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Interested Countries Must Unite to Balance the Oil Price Level

The arrangement between Saudi Arabia and Russia to freeze the volume of oil production at the level of January, 2016 can improve the situation in the oil market and strengthen the price policy.

However, this is a short-term deal and does not solve the problem as a whole, said Andrey Baklanov, Ambassador Extraordinary and Plenipotentiary, Deputy Chairman of the Board of the Association of Russian Diplomats.

"I think that such fragmented arrangements are useful, but they do not solve the problem. To do this, you must pull together the countries which are interested to balance the price level ", - the expert said in an interview with valdaiclub.com.

According to Baklanov, Russia-Saudi oil cooperation is not an utopia, but also not a reality, it is simply a necessity. "The problem should be resolved, but not in a way as happened in recent years - from time to time and without proper efficiency. It is necessary to build relationships on a regular basis, and this must be done by experts in the area of oil pricing. Now the negotiations on this level do not happen "-, the expert said.

Baklanov said that in September 2003 the Russian Federation and Saudi Arabia signed an agreement on cooperation in oil policy, in the presence of President Putin and Crown Prince Abdullah. The aim was to achieve stability of the world oil market and maintain an acceptable price corridor.

Since then, the world watched the two quiet periods when the price level roughly corresponded to objective conditions. However, according to Baklanov, that was not the result of "intelligent oil-producing countries approaches, but it just simply happened."

To fix the price level in the long term, according to the expert, is quite possible. To do this, you must work on the establishment of an association, which would include all countries - oil-producing and oil-importing, and major players in the area of price transactions. Now "there is a sluggish process, and the result is extremely negative."

"Because of the fact that serious work in this direction is not carried out, we see the overvaluation (obviously speculative) of the oil price, or its undervaluation. And this happens despite the fact that the optimal price corridor today is 52-59 dollars, " - Baklanov said.

"We cannot allow any overheating or reduced price. We must constantly continue a dialogue, to negotiate and meet each other in different platforms proposed for discussion. I still don't see how it works ", - concluded the expert.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.