(MENAFN- Arab Times) MONTEVIDEO Dec 4 (AFP): Not all oil giants are created equal as struggling Venezuela Nigeria Iran and Russia are painfully aware in the wake of OPEC's divisive decision to maintain production levels. Last week's decision to keep output at 30 million barrels a day has sent oil prices tumbling to five-year lows and split the 12-country cartel and other major producers between haves and have-nots. While well-heeled OPEC members are playing a long game to protect their market share in the face of a US shale oil onslaught their poor cousins are desperate for prices to rise so they can balance their books and salvage their teetering economies.
Unlike the Gulf states that rejected turning down the taps these countries generally do not have sovereign wealth funds to smooth over price fluctuations and have built their government budgets around a price scenario that is now radically out of sync with reality. OPEC's decision 'increases the chance of unrest in member countries without sufficient financial reserves to weather the price storm' said James Williams an energy economist at consultancy WRTG Economics. Many of these countries need prices of more than $100 a barrel for their national budgets to break even. But crude prices are currently hovering around $70 a barrel in New York and London. The pain is especially acute for Venezuela. The South American country holds the world's largest proven crude reserves but is the most fragile of the oil giants. On Friday President Nicolas Maduro's government announced painful budget cuts in the aftermath of the OPEC decision. 'This is clearly a disaster for Venezuela with currency reserves too low to weather anything below $90 per barrel for more than a few months' said Williams. Venezuela relies overwhelmingly on oil revenues which account for 96 percent of its foreign reserves and the slide in prices is bad news for a country that was already struggling to balance its books. 'The fall in oil prices pushes Venezuela even closer to default. Given that the government has nothing in the way of savings from the oil price boom of the past decade the loss of oil revenues will wipe out whatever foreign currency that the government has' said David Rees an analyst at Capital Economics. The oil price pain could rekindle the violent protests that gripped the country in the first half of the year analysts warned. 'Venezuela is the weakest link in the chain. The likelihood of civil unrest in the country in 2015 is increasing' said Oliver Jacob analyst at Petromatrix. Nigeria whose oil wealth has made it Africa's largest economy is also stuck in a predicament. 'The government has taken some panicky measures including massive devaluation of the naira' a tool also used in Venezuela said Peter Ozo-Eson secretary general of the Nigeria Labour Congress. 'The lesson for oil producers is that it is unwise to rely on a single commodity for survival' said Nigerian economist Abolaji Oladimej Odumesi. Iran has begun following that advice increasing non-oil exports including petrochemical products and natural gas. 'The budget is less and less dependent on oil' said Saeed Leylaz one of the country's top economists. 'The country could even withstand $75 a barrel.' But other analysts say double dependence on oil and petrochemicals will keep the country at the mercy of crude prices. The Iranian government has announced a tax increase and austeritydriven monetary policy for 2015. It also appears to have asked for a bailout from China which recently announced it was doubling investment in Iranian energy. Venezuela is trying the same strategy. Officials announced Friday that the Chinese economy minister would visit Venezuela to deepen economic and financial agreements to compensate for a lack of earnings due to low oil revenues. In non-OPEC member Russia which relies on oil for half its revenues the ruble has accelerated its decline losing more than 40 percent against the euro this year and more than 60 percent against the dollar. The government wants to slash oil exports by five million tons to prop up prices.
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