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Chavez proposes forming separate oil cartel

Russian-Venezuelan "techno-military" cooperation

Relations between members of the Organization of Petroleum Exporting Countries (OPEC) appear to be suffering as a result of the Arab Spring and unilateral decisions to increase production taken by members of the Gulf Cooperation Council.

This week Venezuelan president Hugo Chavez told visiting Russian vice minister Igor Sechin and energy minister Sergei Shmatko that he had “a modest proposition, one of those ideas that one throws out:  to discuss how we can create a new organization for this new world that is surging forth.  An organization of petroleum giants, which don’t number more than four or five, of which Russia and Venezuela are two.  It’s something to talk about”, he said.

Chavez’ declarations come as Iraq and other Persian Gulf OPEC member countries have granted diplomatic recognition to Libya’s National Transition Council government, which overthrew Chavez ally Muammar Gaddafi.

The chief of state added that OPEC would not be affected in any way.

“OPEC is an organization with a history, a profile, a trajectory.  It has and will continue to play an important role of internal equilibrium in historic times like we are living:  the invasion of Iraq, the invasion of Libya, conflicts between member countries.”

Following Chavez’ suggestion his Minister of Petroleum and Energy Rafael Ramirez also referred to OPEC, in the context of production quotas.   “Countries that produced additional volumes need to reduce them from the market before we go back to talking about anything else”, he said.  “There are people who have been led astray from OPEC; they have to return to the system of disciplined production.”

In OPEC’s last meeting this June, US ally Saudi Arabia led a group proposing to increase production to stabilize oil prices and offset shortages resulting from the revolution in Libya.  Venezuela and Iran led the resistance to that idea. Although the quotas were not changed, the Saudis and United Arab Emirates unilaterally hiked production to help lower prices, which approached 120 dollars per barrel in April.

During the visit it was announced that joint Russian-Venezuelan company Petromiranda would begin early production of 50,000 barrels daily by May of 2012, from wells being drilled by December of this year.  The parties signed an agreement to speed formation of the company, which is expected to swell volume to 450,000 barrels daily, according to Ramirez.  He said that the partners are investing US$525 million financed by bilateral Russian-Venezuelan institutions or other financial entities.

Chavez also announced an agreement extending credit worth four billion dollars to support military technical cooperation between Russia and Venezuela.  “That’s two billion next year and two billion for 2013”, he said from Miraflores Palace.