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Exclusive: Russia's Sechin raises pressure on Putin to end OPEC deal

Reuters  |  MOSCOW 

By and Astakhova

MOSCOW (Reuters) - Igor Sechin, of Russian giant and one of Vladimir Putin's closest allies, has written to the Russian saying Moscow's deal with OPEC to cut output is a strategic threat and plays into the hands of the

The letter did not say whether the agreement in place since 2017 between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by to cut output should be extended or not.

But according to two well-placed industry sources, the letter was a clear signal to other senior Russian officials involved in that Sechin wants the deal to come to an end.

There is no guarantee Putin will back Sechin's view because the sees the pact with OPEC as part of a much bigger puzzle involving dialogue with OPEC's over and other geopolitical issues.

"The letter is a threat to the deal extension. But anyway, Putin is the ultimate decision maker," one of the sources said.

has seen a copy of the letter with no date or header. A government source said it was sent at the end of December.

The so-called OPEC+ deal has helped double to more than $60 per barrel. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million barrels per day (bpd) until the end of June.

OPEC and its allies will meet on April 17-18 in to review the pact.

Should abandon the deal, it would result in a or force to carry most of the burden of cutting output to continue propping up global crude prices. has said it will not do this alone.

A price crash would deal a severe blow to U.S. as they operate fields where it is more expensive to extract oil, but would benefit the broader U.S. economy.

The United States, which overtook and as the world's biggest last year, is not participating in the output cuts.

U.S. is expected to rise to a record of more than 12 million bpd this year and climb to nearly 13 million bpd next year, the said on Tuesday.

'STRATEGIC THREAT'

Sechin has been the only Russian to consistently oppose the OPEC deal since the Kremlin endorsed the plan, saying it has allowed U.S. clout to rise significantly.

"The participants of the OPEC+ agreement have actually created a preferential advantage for the USA - that sees raising its own market share and the seizure of target markets as its primary task - which has become a strategic threat to Russia's development," the letter seen by says.

"The key strategic challenge which the domestic is faced with today is the further decline in Russia's market share, despite the availability of quality recoverable oil reserves, necessary infrastructure and personnel," it said.

Rosneft, Russia's largest oil producer, has been the main contributor to the country's share of cuts. has signalled that its may increase by 3 percent to 4.5 percent this year, subject to OPEC agreements.

Sechin, who worked closely with Putin in the mayor's office of in the 1990s, has long been sceptical of OPEC's ability to regulate and has opposed output cuts before.

Former Saudi said in his 2016 book "Out of the Desert" that Sechin told him in a meeting with several in in 2014 that Russia was not in a position to cut production.

In the book, Naimi wrote that he then gathered his papers and said, "so I think the meeting is over".

The first attempts to forge an OPEC-Russia output deal fell through that year. It took another two years of talks and Saudi Arabia replacing its to clinch a deal.

Sechin's letter also reflects growing tension within over the agreement.

The of Russia's sovereign wealth fund, Kirill Dmitriev, one of the main architects of Russia's agreement with OPEC, told in January that he saw no reason to abandon the pact, despite a steep rise in U.S. output.

Dmitriev said U.S. would decline only if prices fell to $40 per barrel but if that happened it would also cause major damage to the Russian economy, which relies on for more than half its budget revenues.

(Writing by Vladimir Soldatkin; editing by and David Clarke)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, February 08 2019. 21:57 IST
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