“It was forced on them. They don’t have the ability to keep up the production volumes because they don’t have access to necessary technology.” So said the EU’s energy commissioner Kadri Simson in response to Russia’s announcement that it would cut oil production in March by 500,000 barrels per day (bpd). But is this the real reason?
National oil industries can collapse for various non-technical reasons: war, sanctions, political breakdown. History offers at least four solid examples that might compare to Russia’s current situation, excluding physical destruction such as that in Kuwait in 1990-91.
Iran’s production reached its all-time high of slightly more than 6 million bpd in 1974. The revolution of 1978-79, strikes by oil workers and the invasion by Saddam Hussein’s Iraq in 1980 brought it crashing down to 1.3 million bpd in 1981.
Post-war recovery was hampered by American sanctions and unattractive conditions for foreign investment, then by US presidents Obama and Trump’s moves to cut off most of the country’s oil exports. Nevertheless, despite ageing fields and infrastructure, and waves of civil unrest, production still hovers around 3.6 million bpd.
Iraq was also badly affected by wars. Production in the post-nationalisation glory years of the 1970s peaked at almost 3.7 million bpd in 1979. During the Iran-Iraq War, exports via the Gulf were cut by Iranian military action and Iran’s ally Syria closed the pipeline through its territory. Output dwindled, partly recovered when a pipeline via Turkey was opened, then crashed to fewer than 300,000 bpd because of UN sanctions following the 1990 invasion of Kuwait.
The oil-for-food programme in the 1990s allowed for some recovery but the industry was starved of funds and equipment, then battered by looting and political chaos following the 2003 US-led invasion. Only after 2009 and the advent of major foreign investment could the situation improve, as Iraq passed its previous high in 2015 and reached a record of nearly 4.8 million bpd in 2019 before Covid struck. Today’s Iraqi oil industry is almost entirely a post-2009 creation.
Venezuela is the most extraordinary case: without war or, until 2019, strict sanctions, it sabotaged itself. In the late 1990s, it challenged Saudi Arabia and its Opec colleagues with plans for rapid production growth, contributing to a price collapse. President Hugo Chavez, elected in December 1998, reinstated full co-operation with Opec. He fired 17,000 oil workers after a general strike of 2002-03 aimed at unseating him, ruining Petroleos de Venezuela, once an admired national company.
Expropriation of foreign projects, lack of investment, emigration, corruption, theft and sabotage decimated Venezuela’s petroleum industry under Mr Chavez and his hand-picked successor Nicolas Maduro. US sanctions in early 2019, following another disputed presidential election, were the final straw. Record production in 1998 of more than 3.4 million bpd slumped to just 640,000 bpd in 2020.
Despite sanctions waivers to allow US companies to resume some operations, and greater openness to foreign involvement after an apparent change of heart in the Maduro administration, it seems unlikely that Venezuela’s rusting industry, based on heavy, high-carbon oil, will ever truly recover.
Russia itself is the final example. As Thane Gustafson’s prescient book Crisis Amid Plenty recounts, the Soviet oil industry of the late 1980s, when Russian output peaked at 11.4 million bpd, was already struggling with inefficiency, outdated technology and depleted fields.
During the post-Soviet time of troubles in the 1990s, the integrated business was broken up and most passed into the hands of “oligarchs”, who fought messy corporate battles to grab more. Prices were low, investment and tax payments minimal.
When oil prices recovered — to the great good fortune of Vladimir Putin, who had become President in 2000 — the cleverest of the oligarchs had reinvented themselves as market-friendly entrepreneurs. Dismal output of merely 6 million bpd in the nadir of 1996 turned around as modern technology was applied to the heartland of West Siberia.
Then Mr Putin tamed or exiled those who threatened him politically, and reunited most of the oil and gas business under the state giants Rosneft and Gazprom, run by loyalists. Growth continued, but much more slowly, passing the Soviet-era record in 2018 and topping out at 11.7 million bpd in 2019.
These past cases tell us that temporary production drops, even physical destruction, can be reversed; the long-lasting degradation of a nation’s petroleum industry comes from the loss of institutional capability, expertise and access to markets.
How does this apply to today’s Russia? Its future expansion is reliant on unconventional resources and a new generation of fields in the Arctic offshore and remote East Siberia, requiring vast investment in basic infrastructure. That will not be forthcoming as long as the war in Ukraine continues, European sanctions close off Russia’s best market and international expertise is restricted. In July, Swiss-based trader Trafigura exited its investment in Vostok Oil, an $85 billion, 2 million bpd East Siberian project which was to have driven the next phase of Russian output growth.
Nevertheless, Russian drilling was at a decade’s high last year. Capable companies and people remain active; the country has been producing below capacity since April 2020 because of compliance with the Opec agreement. There is no sign of an imminent decline in output and Ms Simson’s characterisation of the situation is misleading.
If Russia does indeed cut production, it is because it can sell neither the crude nor the associated refined products, in the face of the EU’s ban and difficulty accessing enough tankers for the long voyages to India and China.
The Kremlin will attempt to extract more cash from the industry to fund its war — as it has already done by raising the price benchmark used for taxation and receiving a large special dividend from Gazprom. That and sanctions will eat away at the productive base over time.
A slow decline in Russian output is favourable for its Opec partners, who can gain market share. It also aligns with European and American intent, to limit Russian government revenue, avoid a price spike and, in the longer term, to transition to a lower-carbon, less oil-intensive economy.
As Mr Gustafson’s sequel Klimat argued in 2021, Russia’s petroleum business already faced swelling challenges in the 2030s and beyond. It will not collapse like 1990s Iraq or 2000s Venezuela, or even its own earlier incarnation. But the confrontation with the West has dramatically accelerated its reckoning with a difficult destiny.
Robin M. Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
FA Cup fifth round draw
Sheffield Wednesday v Manchester City
Reading/Cardiff City v Sheffield United
Chelsea v Shrewsbury Town/Liverpool
West Bromwich Albion v Newcastle United/Oxford United
Leicester City v Coventry City/Birmingham City
Northampton Town/Derby County v Manchester United
Southampton/Tottenham Hotspur v Norwich City
Portsmouth v Arsenal
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
Key recommendations
- Fewer criminals put behind bars and more to serve sentences in the community, with short sentences scrapped and many inmates released earlier.
- Greater use of curfews and exclusion zones to deliver tougher supervision than ever on criminals.
- Explore wider powers for judges to punish offenders by blocking them from attending football matches, banning them from driving or travelling abroad through an expansion of ‘ancillary orders’.
- More Intensive Supervision Courts to tackle the root causes of crime such as alcohol and drug abuse – forcing repeat offenders to take part in tough treatment programmes or face prison.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The struggle is on for active managers
David Einhorn closed out 2018 with his biggest annual loss ever for the 22-year-old Greenlight Capital.
The firm’s main hedge fund fell 9 per cent in December, extending this year’s decline to 34 percent, according to an investor update viewed by Bloomberg.
Greenlight posted some of the industry’s best returns in its early years, but has stumbled since losing more than 20 per cent in 2015.
Other value-investing managers have also struggled, as a decade of historically low interest rates and the rise of passive investing and quant trading pushed growth stocks past their inexpensive brethren. Three Bays Capital and SPO Partners & Co., which sought to make wagers on undervalued stocks, closed in 2018. Mr Einhorn has repeatedly expressed his frustration with the poor performance this year, while remaining steadfast in his commitment to value investing.
Greenlight, which posted gains only in May and October, underperformed both the broader market and its peers in 2018. The S&P 500 Index dropped 4.4 per cent, including dividends, while the HFRX Global Hedge Fund Index, an early indicator of industry performance, fell 7 per cent through December. 28.
At the start of the year, Greenlight managed $6.3 billion in assets, according to a regulatory filing. By May, the firm was down to $5.5bn.
Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
Terror attacks in Paris, November 13, 2015
- At 9.16pm, three suicide attackers killed one person outside the Atade de France during a foootball match between France and Germany
- At 9.25pm, three attackers opened fire on restaurants and cafes over 20 minutes, killing 39 people
- Shortly after 9.40pm, three other attackers launched a three-hour raid on the Bataclan, in which 1,500 people had gathered to watch a rock concert. In total, 90 people were killed
- Salah Abdeslam, the only survivor of the terrorists, did not directly participate in the attacks, thought to be due to a technical glitch in his suicide vest
- He fled to Belgium and was involved in attacks on Brussels in March 2016. He is serving a life sentence in France
Six large-scale objects on show
- Concrete wall and windows from the now demolished Robin Hood Gardens housing estate in Poplar
- The 17th Century Agra Colonnade, from the bathhouse of the fort of Agra in India
- A stagecloth for The Ballet Russes that is 10m high – the largest Picasso in the world
- Frank Lloyd Wright’s 1930s Kaufmann Office
- A full-scale Frankfurt Kitchen designed by Margarete Schütte-Lihotzky, which transformed kitchen design in the 20th century
- Torrijos Palace dome
UAE currency: the story behind the money in your pockets
Calls
Directed by: Fede Alvarez
Starring: Pedro Pascal, Karen Gillian, Aaron Taylor-Johnson
4/5
Results
Women finals: 48kg - Urantsetseg Munkhbat (MGL) bt Distria Krasniqi (KOS); 52kg - Odette Guiffrida (ITA) bt Majlinda Kelmendi (KOS); 57kg - Nora Gjakova (KOS) bt Anastasiia Konkina (Rus)
Men’s finals: 60kg - Amiran Papinashvili (GEO) bt Francisco Garrigos (ESP); 66kg - Vazha Margvelashvili (Geo) bt Yerlan Serikzhanov (KAZ)
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
What is Folia?
Prince Khaled bin Alwaleed bin Talal's new plant-based menu will launch at Four Seasons hotels in Dubai this November. A desire to cater to people looking for clean, healthy meals beyond green salad is what inspired Prince Khaled and American celebrity chef Matthew Kenney to create Folia. The word means "from the leaves" in Latin, and the exclusive menu offers fine plant-based cuisine across Four Seasons properties in Los Angeles, Bahrain and, soon, Dubai.
Kenney specialises in vegan cuisine and is the founder of Plant Food Wine and 20 other restaurants worldwide. "I’ve always appreciated Matthew’s work," says the Saudi royal. "He has a singular culinary talent and his approach to plant-based dining is prescient and unrivalled. I was a fan of his long before we established our professional relationship."
Folia first launched at The Four Seasons Hotel Los Angeles at Beverly Hills in July 2018. It is available at the poolside Cabana Restaurant and for in-room dining across the property, as well as in its private event space. The food is vibrant and colourful, full of fresh dishes such as the hearts of palm ceviche with California fruit, vegetables and edible flowers; green hearb tacos filled with roasted squash and king oyster barbacoa; and a savoury coconut cream pie with macadamia crust.
In March 2019, the Folia menu reached Gulf shores, as it was introduced at the Four Seasons Hotel Bahrain Bay, where it is served at the Bay View Lounge. Next, on Tuesday, November 1 – also known as World Vegan Day – it will come to the UAE, to the Four Seasons Resort Dubai at Jumeirah Beach and the Four Seasons DIFC, both properties Prince Khaled has spent "considerable time at and love".
There are also plans to take Folia to several more locations throughout the Middle East and Europe.
While health-conscious diners will be attracted to the concept, Prince Khaled is careful to stress Folia is "not meant for a specific subset of customers. It is meant for everyone who wants a culinary experience without the negative impact that eating out so often comes with."
The Africa Institute 101
Housed on the same site as the original Africa Hall, which first hosted an Arab-African Symposium in 1976, the newly renovated building will be home to a think tank and postgraduate studies hub (it will offer master’s and PhD programmes). The centre will focus on both the historical and contemporary links between Africa and the Gulf, and will serve as a meeting place for conferences, symposia, lectures, film screenings, plays, musical performances and more. In fact, today it is hosting a symposium – 5-plus-1: Rethinking Abstraction that will look at the six decades of Frank Bowling’s career, as well as those of his contemporaries that invested social, cultural and personal meaning into abstraction.
Our Time Has Come
Alyssa Ayres, Oxford University Press
UAE currency: the story behind the money in your pockets
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
South Africa v India schedule
Tests: 1st Test Jan 5-9, Cape Town; 2nd Test Jan 13-17, Centurion; 3rd Test Jan 24-28, Johannesburg
ODIs: 1st ODI Feb 1, Durban; 2nd ODI Feb 4, Centurion; 3rd ODI Feb 7, Cape Town; 4th ODI Feb 10, Johannesburg; 5th ODI Feb 13, Port Elizabeth; 6th ODI Feb 16, Centurion
T20Is: 1st T20I Feb 18, Johannesburg; 2nd T20I Feb 21, Centurion; 3rd T20I Feb 24, Cape Town
FIXTURES
Saturday
5.30pm: Shabab Al Ahli v Al Wahda
5.30pm: Khorfakkan v Baniyas
8.15pm: Hatta v Ajman
8.15pm: Sharjah v Al Ain
Sunday
5.30pm: Kalba v Al Jazira
5.30pm: Fujairah v Al Dhafra
8.15pm: Al Nasr v Al Wasl
New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
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MATCH INFO
Crawley Town 3 (Tsaroulla 50', Nadesan 53', Tunnicliffe 70')
Leeds United 0
