Whenever there is a surplus production capacity made available, most of the oil-producing countries tend to increase their production in the event of rising oil prices or in the case where these countries are anticipating a future increase in these prices. The aim of such a policy is very clear, and is to achieve the highest possible oil revenues through exploiting the opportunities presenting themselves in this regard. In fact, this is exactly what is taking place at the moment in the Russian Federation, according to information and studies released by oil companies operating in the country, in addition to those released by the relevant ministries in Moscow. Hence, according to the forecasts of the Russian Ministry of Economy, the average price of the exported Russian oil (Ural oil) will increase to an annual average of approximately 65 dollars per barrel, compared to about 61 dollars in 2009. This is while the ministry also forecasted an increase in the price of its exported crudes to about 71 dollars per barrel by 2012. Despite the fact that the policy of increasing production at the time of rising prices is profitable for certain countries, the results, if this policy continues for a long time without any coordination with the rest of the oil-producing countries, may prove to be negative for these countries, and to the rest of the producing countries. This is because this policy increases the ratio of supply to demand which will ultimately drop prices far below acceptable levels. Moreover, this policy, if exaggerated, might lead to a price war. Russia is considered to be one of the major oil-producing countries. The volume of its reserves, for instance, is estimated at 80 billion barrels of crude oil, compared to Saudi crude reserves which are estimated to be at 264 billion barrels, while the Iranian reserves stand at 137 billion barrels, and the Iraqi reserve at 115 billion barrels. And when it comes to the question of Russian oil production in recent years, the latter had reached its peak near the end of Soviet era, when it hit 12 million barrels per day. Later on in the early nineties, production fell to its lowest levels, as chaos prevailed in the Russian energy sector, and not unlike all other economic sectors in the country. However, production started to rise gradually again since the late nineties, and attained the level of about 6.2 million barrels per day in 1998, and has since been on the rise. For a few months in 2009 in fact, production rose to around 10 million barrels per day. This is while forecasts are currently indicating that production will stabilize at a high level in 2012, as the Ministry of Economy is expecting production levels to rise over the current year to about 9.9 million barrels, or in other words, an increase of 140 thousand barrels per day from the levels of 2009, which represents a 1.4 percent increase. Furthermore, Transneft, the Russian company responsible for the national oil pipeline grid, estimated that the annual production level would reach 11.1 million barrels per day after 2012. It should be mentioned here that the current production levels exceed the production level of any OPEC member states. While some of the latter do indeed possess the capacity to accommodate additional production, they do not operate at full capacity in order to maintain an appropriate price level. Meanwhile, Russia will be able to further increase production owing to its new oil fields in East, South and West Siberia, in addition to increasing the volume of its exports after the completion of the construction of the new port at Kuzmino, in the east of the country, and which overlooks the Pacific Ocean. This port will be able to serve the U.S market, in addition to serving ever expanding Asian market. But despite this growth in production and exportation capacities, there are still some outstanding problems dating back to the Soviet era, and which direly need to be resolved between Russia and its former allies in the Warsaw Pact. Following the price dispute which led to the suspension of natural gas supplies to Ukraine in recent years, for instance, a new dispute erupted again this year, but this time between Russia and Belarus over the prices of crude oil. This led to further tensions, something that raised the concerns of Belarus and other European countries about the possibility of a disruption in Russian oil supplies, especially to Germany and Poland, since these two countries receive a fraction of their oil imports from Russia through Belarus. The Russian oil supplies to two refineries in Belarus were hence suspended for a short period of time. But following the bitter dispute over the natural gas supplies to Ukraine and other European countries in recent years, and the angry reactions by the European Union, Moscow has this time decided to deal with the crisis in wiser manner, and decided not to suspend crude oil supplies in widespread or lasting manner, given the financial and geopolitical damages this may incur. It is noteworthy that a delegation from Belarus is currently negotiating with the relevant authorities in Moscow regarding this particular issue. The main dispute between the two parties lies in the fact that Russia is seeking to impose higher taxes on the crude oil going to exportation refineries, while Belarus is rejecting such a bid. But in spite of the difficulty inherent to these negotiations, and the low probability of arriving at a final solution to this problem at present, supplies are not expected to halt. *. Mr. Khadduri is an energy expert
