Statement by OPEC Secretary General at the 16th Annual Meeting of the Valdai Discussion Club

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 16th Annual Meeting of the Valdai Discussion Club, Special session on energy- “World Energy Markets: How to Avoid Instability and Ensure a Balance of Interests”, 30 September 2019, Sochi, the Russian Federation.

Ladies and gentlemen,

Dobh-reyh dehyn

It is a great pleasure to be here at the 16^th Annual Meeting of the Valdai Discussion Club, in the great city of Sochi. I would like to sincerely thank the Valdai Club for inviting me to speak and my friend HE Alexander Novak, who insisted that I attend. I would also like to commend all involved who have succeeded in making the Valdai Conference one of the leading international events in the world; a must-attend event in everyone’s calendar.

When I consider today’s distinguished line-up of speakers and, indeed, all of the prestigious contributors in the years since the Valdai Discussion Club was established in 2004, I am humbled and honoured to be amongst them.

On a personal note, I am a keen fan of all sports and, of course, Sochi is synonymous with prominent sporting events. I recall watching with rapt attention the Winter Olympics in 2014 and several of the football World Cup games in 2018. Yesterday, we watched together the Formula One World Championship at the Sochi Autodrom, already the sixth one held here.

More importantly, when I spoke to anybody who attended the Olympics, the World Cup games or other international events in Sochi; they all unanimously spoke about the same thing: the gracious hospitality and warm welcome they received from the Russian people.

And as someone who has been fortunate enough to be a regular visitor of this great country, such reviews came as no surprise to me!

We are currently in the midst of an historic era for OPEC-Russian relations. Our partnership has evolved into a permanent, transformative force-for-good in the energy market; one that has had a profoundly positive effect on the industry and the global economy.

What has been the secret behind this success? Well, the answer to that can be encapsulated by the famous saying of the legendary Russian military leader, Alexander Suvorov:

“Sincerity in relations, truth in communication  ̶  that is friendship.”

The OPEC-Russian relationship is one based on friendship and mutual respect. At OPEC, we have tremendous respect for the Russian Federation; its status as one of the top producers of oil; the important leadership role it plays in international affairs and the enormous contribution generations of Russian scientists, artists, writers, musicians and poets have made to shaping human civilization.

This respect obviously applies to how we at OPEC view Russia’s leaders. I am referring of course to the President of this great country: HE Vladimir Putin. Our Organization has been infinitely enriched from our association and cooperation with President Putin.

The ‘Declaration of Cooperation’ between OPEC Member Countries and 10 non-OPEC producing countries, led by Russia, which came into force on 1 January 2017, resuscitated the fortunes of the global oil industry. President Putin has been one of the key architects and authors of making this endeavour a success. A crucial milestone which set in motion the chain of events which resulted in the “Declaration of Cooperation,’ was the “breaking of the ice” meeting that President Putin had with His Highness Crown Prince Mohammad Bin Salman of Saudi Arabia, on the margins of the 2016 G20 Hangzhou Summit, held on the 4^th and 5^th September, in China. This courageous step, particularly the warm rapport that President Putin developed with the Crown Prince, has played an immense role in our subsequent successes.

President Putin’s support was also critical in ensuring that the ‘Charter of Cooperation’ was signed on 2 July 2019, something I will return to later in my remarks.

We have been very fortunate that President Putin appointed one of the ablest minds in the industry as Russia’s Minister of Energy, a fine example of his impeccable judgement. I speak, of course, of HE Alexander Novak, who throughout this entire process, especially in his role as Alternate Chairman of the Joint Ministerial Monitoring Committee, and co-chair of the OPEC and Non-OPEC Ministerial Conference has been a pillar of sound decision making, knowledge and exceptionally good instincts.

As the productive partnership between OPEC and the Russian Federation has intensified over the last three years, HE Novak has conducted himself with the utmost professionalism, dignity and statesmanship. This has earned him the respect of his peers and admiration of all who have worked with him. He has been a tremendous asset to the entire ‘Declaration of Cooperation’ enterprise, not only through his leadership role within the non-OPEC partners but also in forging consensus among OPEC Member Countries. Indeed, he is widely viewed as the reliable and dependable bridge between OPEC and non-OPEC  ̶  an ‘umbilical cord’ binding this great initiative.

I have spoken at length about this friendship between OPEC and Russia because I believe it is the answer to the question posed in the title of this session: “How to avoid instability and ensure a balance of interests?”

The challenges which this industry faces are inherently complex. No single stakeholder possesses all of the answers or, indeed, knows all of the questions. It is only through working together that we can hope to surmount the obstacles we face.

We saw this in the severe downturn which beset the industry between 2014 and 2016. The collapse in commodity prices pushed many developing countries to the verge of recession. Our industry was in dire straits. The oil market went into sharp disequilibrium when a rampant world supply surge of 5.5 mb/d significantly overtook the oil demand increase of 4.1 mb/d. By July 2016, OECD commercial stock overhang reached a record high of about 403 mb over the five-year industry average. The OPEC Reference Basket price fell by an extraordinary 80% between June 2014 and January 2016.

Nearly one trillion dollars in investments were either frozen or discontinued, and a record number of companies in our industry filed for bankruptcy. According to the consulting firm Graves & Co., almost half a million jobs were lost in the global oil and gas industry.

There were initial talks in Doha I (16 February 2016 among Venezuela, Saudi Arabia, Qatar, and The Russian Federation), and Doha II (17 April 2016 among all OPEC Member Countries except IR Iran, and Non-OPEC countries comprising of The Russian Federation, Azerbaijan, Bahrain, Kazakhstan, Oman, Mexico, and Trinidad and Tobago).

Russia and OPEC knew that in the face of this crisis, action must be taken. Hence, the ‘Declaration of Cooperation’ was signed on the 10^th December 2016. This action reversed the downturn and contributed to an improvement in the health of the global economy in 2017 and 2018.

Together, we embarked on a remarkable journey over the last three years; one which has served the interests of producers, consumers and the global economy. We decided to further build on this cooperation through the ‘Charter of Cooperation’ which was endorsed at the 6^th OPEC and non-OPEC Ministerial Meeting, on the 2^nd of July 2019.

The ‘Charter’ is a platform to facilitate dialogue among the Participating Countries, aiming to promote oil market stability, cooperation in technology and other areas, for the benefit of oil producers, consumers, investors and the global economy. It is a means of enabling the long-term use of oil as a key component in the evolving global energy mix, as well as improving the environmental and efficiency credentials of oil. The ‘Charter’ will promote strategies and technologies to advance the global oil industry.

Our 24 participating countries of the DoC have chosen the path of cooperation; the path of dialogue, the path of transparency and openness. The ‘Charter’ crystalizes these intentions and provides them with an overall framework.

The ‘Charter’ can steer us through challenges we may face in the future. This is especially apparent given the fact that our industry is often vulnerable to external shocks beyond the capacity of any one stakeholder to control: geopolitics; trade tensions; monetary policy; natural disasters and other factors. However, the ‘Charter of Cooperation’ is a sturdy ship, which can navigate these tempestuous waters.

Therefore, further and more intensified cooperation is the best prescription to treat volatility. For this reason, participation in the ‘Charter’ is voluntary and open to all producing countries. I would like to extend the hand of friendship to all 97 oil producing countries and invite them to join the ‘Charter of Cooperation’ as we seek to build a better world.

I also believe the ‘Charter of Cooperation’ reflects a trend in the energy sphere which is being mirrored in other developments in international politics. This June, the UN Secretary General’s Panel on Digital Cooperation, released a report entitled “The Age of Digital Interdependence.” It sought to advance global multi-stakeholder dialogue on how we can work better together to realize the potential of digital technologies for advancing human well-being while mitigating the risks.

One very notable conclusion from the report was its forecast that multilateralism will increase in importance in the coming decades and this will be complemented by, something which the Committee termed ‘multi-stakeholderism.’

The ‘Charter of Cooperation’ embodies the concept of ‘multi-stakeholderism’ in the energy sphere. It encompasses broad and inclusive dialogue among producers, consumers, investors and other relevant counterparts in the global economy. The importance of such movements was articulated by the genius Russian author, Leo Tolstoy when he said,

“To be true friends, you need to be confident in each other.”

Recent events in the energy industry have underscored the fact that unexpected developments can have a dramatic impact on market fundamentals. This only underscores the need for continued cooperation. I would like to conclude by recalling the words of the Russian poet, Osip Mandelstam:

“Friendship is similar to treasure: you cannot draw more than you invested.”

On behalf of the entire OPEC family, I would like to thank the Russian Federation for our partnership and friendship.