Month: September 2015

Indo-Africa Summit: Revival of diplomatic legacy

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Nagesh K. Ojha

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If the short-term future lies with the Asia; long-term growth and development is bound to depend on the African continent. This potential region has the capacity to support the juggernaut of Asian progress. India, having this context into consideration, rightly made a move to extend cooperation toward Africa through the Indo-Africa Forum, a well thought-out program and diplomatic move, to establish better understanding with the second most populous region on this planet.

Since, April (4-8) 2008, when the first Summit was held in New Delhi, a lot of water has been flown not only from the Indian establishment but also through Africa. Both have covered a long journey from the financial crisis to the recent oil market upheavals in a short period of seven years. So, the next rotational Indo-Africa Forum Summit is going to be held from 26-30 October 2015 in New Delhi with a new hope. Though, it was scheduled for December 2014 but could not take place due to ‘Ebola’ outbreak in many West African countries or any undisclosed reasons. This is going to be the largest summit as representatives or heads of state of 54 nations are expected to attend the five days meet.

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The world’s second largest continent has got attention not only by India; China and many other countries are also having a focus to reach out in the region for various reasons. Recently, Commonwealth Games of 2022 has been awarded to Durban and that has become the first city in Africa to host a multi-sports event of this kind. The sports diplomacy of 71 countries of the Commonwealth Games Federation was only the extension of the reaching out programs of other continents where the first FIFA World Cup was held in Africa in 2010 and the Rugby World Cup in1995.

Therefore, India’s effort to reach out Africa is a timely and intelligent move to make future better secure and sound. This year in May, a visit of India’s External Affairs Minister to South Africa was only an additional step to show the significance of this region and focus in country’s diplomacy. Moreover, its extension was experienced in Ufa, where Prime Minister met with President Zuma of South Africa as well. The personal invitation given by the Prime Minister to President Zuma for the India-Africa Form Summit had again shown India’s interest in the region. Other heads of state are well aware of the fact that this would be not only an opportunity to discuss issues on a multilateral platform, it could be a new opening bilaterally as well in various fields; e.g. sustainable development, climate change, environment, poverty alleviation, energy efficiency and innovation or trade, professional and cultural education, science and technology, space, and various bilateral issues. In fact, from 14 nations (1st summit) and 15 countries (2nd summit) to more than fifty states is going to be the largest diplomatic outreach to the new government in India.

Martin-23230-Wiki

Courtesy: Martin23230/Wikipedia

Since, poverty driven many African nations do not find a proper voice for their grievances at various big multilateral forums, it could be a suitable place to table the subject in their own context. Though, it looks new stand to discuss individual problems and bilateral or multilateral issues, but in historical terms, it has the legacy of the Asia-Africa Conference that was held in Bandung, Indonesia in 1955. The leaders of 29 states mostly belonged to former colonies and two continents of Asia and Africa discussed their common concerns and focused on developing common and joint policies in world affairs. At the time ‘Nehru-Soekarno-Nasser,’ the trio led the conference. Leaders of the third world shared and discussed their similar problems to resist the pressure of regional, super, and major powers. Opposing colonialism and neo-colonialism, along with maintaining their own freedom from western powers and domination was the big concern. This led the opening of the Non-Aligned Movement, which paved the way for many poor and developing countries to cooperate on the basis of shared principles.

However, in the current situation, if India desires a permanent seat in the United Nations Security Council; the whole African continent is not being represented at the same fora. This issue could be a strong meeting point to cement the India-Africa Forum at the United Nations as well. There is no need to say that the ‘Vibrant Gujarat Summit’ and its established tradition are very helpful in dealing with many countries as far as this new government and especially Prime Minister Modi is concerned. Either the issue of asking support for India’s membership for the Nuclear Suppliers Group is concerned wherein South Africa is ready to support India on the issue or support for the permanent seat at the United Nation’s Security Council is concerned, the relation and the legacy of Gujarat forum have helped a lot to deal with various heads of state and reconstruct the foreign policy rules (?) to the Prime Minister Modi specifically. In other areas like defense and naval, joint exercises or joint defense productions may focus on security as well as foreign direct investments. Since, Africa is rich in natural resources; mining could be a special focus while focusing on Yoga could provide an opportunity to discuss holistic health for all. So, the third summit of the India-Africa Forum at the Indira Gandhi Stadium Complex in New Delhi would be a golden opportunity before the new government to extend cooperation with various African nations in different fields and to compete with other stakeholders in the potential and growing region.

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As far as financial and economic potential of this region is concerned it could well be understood by the growing strength of the Johannesburg Stock Exchange, which is the largest one in Africa and had the market capitalization value of US$ 1,007 billion in 2013. Since fluctuation oil and food prices have been a constant concern of Indian and African leaders, it could become a focal issue in this Summit to invest in the long term. However, India is more focused on the South African and alike markets where the market value has been projected to expand to roughly $1.4 trillion by 2020, though it was only $860 billion in 2008, when the first Summit was held in New Delhi. In fact, various nations of this growing continent have perceived ‘Make-in-India’ initiative to boost trade with India along with attracting huge Indian investments to the natural resource-rich continent. In this context, Ghana’s High Commissioner Samuel Panyin Yalley’s comment is pertinent to highlight that “Source raw material from Africa, Make in India and sell in Africa.” It is true that 54 countries of this continent have potential to offer big opportunities regarding raw material sourcing and final product marketing in a wider market of these nations. Africa has rightly been observed as a ‘New Frontier’ of trade for old as well as prospective investors. Agro-processing industry, BPO services, and many others have a decent opportunity to lure investment in more than fifty cities having a population of over one million. India rightly acknowledged Africa as its extended neighborhood and ready for economic engagements. It is interested in the region’s growth and integration with the world economy. India is looking for the extension of Duty-Free Tariff Preference (DETP) scheme to the least developed nations. The new government focuses on various issues to be taken at the forthcoming Summit; e.g. various capacity building programs to make human resource development more effective, infrastructure development, agriculture along with food processing industry, maritime security engagement to create an atmosphere of economic growth, investment and development. India has launched the ‘Make in India’ program to facilitate investment, protect intellectual property, foster innovation, and build high-class manufacturing infrastructure. It is necessary for the knowledge economy. India has five prime concerns to be addressed at the Summit; i.e. development, security, capacity building, maritime dimension, and a new global order. India is bound to strengthen and deepen the African strategic partnerships in a globalized world.

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1-Courtesy: Martin23230/Wikipedia 2-Photo: BBC 3-Courtesy: http://topwalls.net/ Handshake Photo Courtesy: http://indoafricatrade.com/

Oil Plunge: Russia is not the only affected party

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Nagesh K Ojha

royal-dutch-shell-plc-energy-strategy-2014 shell Photo: Shell

The logic of efficiency and technological advancement has been effectively waning from the American shale oil revolution narratives.

It was always a known fact in general that Russian oil industry easily could survive at $60 a barrel; however, it could be stretched up to $50 for some time as well, but it is not possible to grow beyond that point of market prices. Now, when the specter of low prices looming to go away far from that lower limit; it is certainly a great matter of concern for the Russian policy makers and industry personnel.

How to solve the price crisis, in the long run, is a major question before the Russian state, in general, and energy strategists in particular. Though, the state has made a U-turn on major private initiatives in the past; now again, it has started to promote the policy of inducting independent players in the industry. The First Deputy Minister of Energy Alexey Teksler recently said that the Russian Energy Strategy until 2035 provides independent gas producers an opportunity to export of pipeline gas. He said that “In terms of access of independent producers to export sales firstly we expected at the first stage to liberalize and develop the LNG production, and at the second stage – provide independent exporters access on a competitive basis to a single channel of pipeline gas export”. Furthermore, the state has the plan to push reforms regarding domestic gas prices, but only after 2020.

On the one hand, there is a bigger goal to provide access to many independent gas producers in the ‘Power of Siberia’ pipeline program; but the main objective is to find out independent gas producing companies that could sell their products to Gazprom. The competitive prices would be close to the export prices. Along with the Rosneft, a state oil company, independent gas producing companies may get access to export through the Power of Siberia pipeline up to 2020-2025. In fact, the state is interested in exploiting the efforts of independent producers to assist the Chinese supply especially from the oil and condensate oil fields.

  • “The Power of Siberia is a gas transportation system to deliver gas the Yakutsk and Irkutsk gas production centers in Siberia to Russia’s Far East and China. Its planned capacity is 61 billion cubic meters per year. The pipe’s total length is 3,968 km. The estimated construction cost is $21.3 bln. The pipeline route will run along the existing route of the Eastern Siberia – Pacific Ocean oil pipeline.”

It looks that independent producers may get an access due to prices; however, it has some long-term game plans as well. Current oil market prices do not suit the long-term Arctic programs and it is based only on the constant high prices. Lower prices have hit Shale industry in the U.S. and are ready to hit the Russian efforts in the Arctic.   Alexei Texler, the First Deputy Energy Minister, explained that “It is possible if the [oil] price is lower than the current level. It’s obvious that amid such prices the Arctic shelf development will be out of the question. We base all our plans on boosting output in the Arctic on projections that we’ve announced [of oil price growth to $80 per barrel within 5 years – TASS].”

Though, the Russia’s Energy Strategy 2035 gives hope for the oil export growth by 40-50 mln tonnes, it is difficult to maintain the promises at the current trends of oil prices. Neither OPEC itself nor Russia independently or even collectively has any plan to curb the current production levels. Lukoil CEO Vagit Alekperov said that “Russia cannot agree upon the oil production limits with the OPEC in view of specific process features of domestic oil production.” The real reason seems behind the continued high level of production that the Russians “have challenging fields; the majority of them have low production rates… It is impossible to stop wells because starting will require much more funds than stopping… In certain cases, it will simply be impossible to restart wells.”

However, CEO of Rosneft, Igor Sechin thinks that the market could be balanced by OPEC quota system and by sticking with it. He said the countries of the Organization of the Petroleum Exporting Countries (OPEC) are currently exceeding their own quotas by 1.5-2.5 mln barrels per day… A lot is still potentially connected to the OPEC losing its regulatory functions. I would like to note, that the OPEC countries currently exceed their own quotas (30 mln barrels per day) by the amount, according to various estimates, from 1.5 mln to 2.5 mln barrels per day. If the quota was met, according to our estimates and the OPEC Secretariat analysts, the global oil market would be balanced, which would undoubtedly have a positive impact on the oil price.”

Nowadays, Russian approach toward the oil market depends on its potential Asia-Pacific destinations. It could double the export to this market by 2035. The new document on the draft Energy Strategy 2035 says that “Growing demand on the soaring Asia-Pacific market creates an opportunity of increasing Russia’s oil export by 1.8-2.2 times and the natural gas export by 8-9 times in this destination by 2035…This opens new opportunities for the Russian fuel and energy sector but requires huge investments into development of the relevant energy transport infrastructure.” 

However, slowly, now the question of stabilizing the prices has become more pertinent. The experts of Bank of America Merrill Lynch expressed the hope that OPEC may try to keep the prices above $50 a barrel. In fact, weak demand in developing countries could compel the OPEC to react very soon. Experts believe that “Over the past few years, the breakeven points of OPEC countries budgets increased, while Saudi Arabia is able to finance its budget deficit at the expense of state reserves while Brent price stays in the range of $55-70 per barrel.”

However, while, the U.S. shale oil revolution is facing a fatal crisis in many cases; other than North Dakota, where breakeven costs varies from $20-$120; the average breakeven costs has been generally estimated between $40 – $60. From the beginning, OPEC-“which supplies about 40% of the world’s crude and has produced above its 30-million-barrel-a-day quota for the past 15 months”, has taken a tough stand to retain its market share along with the Saudi Arabia. In its recent report, the cartel has stated that “in North America, there are signs that U.S. production has started to respond to reduced investment and activity…Indeed, all eyes are on how quickly U.S. production falls.”  In fact, the drilling rig counts in America are continued on “its decline and dropping to 662, while the overall rig count is now down 864 units year on year.” It is not only the warning of the OPEC; Paris-based International Energy Agency (IEA) also has the opinion that American fracking industry would feel the heat of the sustained lower oil prices and “on the face of it, the Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, ‘inefficient’ production…U.S. oil production is likely to bear the brunt of an oil price decline that has already wiped half the value off,” the major international oil contract.” It expects only a little chance to rebound the production from shale. The logic of efficiency and technological advancement has been effectively vaning from the American shale oil revolution narratives. It is evident even to the IEA that “that OPEC’s market share strategy was bearing fruit.” It has shown the relevance of OPEC and how market could be dominated by the cartel or how it could affect any nascent oil and gas industry even in a powerful country. At this point of time, the Iranian oil has become crucial to the market supply that would certainly balance the shortage created by the low shale oil production. Libya should also not be ignored, which roughly has the capacity to produce 1.5 mb/d.

royal-dutch-shell-plc-energy-strategy-2014-Photo: Shell

  • Production outside the Organization of Petroleum Exporting Countries will fall by 500,000 barrels a day to 57.7 million in 2016. Shale oil production in the U.S. will drop by 385,000 barrels a day next year as a crude price below US$50 a barrel “slams brakes” on years of growth.(IEA)
  • For the global surplus to end by the fourth quarter of 2016, U.S. output will need to decline by 585,000 barrels a day, with other non-OPEC production falling by a further 220,000 barrels a day. (Goldman)

The most intimidating, scary, and alarming hints came from the Goldman Sachs Group Inc, which has the opinion that due to lower demands the prices may keep low for the next one and a half decade. However, according to the Goldman the long term crude prices could be at $50 a barrel. As far as the bottom line is concerned, “the global surplus of oil is bigger than it previously thought and that failure to reduce production fast enough may require prices to fall near US$20 a barrel to clear the glut. Prices may touch that level when stockpiles are filled to capacity, forcing producers in some areas to cut output.” This bottom-line would certainly complete a circle of fluctuating prices in the world oil market that would remind us 1947, 1972, and 1998.

http://www.macrotrends.net/1369/crude-oil-price-history-chart

http://www.tradingeconomics.com/commodity/brent-crude-oil

Author:

Having more than 15 years of professional teaching experience; the author holds a Master’s degree in History and M. Phil. in International Relations with a focus on ‘National Security Strategy of the United States and Russia’. He is pursuing Ph.D. in International Relations, where the focus is on the ’Energy Security’. His research mainly focuses on the ‘Role of Energy in the Foreign Policy Behavior of Major Oil and Gas Producing States’.

His current research is focused on the Russian and Eurasian energy markets and its geopolitics at the Center for Russian & Central Asian Studies, School of International Studies, at Jawaharlal Nehru University, New Delhi, India. He has presented many papers in various National and International conferences. Most recently, he presented his research paper “Russian Energy: Breaking the Ice” that was selected for the lX World Congress of the International Council for Central & East European Studies in Makuhari, Japan. Along with lectures and scholarly writings, he participates in Tv discussions and writes commentaries in newspapers and magazines as well.

2015 Global Peace Index

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Recent report of the Institute for Economics and Peace (IEP) on the Global Peace Index (2015) shows that the world is becoming increasingly divided with some countries enjoying unprecedented levels of peace and prosperity while others spiral further into violence and conflict.

Global Peace Index Results Map

“This is the ninth edition of the Global Peace Index (GPI), which ranks the nations of the world according to their level of peacefulness. The index is composed of 23 qualitative and quantitative indicators from highly respected sources and ranks 162 independent states, covering 99.6 per cent of the world’s population. The index gauges global peace using three broad themes: the level of safety and security in society, the extent of domestic and international conflict and the degree of militarisation.” -IEP.

Violence costs 13.4% of World GDP

Global Peace Index Results Map

http://static.visionofhumanity.org/sites/default/files/Global%20Peace%20Index%20Report%202015_0.pdf

http://www.economicsandpeace.org

Assad: I am ready to do everything that will benefit the Syrian people

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Interview

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  • Syrian President Bashar Assad told the “Rossiyskaya Gazeta”, RT, First Channel, “Russia 24”, NTV, “Russia Today”, TASS and “Interfax” on relations with Russia, about why he was dissatisfied with the West, how to fight terrorism and under what conditions he agreed to go.

What do you think of the idea to share power and work together with the opposition groups who continue to openly declare that the situation in Syria does not have a political solution without your immediate departure? Maybe the opposition made it clear that it is ready to work with the leaders of Syria? At the beginning of the crisis, many of these groups have demanded political reforms and transformations. Is it possible to implement these changes against the backdrop of the current situation, the ongoing war and the spread of terrorism in Syria?

Assad: As to the first part of the question – the political process, from the very beginning of the crisis were in favor of dialogue. There have been several rounds of vnutrisiriyskogo dialogue in Syria, Moscow, Geneva. In fact, the only way in which we have been successful – a “Moscow-2”.Not Geneva and “Moscow-1”. At the same time, this step has been incomplete. And this is natural, because the crisis is very ambitious. Unable to find a solution for a few hours or days. However, it is a step forward, and we are waiting for the “Moscow-3.” I believe that in parallel with the fight against terrorism must continue the dialogue between the Syrian political parties and formations, to arrive at a unanimous opinion on the future of our country. We must continue to move in this direction.

We must overcome the terrorism and not only LIH

As for the possibility of any progress in view of the spread of terrorism in Syria, Iraq and the region as a whole: as I said, we need to continue the dialogue in order to achieve consensus.However, if we want real progress is not possible until people die while continuing bloodshed and until people feel safe. For example, we were able to negotiate with the political parties and forces that influence the political and economic issues, science and health care, or any other industry.But how can we implement these agreements, if a priority issue for the Syrian citizen – safety?

Thus, we can reach a consensus, but we can not realize anything until you defeat terrorism in Syria. We must overcome the terrorism and not only LIH. I’m talking about terrorism, because there are many organizations, primarily LIH and “Dzhabhat An-Nusra” that the UN Security Council declared terrorist groups. This is the question of the political process. As for the separation of powers, we originally implemented it with part of the opposition, which has agreed to it. A few years ago they joined the government. Despite the fact that the separation of powers is governed by the constitution and the elections in the first place parliamentary, because of the crisis, we decided to share power now to take some step forward – not focusing on the effectiveness of such a decision.

Western countries lament the refugees with one eye and the other – look at gunpoint

With regard to the refugee problem, I want to say that the position of the West and the ongoing information campaign, especially in the last week, said that these people are fleeing from the Syrian government that the Western media refer to only as “mode”. However, Western countries lament the refugees with one eye and the other – look at gunpoint. The fact is that in fact these people have left Syria, mainly because of the terrorists and the fear of death, but also because of the consequences of terrorism. Under conditions of terror and destruction of infrastructure is not possible to satisfy the most basic needs. As a result, people are fleeing from terrorism and are looking for an opportunity to earn a living in any other part of the world. Therefore, the West bemoans the refugees, while keeping terrorists from the very beginning of the crisis.

Originally called the West Syrian events peaceful protests, then – the performances of the moderate opposition, but now says the emergence of terrorism in the face of LIH and “Dzhabhat An-Nusra”, and the fault of the Syrian regime and the Syrian President. While continuing this course of propaganda, they will have to accept more refugees. The question is not that Europe or not to accept the refugees, and that the need to address the root causes of this problem. If Europeans concerned about the fate of refugees, even if they stop supporting terrorists. It is our opinion on this issue. This is the core issue of refugees.

What should the internal Syrian opposition to support you? Do you think if it will hold a “Moscow-3” and “Geneva-3”? Will it be beneficial to Syria in this situation?

Assad: We are at war against terrorism, which has the support of external forces. This means that total war is conducted. I believe that any society, all patriots, all parties that are really popular in these situations together against a common enemy – regardless of whether it is internal or external enemy. If today we ask any Syrian what he wants now, the first response will be – security and stability for everyone. Thus, political forces both inside government and outside government, are required to consolidate around the demands of the Syrian people. This means that, firstly, we must unite against terrorism. So I say that the political forces, the government, or the illegal armed groups that fought against the government, must unite to fight terrorism. And it happened: some groups previously fought against the Syrian government, and now oppose terror on our side. In this direction have already been taken certain steps, but I would like to take advantage of our meeting today to appeal to all forces to unite in the fight against terrorism. Because it is – a way to achieve political goals set by the Syrians, through dialogue and political process.

“Geneva-3” is unlikely to be successful if success is not achieved within the framework of the “Moscow-3 ‘

Speaking of the “Moscow-3”, it is a preparatory ground for “the Geneva-3.” International co-sponsorship of the Geneva meetings were not impartial, while Russia on this issue impartial and guided by the principles of international law and UN Security Council resolutions. In addition, there are fundamental disagreements over points of the transitional government in the Geneva Declaration. From “Moscow-3” is required to overcome these differences between Syrian forces in order to reach the “Geneva-3” with a consolidated position. This will provide conditions for the success of the negotiations in Switzerland. We believe that the “Geneva-3” is unlikely to be successful if success is not achieved within the framework of the “Moscow-3.” Therefore, we support the holding of a meeting in Moscow after the successful completion of training in this forum, which is particularly dependent on the Russian side.

It is clear that after the decision of the Iranian nuclear issue, Tehran will play an increasingly active role in the affairs of the Middle East region. How do you assess the latest Iranian initiative regarding the settlement of the situation in Syria? And how much is important to you the support of Tehran? Does it, for example, military aid, and if so, what?

Assad: There is currently no formalized Iranian initiative. But there are preliminary ideas and principles for it, which are based mainly on the principle of the sovereignty of Syria and, of course, the decision of the Syrian people and the fight against terrorism. Naturally, the relationship between Syria and Iran have a long history of more than 35 years. We are bound by the allied relations and greater mutual trust. Therefore, we believe that Iran plays an important role. He is on the side of Syria and its people. This country supports the Syrian government in politics, in the economy and in the military sphere. Under military support did not mean that some Western media are trying to present as the sending to Syria of Iranian military units – this is not true.Tehran is supplying us with military equipment. Naturally, there is an exchange of military personnel between Syria and Iran, but the exchange was carried out always. Of course, this bilateral cooperation is activated under conditions of war. And yes, the help of Tehran – the main elements contributing to the stability of Syria, this barbaric war.

You recently talked about coordination with Cairo in the field of security and the fight against terrorism, that the two countries are on the same side of the barricades the fight against terrorism. What today is your relationship with Cairo, which, meanwhile, has been meeting some of Syrian opposition organization? You communicate with him directly or through Russian mediation, especially given the strategic nature of Russian-Egyptian relations?

Assad: Relations between Syria and Egypt have not been interrupted in the past years, even when the Egyptian President Mohamed Morsi was belonging to a terrorist organization “Muslim Brotherhood.” Even during his reign various Egyptian authorities insisted on keeping the relationship even in a minimal volume. Firstly, this is due to the fact that the Egyptians are aware of what is happening in Syria. Secondly, the fact that the battle that we are now – it’s a battle against the common enemy. Of course, now it has become apparent to all, because terrorism has spread to Libya, Egypt, Yemen, Syria, Iraq and some other countries, including Islamic, such as Afghanistan, Pakistan. So today I can say that we have with Egypt have common vision problems.Currently, however, there exists only on the level of security. Political contacts are absent, for example, there is no communication between the foreign ministries of the two countries. At the same time, we consider that both Cairo and Damascus may be under pressure to prevent the emergence of strong ties between us. Of course, our contacts do not go through Moscow. But today we are pleased to witness the improvement of relations between Russia and Egypt. At the same time, Damascus and Moscow are bound by historical, strong and good relationship. Russia, I believe, will be pleased with any progressive development of the Syrian-Egyptian relations.

How do you feel about the idea of creating a zone free of terrorists LIH in the north, on the border with Turkey? In this context, how can you comment on the indirect interaction between the West and the terrorist organizations like “Al-Nusra Dzhabhat” and others? Who are you ready to fight together against the terrorists?

Assad: If we say, on the border with Turkey would not be terrorists, it means that in other areas they will stay. Such rhetoric is unacceptable to us. Terrorism must be eradicated everywhere. For more than three decades, we call for the creation of an international alliance to combat terrorism.With regard to cooperation with the West, “Al-Nusra Dzhabhat” it is – a reliable fact. We all know that “Al-Nusra Dzhabhat” LIH and arms, money and volunteers supplies Turkey, which has close relations with the West. Erdogan and Ahmet Davutoglu and a step without stepping without the consent of the United States and other Western countries. The growth of its power in the region as the “Al-Nusra Dzhabhat” and LIH obliged patronage of the West. He sees terrorism as a trump card, which can be periodically pull from his sleeve. Today, he wants to use “Dzhabhat An-Nusra” against the LIH, it may be due to the fact that the LIH in some way went out of their control.However, this does not mean that they want to destroy LIH. If you would like, then we could do it.For us, LIH, “Al-Nusra Dzhabhat” and other similar armed groups that kill civilians, are extremists.This raises a very important question – with whom to negotiate? From the very beginning we said that we are ready to conduct any dialogue if it could reduce the terrorist threat, and as a consequence, to enhance stability. Naturally, this applies to political forces. We also entered into negotiations with some armed groups and concludes with their agreement, according to which the problem areas in the world to come. Elsewhere, gunmen joined the ranks of the Syrian army.They fight on an equal basis with others and give their lives for their country. That is, we are in dialogue with all, except those whom I have mentioned – LIH, “Al-Nusra Dzhabhat” and the like.For one simple reason – these organizations are based on the ideology of terror. It’s not just the organization against the state, as some others. No, they feed on the ideas of terrorism. Therefore dialogue with them can not lead to any actual results. They need to fight, fight a war of annihilation. There is no dialogue with them can not be.

If we talk about regional partners with whom you are willing to cooperate in the fight against the terrorists?

Assad: Of course, we are cooperating with friendly countries, especially with Russia and Iran. Iraq, which is as much as we fight against terrorism. As for other countries, then we are open to cooperate with any of them if there is a serious desire to fight terrorism. But we do not see in the case of so-called anti-terrorism and “antiIGILovskoy” coalition, led by the United States. Although this coalition began its operation LIH continued expansion. They have nothing. The coalition does not affect the situation “on the ground”. At the same time, countries such as Turkey, Qatar, Saudi Arabia, as well as France, the United States and other Western nations, patronizing the terrorists can not do to fight terrorism. You can not be both terrorists and together with them. However, if these countries decide to change their policies, and they must take into account that terrorism – like a scorpion: if you put it in your pocket, it definitely will bite you – we will not oppose cooperation with them, provided that this is real and not illusory antiterrorist coalition.

In what state is now the Syrian army? The armed forces are fighting more than four years, they bled white by the war or became stronger in the fighting? Is there any provision, in order to increase the activity? You talked about the fact that your opponents and former opponents of the Syrian army moved to your side and fight in the ranks right now the government forces. A lot of them, and how they help in the fight against radical groups?

Assad: Any destructive war, any war weakens society and the army, no matter how rich and strong or a country. However, there is always a positive side. In particular, the war would unite society in the face of the enemy, and the army has become the most important symbol of any society at a time when the country is subjected to aggression. The Company cares about the army, supports her, including human resources. In addition, the war gives the armed forces of any experience in conducting military operations. In other words, there is always both positive and negative points. You can not put the question in this way – has weakened the army or become stronger. Asked whether there is a reserve, say, of course, if the army did not have a reserve, it would be impossible to survive for four and a half years in a very difficult war, especially when our current enemy has unlimited human resources. In Syria, are fighting terrorist operatives from more than eighty countries around the world, that is the enemy uses multi-million support in different countries. As for the army, our reserves – only Syria. But they are, and it allows us to continue to defend the country. Also we have the persistence – in fact reserves are not limited to human resources, it is also the will. Today our will to fight and defend their country against terrorists stronger than before. This situation has led to the fact that some militants, initially for various reasons, had fought against the state, they realized that they were wrong, and decided to join us. Now they are fighting together with the army, some joined the armed forces, while others were weapons and act together with the Syrian army in different parts of the country.

Now, it seems, the world sees a new model: the occupied territories creates LIH courts, the administration plans to issue its own currency. That is, there are formal signs of statehood, and perhaps it is also attracting more and more supporters from different countries. With whom are you still fighting: it is a huge group of terrorists, or it may be a new state, which intends, in general, radically redraw the borders of the region and the world at large? What LIH now?

Assad: Of course, the terrorist group LIH aimed to form the state to recruit as many volunteers who live in the illusions of the past. This – the dream of creating an Islamic state exists for the sake of religion. But this approach – idealist, which has nothing to do with reality. You can not just impose on society and the state from nothing. Society must establish this state. It should be a natural result of the development of society, be it a reflection, albeit sometimes not perfectly accurate. You can not take someone else’s country, and to impose its society. And then we wonder – whether “Islamic state” something in common with the Syrian people? Definitely not. We have terrorist groups, but they do not reflect the character of our society. In Russia, too, there are terrorists, but they have nothing to do with the diversity and openness of the Russian society.Therefore, even if the LIH and try to print money, stamps, issue passports, or to acquire any other attributes of the state, it does not mean that they have a state. Firstly, they have nothing in common with the people, and secondly, the people living in the occupied territories by terrorists or run into a real state – to their homeland, or fighting with militants. Only a small minority believe in their lies. Of course, LIH – not the state, and the terrorist group. They – the third wave created by Western political organizations for distribution poisonous ideology. They pursue political goals.With the first wave in the beginning of the last century came “Muslim Brotherhood”, the second – “Al-Qaeda”, which fought against the Soviet Union in Afghanistan. The third wave – a – LIH, “Al-Nusra Dzhabhat” and other similar organizations. It – Western extremist project.

Since the beginning of the Syrian crisis has been more discussions on the Kurdish issue. And before you and all the official Damascus strongly criticized for its policy towards the Kurdish minority. But now, at some point in the battle against the Kurdish formation LIH actually your allies in the war scenes. Did you see you have a clear understanding: one for you and who you are Kurds to the Kurds?

Assad: First, it is wrong to say that the state pursued a specific policy was against the Kurds, because the state can not allocate some of their subjects, otherwise it would be fraught with a split of the country. If we actually discriminated in society, most of it would not be today on the side of the state, and the country would be split from the outset. Kurds for us are part of the Syrian society, they are not strangers, they live on this earth, as well as Arabs, Circassians, Armenians and many other nations and religions, co-existing in Syria for centuries. Unknown, when some of these nations have appeared in the region. Without these components can not exist in Syria monolithic society. So, whether Kurds are our allies? No, they are patriots. In addition, it is impossible to generalize how and any other constituent elements of Syrian society, the Kurds are represented by different currents belong to different parties, tribes, and also differ in other characteristics. That is, when we talk about the Kurds as a single whole, it is biased.Some Kurdish parties put forward specific requirements, but they do not represent all Kurds.There are Kurds who fully adapt to society, and I want to emphasize that at this stage they are not simply allies as they try to present some in the army because many fallen heroes from among the Kurds. They harmoniously exist within Syrian society. On the other hand, we have the Kurdish parties, which were different requirements, and some of them we met in the beginning of the crisis. But there are other questions that are not related to the state, and it can not satisfy them.These issues are in the competence of the people and the constitution. They require people to agree with those requirements before we as a nation will take an appropriate decision. In any case, any question should be within national boundaries. So I say, we are now with the Kurds and, together with other elements of society together to fight the terrorists. This is what I have just said, we have to unite for the sake of confrontation LIH. After a LIH, “Al-Nusra Dzhabhat” and other terrorists will be finished, it will be possible to discuss the demands of the Kurds and some Kurdish parties in the national format. Therefore, no taboo issues do not exist, as long as they remain within a unified Syrian state, nation, borders, in the spirit of the fight against terrorism, freedom of ethnic, national, religious, and religious diversity of our country.

Some Kurdish forces in Syria require, for example, to change the constitution to introduce local government until the establishment of an autonomous Kurdish state in northern territories. And most often heard such statements at a time when the Kurds are fighting successfully to LIH.Can the Kurds count on this kind of appreciation?

Assad: When we defend our country, we do not expect gratitude, because it is – the debt. And when you perform your duty, you do not expect gratitude. However, a topic that you raised at the beginning, is directly related to the Syrian constitution. If you want, for example, to change the existing constitutional order in Russia and re-conduct the administrative-territorial division or give some subjects of the federation powers other than the powers of other entities is outside the competence of the President or the government, and the competence of the constitution. The President does not own constitution, as well as the government. The Constitution belongs to the people. Consequently, any amendment to the main document needs a national dialogue. Syrian state have no objection to any claims if they do not affect the unity of Syria, freedom of citizens and national diversity. If any of the parties, groups or sectors of society are the requirements, they should be in the national framework, in the format of dialogue with other Syrian forces. When the Syrian people have agreed to take similar steps associated with federalization, decentralization, introduction of autonomous control or complex change of the political regime, it requires a universal consensus with the subsequent amendments to the constitution and the referendum.Therefore, these groups have to convince the people of Syria in support of its proposals, since their initiatives – not dialogue with the government and with the people. For its part, the Syrian people will decide when to move in a certain direction, we will, of course, agree.

For more than a year, an international coalition of US-led air strikes on deals in Syria. At the same time they operate in the same areas where applied airstrikes on positions LIH air forces of the Syrian army. Despite this, there were no clashes between US-led coalition and the Syrian air force. Is there a direct or indirect coordination between your government and the coalition in the war against LIH?

Assad: You’d be surprised, but I will answer “no.” I understand that it does not sound very plausible – we fight, so to speak, the common enemy, to strike at the same targets in the same place without any coordination, and would not face each other. This may seem strange, but it is – the truth. Between the government and armed forces of Syria and the United States there is no coordination or contacts. They can not recognize and accept the fact that we – the only force that fights the LIH “on the ground”. From their point of view, collaborating with the Syrian army would be an admission of our effectiveness in confronting “Islamic state”. Unfortunately, this position reflects the short-sightedness and stubbornness of the US administration.

That is, there is not even an indirect coordination, for example through the Kurds? It is known that the United States interact with the Kurds and the Kurds, in turn, have links with the Syrian government.

Assad: There is no third party, including Iraqis. In the past, the Western coalition notifies us through the Iraqis before the attacks. But for a long time we have not contacted them, exchange of messages through the other side.

You have lived in the West for some time spinning in circles of Western leaders, who from the very beginning of the crisis strongly support the armed groups, to seek your overthrow. What are your feelings, if you have to work again with the same leaders and shake his hand again?Can you trust them again?

Assad: First, it is – not a personal relationship, and the interstate. When we talk about the relations between the two countries, we are talking about certain mechanisms, rather than trust. Trust – the category of personal, you cannot rely on political relationships between people. That is, I am responsible for the 23 million citizens of Syria and the other person, for example, is responsible for tens of millions of people in another country. You cannot put the fate of millions of people dependent on the confidence between the two people. There should be a mechanism. When it is, you can trust and talk. But, another trust, not personal. In addition, the main objective of any policy of the government, the prime minister or president work for the good of his people and country. If the meeting or shaking hands with someone else will benefit the people of Syria, I have to do it whether I like it or not. Thus, it is not about me, not about what I want, or I suppose. It’s about what kind of added value will the step that I was going to take. I am ready to do everything that will benefit the Syrian people.

Russian President Vladimir Putin called for the creation of a regional coalition to fight LIH. However, Syrian Foreign Minister Walid Muallem said that for security coordination with the governments of Jordan, Turkey and Saudi Arabia require a miracle. And how do you see this kind of coalition? Can it benefit? Are you ready to coordinate their actions with these countries?

Assad: With regard to the fight against terrorism is a global and ambitious theme, which are cultural, economic, military, and that is directly related to safety. Of course, in terms of preventive measures, all other aspects are more important than the military and security. But today, given the realities of the fight against terrorism, especially when we are confronting are not separate gangs, and the whole terrorist army, which in the presence of both light and heavy weapons and billions of dollars to recruit, you must first of all pay attention to is the military aspect and issues security. So for us it is clear that the coalition should act in different ways, but above all must fight against terrorists “in the field”. It is logical that such a coalition must be created by those countries that believe in the fight against terrorism. In the current situation it is possible, to the same people and supported terrorism, and fought with him. Namely, it is now engaged in Turkey, Jordan and Saudi Arabia. They pretend that they are a part of the anti-terrorist coalition operating in northern Syria, although they also support terrorism on the same north, the south, the north-west. In general, the same areas in which they are virtually fighting terrorism. I stress once again: if these countries decide to return to the correct position, changed his mind and will to fight terrorism for the sake of the common good, then we of course accept this, and we will cooperate with them and with other states. The problem is not categorical and not that we think in terms of the past, because political relations change frequently, can be bad, and change for the better, can become an ally of the enemy, and the enemy can become an ally, and that’s fine. Whoever he may be, we will cooperate with it against terrorism.

Now there is a huge flow of refugees – to a very large extent from Syria – to Europe. There is a perception that these people actually lost to Syria, because they are so offended by the fact that the Syrian government has failed to protect them, they were forced to leave their homes. What do you think about those who have left Syria, considering whether their future as part of the Syrian electorate? Will they return, according to your feelings? And if Europe is to blame for the mass exodus of refugees?

Assad: Anyone leaving Syria – is undoubtedly a loss for the country, no matter what his position or capacity. Well, except for terrorists. So for us, this migration – a big loss. In the past year in Syria held a presidential election. Outside the country, especially in Lebanon, there were a lot of refugees. If you believe the propaganda of the Western media, they all fled from the Syrian state, which they were persecuted and killed. It served as if they – the enemies of the state. What surprise Westerners, when most of them went to the polls to vote for president. The man who allegedly killed. It was a serious blow for the promoters. To organize voting abroad, need certain conditions. We need an embassy. Syrian state should control the process of voting. It depends on the relations with foreign countries. Many States severed diplomatic relations with Syria and closed at the Syrian Embassy. In these countries, the vote could not take place, and the citizens had to go to another country, where there was a polling station. This is what happened in the past year.

How can I grieve for the death of a child in the sea and did not notice the thousands of children, elderly, women and men who are victims of terrorists in Syria? These shameful double standards

In Europe, of course, she is guilty. Today, Europe is trying to present the case as if her fault is that it did not allocate funds or failed to ensure orderly migration to him, because of what the refugees drowned trying to cross the Mediterranean. We mourn for all the innocent victims, but not life drowned in a sea of something more valuable than the life of those who died in Syria? The more expensive it is the life of an innocent man, beheaded by terrorists? How can I grieve for the death of a child in the sea and did not notice the thousands of children, elderly, women and men who are victims of terrorists in Syria? These shameful double standards Europeans no longer acceptable and clear to all. Defies logic, how can one feel sorry for the victims and other interested. The principal difference between them. Europe is responsible because it has supported and continues to support and cover terrorism. She calls the terrorists “moderate” and divides them into groups, but they are all – the extremists.

Your opponents – those who fought against the government with weapons in their hands, and political opponents continue to insist that one of the main conditions for peace in the country is your withdrawal from political life and as president. What do you think of this not only as the head of state, but simply as a citizen of the country? And – theoretically – you are ready to go, if you feel that it is necessary?

As for the president, he comes to power with the consent of the people, through elections, and if you go – at the request of the people, not by the decision of the United States, the UN Security Council, the Geneva Conference and the Geneva Communique.

Assad: Since the beginning of the information campaign of the West has focused on the fact that the whole problem is really the president. They wanted to create the impression that the Syrian problem is reduced to one person. Consequently, the natural reaction of people to this propaganda was the assumption that if the question is one person he cannot be a more important country, and must go, and that’s when everything will be fine. That’s the way the West is easy. However, in reality what is happening in Syria, similar to what is happening in your area. Notice what happened in the Western media with the beginning of the coup in Ukraine: for them, President Putin has turned from a friend of the West the enemy dictator who suppresses the Russian opposition, who came to power undemocratically, despite the fact that he was elected democratically elections recognized in the West. This is the western media campaign. It is said that in the event of the departure of President things will get better, but what does it mean in reality? For the West, this means that as long as he is president, they will continue to support terrorism, as they follow the principle of the change of leadership, the so-called regime in Syria, Russia and other countries. Because the West does not accept partners and sovereign state. And what are their claims to Russia? Syria? To Iran? It is a sovereign state. They would like to remove one person and put another in his place, who will act in the interests of these countries, and not in the interests of their country. As for the president, he comes to power with the consent of the people, through elections, and if you go – at the request of the people, not by the decision of the United States, the UN Security Council, the Geneva Conference and the Geneva communique. If the people want him to stay – the president is, and otherwise it should leave immediately. Here is my principled position on this issue.

The fighting continued for more than four years. Was that a turning point when you realize that the war cannot be avoided? And who launched the mechanism of the war? This influence in Washington or neighbors in the Middle East region? Or is it, and your mistakes? Do those things that you regret, and if it were possible to go back, would you change them?

Assad: In any state error. This is, perhaps, every day. But these errors are not fatal, it is – a common occurrence. What is so happened that these errors have led to what happened in Syria? You may be surprised, if I tell you that a turning point in the events leading up to the Syrian crisis was the 2003 war in Iraq, when the United States invaded there. We were categorically against this aggression, as we understand that it is socially divisive. And we – Iraq’s neighbors. We understand that as a result of the Iraq war split along confessional lines. In the west, we border with another divided on sectarian lines by the state – Lebanon. We are well aware that we are all affected. Therefore, the origins of this crisis lie in the war that led to the division of Iraq on sectarian basis, which partially affected the situation in Syria and simplified the problem of incitement to inter-confessional conflict in Syria.

The second, equally important turning point was the support that the West is officially provided to terrorists in Afghanistan in the early 1980s, calling them “freedom fighters.” Later, in 2006, in Iraq under the auspices of the United States appeared LIH, and Washington did not struggled with this group. All these factors together have created conditions for the beginning of the unrest, with the support of the West, the financing of the Gulf states, particularly Qatar and Saudi Arabia, the logistic assistance of Turkey, especially given that Erdogan ideologically belongs to the organization “Muslim Brotherhood”, and, therefore, believes that the change in the situation in Syria, Egypt and Iraq would mean the creation of a new sultanate – no Ottoman and owned by “Muslim Brotherhood”, which will extend under the rule of Erdogan from the Atlantic Ocean to the Mediterranean Sea. All these factors have brought the situation to the current state. I emphasize again that there are mistakes and failures, but they did not justify. Otherwise, why there is no revolution in the Gulf countries, especially Saudi Arabia, which has no idea of democracy?

Mr. President, we thank you for what you gave us time and detailed answers to our questions. In September, you have a personal holiday – the 50th anniversary. The main wish in this situation – to Syria to land as soon as possible back peace and tranquility. Thank you.

Courtesy:

http://www.rg.ru/2015/09/16/asad-site.html

Cheap oil could boost the growth

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Along with the weak Chinese demand, one of the causes of declining oil prices in the world energy market has been highlighted as the increasing production limit of Saudi Arab to “retain” its market share; however, some scholars have the opinion that this was to “expand the market share” in various regions. This decline was seen as an indicator of potential and current gloomy growth, but on the other hand “all recent occasions when the price of oil was halved – 1982-1983, 1985-1986, 1992-1993, 1997-1998, and 2001-2002 – faster global growth followed…and every global recession in the past 50 years has been preceded by a sharp increase in oil prices.” Even metal prices may well increase as the after effects of an oil-price collapse.

  • the world burns 34 billion barrels of oil every year, a $10 fall in the price of oil shifts $340 billion from oil producers to consumers. Thus, the $60 price decline since last August will redistribute more than $2 trillion annually to oil consumers, providing a bigger income boost than the combined US and Chinese fiscal stimulus in 2009.
  • According to the International Monetary Fund, the fall in oil prices this year should boost 2016 GDP by 0.5-1% globally, including growth of 0.3-0.4% in Europe, 1-1.2% in the US, and 1-2% in China.
  • Geopolitics-driven supply boosts are likely in the years ahead.
  • Given the enormous advances in oil-extraction technology since the 1970s and the immense size of Iran’s reserves (the fourth-largest in the world, after Saudi Arabia, Russia, and Venezuela), restoring output to the levels of 40 years ago seems a modest objective of Iran.

(Full story by By Anatole Kaletsky at: https://agenda.weforum.org/2015/08/how-will-cheap-oil-affect-the-global-economy/?utm_content=buffer44c60&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

‘Hard times’ ahead for producers: Daniel Yergin

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Interview

daniel-yergin-replies-to-review_2012_700px_v2

An interview by Brian O’Keefe

In a Q&A, the vice chairman of IHS explains why crude prices are plunging anew and predicts “there’s going to be a lot of turmoil and hurt.”

It’s getting ugly in the oil patch again.

On Monday, the price of benchmark West Texas Intermediate crude closed at $38 per barrel, the lowest level since the depths of the financial crisis in 2009. But that’s just the latest low in what has been a gut-wrenching ride for the oil industry over the past year.

As recently as June of 2014, WTI prices were above $100 per barrel. By January, they had tumbled by half thanks in large part to a supply surge driven by booming U.S. production of shale oil (which I wrote about in a Fortune magazine piece called Oil’s New Math). Producers got a reprieve when prices rallied to around $60 in early summer—only to see a new swoon in recent days.

The immediate reason for the current drop in oil prices is largely the same as the overall market sell-off—new fears about weakness in the Chinese economy. But the stocks of big oil companies have suffered much more than the broader market so far this year. Shares of majors such as Exxon XOM 0.52% , Chevron CVX 1.85% , and Shell RDSA 0.00% are all off by more than 25% year-to-date vs. an 8% decline for the S&P 500.

To get a better sense of where oil prices might go from here and what the consequences will be, I called up Daniel Yergin, author of a pair of essential books on the history of the energy industry, The Prize and The Quest and easily the most erudite expert on the oil and gas industry. As vice chairman of global information and analytics company IHS, Yergin has access to incredible stores of data about what’s happening in the field. His view? Hard times are coming. Edited excerpts:

We started 2015 with oil prices falling dramatically. They rallied in the early summer to above $60 per barrel. Are you surprised to see prices plunging again?

No, because [in the spring] we could see that the companies thought that they were in for a longer period of low. I don’t think anybody was thinking this low. We were hearing six weeks ago how $70 was the new $100 and $65 was the new $90. But the thing that we kept seeing was that the oversupply of oil was actually growing, not decreasing. Since the big price collapse started last fall, Saudi Arabia, Iraq, and the U.S. have added about 2 million barrels per day of new production to the world market. And with demand growing at about 1.4 million barrels per day, it was clear that this renewed optimism about higher prices was misplaced.

What’s the catalyst for the price reversal happening now?

I think the new factor, although it’s been a factor all along, is the apparent greater weakness and economic uncertainty in China. What we’re seeing now is that what China giveth, China taketh away. And in this case China really gave us the supercycle of commodities. But the relative weakness of the Chinese economy and how it affects demand for commodities is the big new factor because it’s become so much more apparent.

So the China-driven demand story has really turned?

My colleagues in Beijing point out that as the Chinese economy shifts, and there’s less construction, less expansion of cities, less heavy industry, that leads to less demand for oil—because an awful lot of the oil consumption is the form of diesel is really trucks that were part of the giant build-out of China. And if that slows down it means a disproportionate decline in oil demand. Even though people are buying more cars in China than they are in the U.S., they’re not driving them anywhere near as much. People always say ‘China,’ but it was really the build-out of China that was driving global commodity markets.

There has been a confidence that the Chinese really controlled the levers of their economy and could act in ways that other countries could not, and keep this amazing growth story going. But now, obviously, the concern is whether that is in fact true. Or is China in for a weaker period? They’re committed to 7% growth for all of the economic, social, and political reasons, but maybe they don’t control all the tools.

U.S. oil production, including shale oil, has stayed pretty robust this year despite lower prices. Can that continue?

What we’ve seen is not just momentum, but also that the industry got a lot more efficient. We have this tool that we’ve created at IHS called the Performance Evaluator that allows us to look at every oil well, every oil field, every shale play, and what you see is a very wide disparity in the performance of these unconventional wells. In 2014, 30% of the wells were responsible for 80% of the growth. So costs have come down a lot—and the balance between company and service provider has certainly changed a lot in favor of the company—and companies just became a lot more efficient and cut out the peripheral activities. And that’s how they’ve been able to keep going.

So you’ve had companies saying that with oil at $65 they would be back in business with as many rigs as they would have at $100 per barrel. We expect that at the end of this year every dollar spent on unconventional oil will be 65% more efficient than in 2014. This is a very innovative, flexible industry. With that said, I think that with prices where they are, it’s basically panic level.

What will that panic mean for oil companies?

It means that in the autumn as banks are reviewing their loans, if oil continues as this level for another couple of months, we’re going to see a lot of distress in the oil patch.

Back in the winter, there were dire predictions of bankruptcies and acquisitions this year but that scenario hasn’t materialized as quickly as some thought.

Exactly. So I think the dire straits that were anticipated—it’s a delayed reaction and we’re going to see it now. The banks review loans twice a year. I think they could be more flexible in the spring. But at this level, there’s going to be a lot of turmoil and hurt.

Do you see signs that the major oil companies are dialing back their expectations even more than they were earlier this year?

Yes, I think companies are now expecting that prices are going to be in a lower range, longer. This is definitely not a V-shaped recovery. And it’s going to be more of a stretched-out U, with the right-hand side never quite getting back to the level of the left. Because certainly the [Persian] Gulf producers have made it clear that they don’t want to see $100-a-barrel oil again because of what it does to their competitive position.

It was the refusal of the Saudis to cut production last fall that caused prices to really tank. They wanted prices lower to slow down non-OPEC production, such as U.S. shale oil. With prices this low and perhaps staying low for longer, will the Saudis be forced to buckle and cut production?

We don’t think so. We think they’re going to stay resolute. I think this is a shock. But I think from their point of view this is probably a one- to two-year process. They have the wherewithal to withstand it. And were they to step forward and cut now, they would have to ask themselves what they accomplished. They’re whole thesis starting last year was that if they cut production they’d have to cut again and again. So I think they’re going to stay the course.

And then there’s the other key factor, which is the nuclear agreement with Iran. If it goes ahead, that means that some time early next year Iran starts putting maybe 400,000 to 600,000 barrels per day into the market. This is a battle for market share and market position. Given the geopolitics in the region now, the Gulf producers are not keen to make room for Iran. So they’re looking at not only who’s in the market now—and of course Iran is in the market but not with full volumes—but also next year with Iran coming back in. That’s adding to the more bearish outlook of the market.

It’s hard to see what would push prices much higher any time soon.

Yes, it’s kind of like everything has been turned upside down. In recent years we’ve had strong demand growth and tight supplies. Now we have tepid growth and oversupply. But this is part of a cycle. The impact of the cutbacks will not be seen quite as quickly as might have been anticipated last November when OPEC made its historic decision. But it will show up in supplies that are not developed a few years from now.

Can you attach a dollar figure to the projects that won’t get done now?

The industry response is canceling, delaying, and postponing projects that, if you add it all up, would be worth hundreds of billions of dollars. If you exclude the impact of lower service costs, IHS projects as much as a $600 billion reduction in upstream oil and gas spending between 2015 and 2019, compared to what was expected a year ago.

Play prognosticator for me: By the end of the year, are we more likely to have oil prices below $40 or above $50?

Well, who knows because events will intervene that will change things. But at this point for the fourth quarter we’re seeing Brent crude prices below $50. We think that the next few quarters are going to be tough, really into the spring when oil demand goes down and Iran is presumably coming into the market. You say, What could change things? Well, something from left field, some geopolitical event that affects supply. But if you look at it from the point of view of supply and demand, the downward pressure on prices is going to continue.

So oil’s new math is getting enough harder?

Yeah, the new math is going to be even tougher. There was a period of renewed optimism but I think the hard times are really now at hand.

Courtesy: http://fortune.com/

http://fortune.com/…/oil-expert-daniel-yergin-hard-times-a…/