September 14, 2018 / 5:30 PM / 5 days ago

Big Three oil states can offset fall in Iran supplies: Perry

MOSCOW (Reuters) - Saudi Arabia, the United States and Russia can between them raise global output in the next 18 months to compensate for falling oil supplies from Iran and elsewhere, U.S. Energy Secretary Rick Perry said on a visit to Moscow on Friday.

U.S. Energy Secretary Rick Perry talks during an interview with Reuters in Moscow, Russia, September 14, 2018. REUTERS/Dmitry Madorsky

U.S. sanctions on Iran’s oil exports, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere could push up crude prices, hurting consumers.

But Perry, in an interview with Reuters, said he felt comfortable about the outlook for global crude output, and for oil prices.

“I don’t foresee spikes,” Perry said, although he added there was always the potential for unforeseen events.

Some analysts have expressed concerns about Saudi Arabia’s long-term ability to significantly boost output.

But Perry said: “There’s a number of things going on in the kingdom that continue to give me a very positive feeling about their ability to maintain their level and even increase their level” of crude production.

He cited the prospect that Kuwait and Saudi Arabia would soon resolve a border dispute, unlocking access to an oil field in a contested area. “They are working toward a solution in the not too distant future,” he said.

On U.S. production, which has already been growing over the past few years, Perry said: “You look out 18 months, and I think you’ll see even a more substantial increase in the United States because of pipeline capacity being built out.”

Russia, meanwhile, was “working diligently” to deliver its oil output to the world market, Perry said.

GOOD CITIZEN

Perry was in Moscow for talks with his Russian counterpart, Energy Minister Alexander Novak.

Visits by senior U.S. officials are a rarity after relations between Moscow and Washington nosedived, first over the Ukraine crisis and later over allegations of Russian meddling in the U.S. presidential election.

The administration of U.S. President Donald Trump has imposed sanctions on Russia, and Perry said that, while he would rather not see any more, that was a real prospect.

“You avoid that by being a good citizen. You avoid that by obviously tending to this issue with Ukraine, you do this by not meddling in our elections, you do this by not engaging in activities that are considered to be uncivilized, for instance, the poisoning of the people in the UK,” Perry said.

“Russia has the opportunity to send a message that they are going to be good neighbors, they are going to be civilized in the way they deal with their neighbors. That has yet to be seen, from our perspective, in dealing with Ukraine.”

Russia’s conduct toward other countries would influence whether the United States was compelled to impose sanctions on the Russian-led Nord Stream 2 pipeline project.

The project will expand the capacity for pumping Russian gas to northern Europe. Trump has criticized it, saying it will increase European dependence on Russian energy.

Referring to an internationally-brokered roadmap for resolving a conflict in eastern Ukraine between Kiev and Russian-backed separatists, Perry said: “If Russia deals with the Minsk agreement in an appropriate way, there are some signals being sent to the rest of the European Union.”

“Until those signals get sent, the potential sanctions of Nordstream 2 are still very real ... I’ll suggest to you that the ball is in Russia’s court,” he said.

In the interview, Perry issued a message for the European Union, saying it needed to wean itself off its dependence on Russian energy supplies.

“If you’re a country in the European Union and you see how Ukraine has been treated by Russia, then (Russia) being the sole source or practically the sole source of gas to your country will give you a pause,” Perry told Reuters.

“And I think that’s an appropriate and rightful position to take. Have alternatives. Have competition. Have other pipelines,” he said. “So Europe by and large understand that they need multiple sources of energy and we agree with them.”

Additional reporting by Dmitry Madorsky, Dmitry Zhdannikov and Timothy Gardner; Editing by Edmund Blair

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