active opponent of the OPEC+ deal was Rosneft, demanding benefits from the government for joining the agreement. A source in one of the companies told Kommersant that the decision on further cuts is "unprofitable" commercially, and the oil industry might have a new argument for demanding compensation from the state. At the same time, Kommersant’s sources are confident that Russia is unlikely to significantly reduce production, given the technological need to maintain it in the winter.

A certain loophole for Russia has been opened by the consent of other OPEC+ countries to exclude gas condensate production from the calculation of the quotas. If condensate is indeed excluded, this will allow companies to maintain plans for drilling volumes in Western Siberia, Daria Kozlova from Vygon Consulting told Kommersant.


Izvestia: Rift widening between US, Europe over Nord Stream 2

Berlin is not hiding its irritation with pressure from the White House, so the German Bundestag vowed to slap Washington with sanctions if the United States imposes restrictive measures against Nord Stream 2, Izvestia wrote. According to the newspaper, different European countries got into quarrels over the gas pipeline’s construction project. However, experts interviewed by Izvestia said that even amid tensions Germany would not easily give up American LNG.

Many European countries reacted very positively to the new gas pipeline. However, Washington has still not given up on efforts to thwart the Russian gas pipeline’s construction. A real trade war has broken out between the allies, the newspaper wrote. Trump introduced 25% import duties on steel and 10% on aluminum against European manufacturers, and the EU retaliated by imposing duties on 200 US goods. The conflict was resolved, but Trump was still able to impose his will and made Brussels promise to increase its purchases from the United States.

Thus, Berlin reacted rather harshly to the most recent media reports that the US is going to introduce restrictions against companies involved in the construction of the gas pipeline. However, Germany does not intend to completely abandon US liquefied gas. Germany, like the rest of the European Union, stands for diversification of energy supplies, leading researcher at the German Studies Center of the Institute of European Studies of the Russian Academy of Sciences Alexander Kamkin told the newspaper.

"It makes no sense to expect that Germany will buy Russian gas exclusively. Moreover, competitors are also on the alert. Alternative pipelines from Azerbaijan are being constructed, while offshore drilling is underway in Cyprus and the share of US LNG on the European market is growing, despite it being priced way higher than pipeline gas," the expert told Izvestia.

However, this fact, according to Kamkin, will not prevent the launch of the Nord Stream 2 gas pipeline. "Given the current political and economic climate, the Nord Stream 2 gas pipeline will be launched somewhere around the summer of 2020," he predicted.


Nezavisimaya Gazeta: Congress might present Russia with Christmas crackdown

The US Congress will vote on introducing a "sanctions bill from hell" against Russia on December 11, which was drafted last year. So, the reasons for its launch vary from the arrest of Ukrainian boats that have already returned to their ports, to the reaction of Russia’s authorities to the summer protests, as well as to the alleged meddling in US elections. According to Nezavisimaya Gazeta, the bill includes sanctions against Russian representatives, as well as restrictions against the shipbuilding industry, the export of liquefied natural gas (LNG), the cyber sector, banks and sovereign debt.

Expert at the Higher School of Economics Andrey Suzdaltsev told the newspaper, that so far the anti-Russian sanctions have not been very effective, because the US has few seasoned experts on Russia who could work out appropriate measures.

"The sanctions saga has been dragging on for a long time, but these restrictions have essentially not caused any damage because they do not impede current economic activity. The sanctions diminished prospects for the Russian economy, but they have not yet affected the current activities of Russian business," said Associate Professor of the Russian Academy of National Economy and Public Administration (RANEPA) Sergey Khestanov.

According to the professor, these new measures will most likely not affect current activities either. "So far, Russian oil and gas, the main sources of Russia’s export revenues, are indispensable at least for the EU," the expert said. According to him, this however does not exclude potential problems for individual companies, but these problems will not be too large on a general scale. What’s more important, Khestanov doubts that new sanctions will be adopted in a way that will seriously harm Western companies.


Nezavisimaya Gazeta: Persian Gulf may lose interest in Russia’s S-400s

A possible thaw in relations between Qatar and its Gulf neighbors is in the air since Saudi King Salman bin Abdulaziz Al Saud has officially invited Qatari Emir Tamim bin Hamad Al Thani to come to the summit of the Gulf Cooperation Council in Riyadh. According to Nezavisimaya Gazeta, experts consider this may be then end of the economic and political blockade of Qatar, which may affect the arms deals of the Gulf Arab monarchies with Russia.

The expert community assumes that the normalization of relations between Qatar, on the one hand, and Saudi Arabia, the UAE, Bahrain and Egypt, on the other, can lead to a decline in interest for Russia’s S-400s. Analyst with the Russian Council on Foreign Affairs Anton Mardasov told the newspaper that earlier conversations around Russian air defense systems from Qatar or its opponents could be just all talk. However, there is no definite forecast as to whether Doha will stop looking into acquiring Russian weapons.

"It is possible that statements of Qatar’s intention to acquire S-400 systems from Russia were motivated by a conflict with Saudi Arabia, since the air defense system radar could look at neighboring Saudi territory in depth, but this would mean an escalation," Mardasov said.

The expert considers something else as an important consequence of Saudi-Qatari normalization: "The intensity of Qatar’s contacts with Russia at the highest level could theoretically be reduced." Meanwhile, Riyadh’s official invitation to the Qatari emir, the analyst explains is an attempt to transform its image after the assassination of Saudi journalist Jamal Khashoggi.


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