Occasional Memo: Russia’s Mixed Feelings on Production Cut
For Mr. Putin, the deal with OPEC has lifted oil prices, liquidated a global oil glut, and paid dividends in the form of improved relations with Saudi Arabia, boosting Russia’s real and perceived influence in the Middle East. At this juncture, however, the benefits for Russia and thus Mr. Putin may be more fleeting. The expected deal to extend production cuts would further postpone significant Russian production capacity increases, especially for the influential Rosneft. On balance, we believe the deal will be extended, perhaps in phases, but Russian producers will increasingly resist compliance, leading to its eventual unraveling in 2018.