Will The Former Soviet Union Become Opec's Nemesis?

Within a few years' time, muses Adam E. Sieminski, energy analyst of County NatWest Securities Corp.'s Washington Analysis group, "it may be the former Soviet Union rather than Saudi Arabia that will be calling the tune on oil prices."

Sieminski notes that collapsing production in the Commonwealth of Independent States has played directly into OPEC's hands in the past year. In the first quarter, for example, output in the former U.S.S.R. was down about 1.3 million barrels a day from its year-earlier level, and exports were off 600,000 barrels. By contrast, opec production was up around 1 million barrels. "Without declining output in the former U.S.S.R.," says Sieminski, "oil prices would be 10% to 15% lower than they are today, or opec would be pumping less oil."

The catch is that OPEC can't depend on this much longer. With demand in the former U.S.S.R. also falling, exports are leveling off. And joint ventures between Western oil companies and former Soviet republics are being announced daily.

"The former U.S.S.R. remains the leading producer of oil," notes Sieminski, "and nobody really knows its potential productive capacity." Given the area's need for foreign exchange and the possible impact of Western knowhow on its lagging output, the world oil market could experience considerable downward price pressures in coming years.