Russia appears to be all set and determined to rule the oil markets again. The rising giant is giving the cartel of Organization of Petroleum Exporting Countries (OPEC) tough competition and anxious moments. The battle between the two and the ensuing drama surrounding itwith all the economics, commerce, geopolitics, diplomacy that engulf a wealth like oilwill have great ramifications in the world economy and political scene.

When Russia agreed with OPEC to cut its oil exports by 1,50,000 barrels-a-day (b/d) last December, nobody including itself believed that it would seriously abide by the promise. The decision to curtail production in the first quarter of 2002 was a gesture of moral support and was an easy one because the coming winter meant that production would anyway fall. In exchange OPEC members pledged to trim their collective production by 1.5 million barrels a day and to lower their exports by 462,500 b/d starting January 2002. Under pressure from OPEC, Norway and Mexico also agreed to cut 200,000 b/d and 100,000 b/d respectively. These cuts were made to sustain prices in the target range of $22 to $28 per barrel.

The Russians found ways to circumvent the promise with the Russian Government happily looking away. The export reduction pertains to oil that is supplied through pipelines outside the former Soviet Union so the Russians increased shipments through ports and rail, thereby actually raising total exports. The Russian Government's decision to reduce export tariff on fuel oil under new customs rules and to completely lift its quotas on fuel oil exports fueled more exports. Moreover, Russian companies diverted crude oil that could not be exported to domestic refineries and refineries in Belarussia and Ukraine and exports of refined products to western and Central Europe increased. Russia's oil output in 2001 increased by 500,000 barrels a day. According to Petroleum Argus, a reputed British information agency providing information on oil and gas markets, exports outside the former Soviet Union grew seven percent last year. For 2002 as a whole, Russia's net oil exports are projected to increase to 5.01 million b/d.

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