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BP reports biggest ever annual loss

LONDON BP (BP.L) slumped to its biggest annual loss last year and announced thousands more job cuts on Tuesday, showing that even one of the nimblest oil producers is struggling in the worst market downturn in over a decade.

The British oil and gas company, which is still grappling with about $55 billion of costs from the oil spill in the Gulf of Mexico in 2010, said it would cut 7,000 jobs by the end of 2017, or nearly 9 percent of its workforce.

BP said it lost $6.5 billion in 2015 and its fourth-quarter underlying replacement cost profit, which is the company’s definition of net income, came in at $196 million, well below analyst expectations of $730 million.

BP shares fell as much as 8.5 percent and were 8.1 percent lower at 6.36 a.m ET, the worst performer on the pan-European FTSEurofirst 300 index .FTEU3 and on track for their biggest one-day fall since June 2010.

The company’s 2015 loss shows that even its “shrink to grow” strategy adopted after the Macondo rig explosion in 2010, hailed as the best preparation for a weak oil market, was unable to buffer the impact of the lowest oil prices since 2003.

“Should low oil prices prevail, they’re a quarter or two away from having to cut the dividend, or divest some more assets,” said Jack Allardyce, analyst at Cenkos Securities.

Dividends are considered sacrosanct among most major oil companies but BP’s weak results and outlook are likely to put pressure on a company that has had to increase borrowing. BP maintained its 2015 dividend at 10 cents per share.

BP’s results are the latest to show the extent large oil companies are struggling following a 70 percent slide in oil prices since the middle of 2014 that has forced them to cut tens of thousands of jobs and slash spending.

BP’s 2015 annual loss was bigger than the overall loss of $4.9 billion it reported in 2010, even though it took a $17.2 billion hit in the second quarter of that year after the explosion in the Gulf of Mexico.

BP declined to comment when asked if the company’s 2015 loss was the biggest on record.

Chevron (CVX.N), the second biggest U.S. producer behind Exxon Mobil (XOM.N), reported its first quarterly loss last week in more than 13 years. Royal Dutch Shell (RDSa.L) is expected to report a near halving of profits.

BP’s poor results came a day after credit ratings agency Standard and Poor’s placed the company on the path toward a credit downgrade and lowered Shell’s rating.

BP took a bigger-than-expected hit at its upstream oil and gas production business and booked charges of $2.6 billion in the fourth quarter because of low oil prices, including on fields in the Gulf of Mexico, the U.S. Utica shale acreage in Ohio and Libya.

Analysts at Bernstein said warmer than expected weather in 2015 probably meant that BP took a hit from some of its oil and gas hedging positions.

Benchmark Brent oil prices averaged $43 a barrel in the fourth quarter of 2015, down from $76 a year earlier. The poor market backdrop is set to persist with Brent averaging about $33 per barrel in 2016 so far.


BP said if the current downturn persists for longer than anticipated, it would be able to reduce its costs further to allow its balance sheet to break even below $60 a barrel.

“Should current conditions persist for longer than anticipated, we expect that all the actions we are taking will capture more deflation,” Chief Financial Officer Brian Gilvary said in a statement.

The oil and gas sector is set to slash spending to its lowest in six years in 2016 to $522 billion, following a 22 percent fall to $595 billion in 2015, according to analysts.

It would be the first time since 1986 that the industry has cut spending for two consecutive years.

BP said its capital spending came to $18.7 billion in 2015, down from a planned $24-$26 billion, and it expected 2016 spending to be at the lower end of a $17-19 billion range.

BP reduced operating costs by $3.5 billion last year and said it expected savings to reach $7 billion by 2017.

It plans to cut 3,000 jobs in its downstream division by the end of 2017, on top of 4,000 cuts in its oil and gas production business announced last year.

“We are continuing to move rapidly to adapt and rebalance BP for the changing environment,” Chief Executive Bob Dudley said in a statement.

Despite lower revenue from oil production, BP’s output rose 5.4 percent to 2.26 million barrels of oil equivalent per day.

Its refining and trading operations, benefiting from cheap fuel prices, once again offset losses in oil and gas production, although BP indicated that supply and trading weakened over the fourth quarter compared to a year earlier.

Like many of its peers, BP has tapped the debt market to plug the gap in income to cover spending and dividend payouts. BP said it intends to maintain its debt at current levels. Its debt-to-equity ratio stood at 21.6 percent at the end of 2015.

(Editing by Jason Neely and David Clarke)

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ChemChina close to striking deal for Syngenta: sources

China’s state-owned ChemChina is nearing a deal to buy Swiss seeds and pesticides group Syngenta (SYNN.VX) for around 43 billion Swiss francs ($42.2 billion), two people familiar with the matter said on Tuesday.

The deal, for roughly 470 Swiss francs per share, would be the biggest cross-border deal involving a Chinese buyer and mark an acceleration of a shakeup in the global agrochemicals industry.

It will likely be announced on Wednesday, when Syngenta is scheduled to release its 2015 results, the people said.

One source said minor adjustments to the price were still being discussed.

Syngenta’s shares jumped as much 8.4 percent and were 5.7 percent higher at 400 francs at 1352 GMT in Zurich.

ChemChina’s offer would be at a premium of about 24 percent to Syngenta’s Monday close of 378.40 francs.

Syngenta declined to comment. ChemChina was not immediately available for comment outside regular business hours.

Bloomberg had reported earlier on Tuesday that the deal worth 43.7 billion Swiss francs was near.

Syngenta last year spurned takeover approaches from U.S. seeds giant Monsanto (MON.N), arguing it can create value on its own.

But as agricultural markets deteriorated and major rivals DuPont (DD.N) and Dow Chemical Co (DOW.N) agreed to combine their seeds and pesticides businesses, Syngenta Chairman Michel Demare recently conceded that “going it alone is hardly possible”, given what shareholders were expecting.

The likely takeover price would nominally match Monsanto’s revised cash-and-stock bid made last August but the value of that offer would have fallen along with Monsanto’s share price.

ChemChina’s move marks another instance of the country’s quest for Western technology and distribution networks.

Similar transactions include last year’s buyout of Italian tyre maker Pirelli by ChemChina. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about $1 billion.

The Chinese government is keen to boost farming productivity as it seeks to cut reliance on food imports amid limited farm land, a growing population and higher meat consumption.

A group of Syngenta shareholders said last month it opposed selling the company to ChemChina and called for the ousting of the Swiss group’s leadership.

(Additional reporting by Amrutha Gayathri in Bengaluru, Sue-Lin Wong in Hong Kong)

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No decision yet on OPEC, non-OPEC meeting, some in OPEC skeptical: delegates

LONDON OPEC has not yet scheduled any talks with Russia and other non-OPEC countries aimed at supporting oil prices, two OPEC delegates said on Tuesday after Russian officials talked up potential cooperation with the exporter group.

Russian Foreign Minister Sergei Lavrov said Moscow was open to further cooperation in the oil market with OPEC and non-OPEC countries.

The prospect of supply restraint by the Organization of the Petroleum Exporting Countries and rivals has helped oil prices rise above $32 a barrel from a 12-year low close to $27 last month, despite widespread scepticism that a deal will happen.

OPEC delegates have previously suggested OPEC and non-OPEC could hold talks in February or March. But no date has been scheduled, and one delegate said OPEC did not have a common view on the aim of such a meeting.

“There is nothing from OPEC yet. It is not fixed,” an OPEC delegate said, who added that expert-level OPEC meetings with non-members held in 2015 did not result in supply cuts.

“We had two meetings before. The two sides discussed the market, but there were no concrete steps.”

A second OPEC delegate said there was little point in OPEC holding a meeting with non-OPEC until OPEC itself had agreed a common position. For example, Iran, after the lifting of Western sanctions, wants to recover market share, a source familiar with the matter said last week, not cut output.

“Some of them, OPEC member-countries, are not sure what we are going to do in this meeting with non-OPEC,” the delegate said. “If the meeting takes place without results, we’ll have a big problem with the market, the price will go down.”

Venezuela has called for a standalone meeting of OPEC to discuss steps to prop up prices. But a number of OPEC members have reacted coolly to the idea, suggesting no meeting will take place.

(Editing by Jeremy Gaunt)

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Russia’s crisis produces a paradox: surging luxury car sales

MOSCOW As Russia wrestles with an economic crisis, more and more Porsches and Rolls-Royces are appearing on its roads.

It seems something of a paradox; while mass-market car sales in the country have tumbled along with the rouble and oil prices, one area is bucking the trend – luxury cars.

Sales of Porsche, Bentley, Rolls-Royce and Lexus cars all rose last year, even as Russia sank into recession.

“It’s bizarre,” said IHS Automotive analyst Tim Urquhart. “Even in the absolute depths of despair which the economy is in at the moment, these brands still seem to be doing ok.”

Falling wages in the country have deterred many people from buying new cars in any price bracket, but for those Russians who can still afford top-of-the-range autos, it could be a good time to buy.

The weaker rouble, which lost almost 20 percent against the dollar last year, means foreign-made luxury cars are considerably cheaper in Russia than elsewhere.

A new Porsche 911 Turbo S Cabriolet costs 11.8 million rubles ($151,687) in Russia, for example; in the United States, the same model sells for $200,400.

Maria Malinskaya, showroom head at the Rolf car dealership group, said some premium models were now two or three times cheaper in rubles than in dollars.

Richer Russians have also looked to store their wealth in premium autos rather than volatile rubles, say analysts, as foreign-made cars have not traditionally depreciated as sharply in Russia as in the West.


Russia’s premium car market has come a long way since the 1970s when only three Mercedes reportedly drove on Moscow’s concentric ring roads: one owned by then Soviet leader Leonid Brezhnev, the other two by world chess champion Anatoly Karpov and dissident songwriter Vladimir Vysotsky.

Today, the wider Russian auto industry is suffering.

After a decade of annual sales growth in excess of 10 percent, the sector has been hammered by a steep economic downturn since 2013 in major oil producer Russia, which has been hit by collapsing global crude prices and Western sanctions imposed over Moscow’s actions in Ukraine.

New car sales plunged 36 percent last year and are forecast to decline for the fourth year running in 2016, according to the Association of European Businesses (AEB) lobby group.

But few high-end brands are feeling the same pain.

Bentley sales rose 7 percent year-on-year in 2015 and purchases of Rolls-Royce cars were up 5 percent. Porsche and Lexus, whose sales increased 12 and 6 percent respectively last year, are the only two brands to have maintained annual sales growth in Russia since the market peaked at almost 3 million sales a year in 2012.


Porsche and Rolls-Royce said the devaluation of the rouble had supported demand for their vehicles.

“There was an impulse move to put cash into a physical asset, a high-value physical asset, which helped a lot of the premium and ultra-premium brands,” added IHS’s Urquhart.

Their healthy sales figures also highlight the wealth disparity in Russia, brought into sharp focus by the economic downturn which saw real wages – adjusted for inflation – fall 9.5 percent in 2015, according to government figures.

New cars are out of reach for many Russians. Prices for Avtovaz’s Lada Granta sedan, Russia’s best-selling car last year, start at 368,900 rubles ($4,694).

With the average monthly salary in the country at 42,684 rubles in December, buying even a new budget car like the Lada Granta represents most of a year’s wages.

At the luxury end of the market, the base price for a Rolls-Royce Ghost SWB currently stands at 19 million rubles ($241,784), the British carmaker told Reuters, enough to buy more than 50 Ladas.

“Even in a crisis there are people who have money,” said VTB Capital analyst Vladimir Bespalov. “Possibly, it is precisely in a crisis that they think it a good time to buy expensive cars.”

(Editing by Andrew Osborn and Pravin Char)

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Alphabet overtakes Apple in market value

Alphabet Inc (GOOGL.O) might win the market cap battle against Apple Inc (AAPL.O), but will it win the war?

Maybe not.

The median share price forecast of 31 analysts who raised price targets after Alphabet reported strong results on Monday was $924, suggesting that the company formerly known as Google could be valued at $628 billion in the next 12 months.

Apple, tracked by 49 analysts, would be valued at $748.5 billion, at the current median price target of $135.

That’s not all.

A look at the most bullish price targets on the companies’ shares shows that Alphabet is expected to be valued at $734 billion in the next 12 months, while Apple could hit $1.10 trillion – making it the first publicly listed company ever to be worth more than $1 trillion.

Billionaire investor Carl Icahn, an Apple investor, said in May that the iPhone maker was “dramatically undervalued” and should trade at $240 per share. At that price, the company would be valued at about $1.30 trillion.

Alphabet easily beat Wall Street’s forecasts, helped by strong mobile advertising sales.

Alphabet’s shares rose as much as 4.4 percent to $804.50 on Tuesday, valuing the company at $546.50 billion, making it the world’s most valuable company – for now.

Apple shares fell 1.2 percent to $95.28, giving the company a market capitalization of $528 billion.

Alphabet, which rejigged its operating structure last year to separate its core Google business from its so-called “moonshots” also broke out results for these operations for the first time on Monday.


Sustaining the lead could be tough, though.

The two tech giants have long wrestled for the top spot, as the likes of IBM (IBM.N) have declined.

Once allies, they fell out after Google launched its own Android mobile operating system in 2008.

Alphabet’s stock has surged 43 percent in the past year.

Apple, on the other hand, has struggled due to softening demand for its signature iPhone, especially in China, and the apparent lack of another blockbuster product in its pipeline.

Apple’s shares fell last week after the company reported disappointing results and have yet to recover.

Still Apple – whose stock has fallen about 18 percent in the past year – has an upcoming catalyst in the form of the iPhone 7 launch in September. That could spur sudden growth.

Alphabet is expected to gain more gradually from growth in mobile search and monetization of YouTube.

To be sure, analysts remain bullish on both stocks.

No analyst rates either stock a “sell”.

Apple shares trade at 10.59 times forward 12-month earnings versus Alphabet’s 22.47, among the most expensive in the tech sector.

“We think the current re-rating in GOOGL shares is two-thirds of the way complete and is likely to grind to $1000+,” Deutsche Bank analyst Ross Sandler wrote in a client note.

Sandler, the most bullish analyst on Alphabet, raised his price target on the stock to $1,080 from $900 on Tuesday.

Drexel Hamilton analyst Brian White is the most bullish on Apple stock, with a target of $200.

(Reporting by Sayantani Ghosh and Supantha Mukherjee in Bengaluru; Additional reporting by Tenzin Pema; Editing by Ted Kerr)

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Pfizer 2016 forecasts disappoint; shares fall

U.S. drugmaker Pfizer Inc (PFE.N) on Tuesday forecast 2016 revenue and earnings below analysts’ estimates, largely because of the strong dollar.

The company’s shares fell 1.5 percent to $29.70 even though soaring Prevnar pneumonia vaccine sales led to a stronger-than-expected fourth quarter.

Pfizer, which plans to buy Botox maker Allergan Inc (AGN.N) later this year in a $160 billion deal, said it expected earnings of $2.20 to $2.30 per share in 2016. That would not be much different from $2.20 reported for 2015 and below Wall Street forecasts of $2.36.

Evercore ISI analyst Mark Schoenebaum said Pfizer attributed its cautious 2016 forecast largely to the stronger dollar, which hurts the value of sales outside the United States.

Pfizer forecast 2016 revenue of $49 billion to $51 billion, up from $48.9 billion in 2015 but shy of Wall Street expectations of $52.49 billion.

The company’s forecasts do not include the planned purchase of Allergan in the second half of the year.

Revenue rose 7 percent to $14.05 billion in the fourth quarter, ahead of the average analyst estimate of $13.56 billion, according to Thomson Reuters I/B/E/S.

Global vaccine revenue rose 45 percent to $1.92 billion, with sales of Prevnar 13 doubling in the United States. Pfizer said Prevnar benefited from increased use by adults and the timing of government purchases of the product for children.

Pfizer’s net income fell to $613 million, or 10 cents per share, from $1.23 billion, or 19 cents per share, a year earlier.

Excluding special items, the company earned 53 cents per share, topping the analysts’ average estimate of 52 cents.

Pfizer said on Nov. 23 that it would buy Allergan to slash its U.S. tax bill and obtain faster-growing medicines.

The combined company would be based in Dublin and have an expected tax rate of 17 percent to 18 percent by 2017, well below Pfizer’s current corporate tax rate of about 25 percent.

Allergan shares are trading at about a 17 percent discount to their value under the all-stock deal as some investors still fear the U.S. government could stop the tax-inversion deal.

(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn)

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India’s Tata Motors to rename hatchback that sounds like Zika

MUMBAI The rapidly-spreading Zika virus has an unlikely victim – Indian carmaker Tata Motors Ltd (TAMO.NS).

The carmaker said on Tuesday it had decided to rename its soon-to-be-launched hatchback Zica, short for Zippy Car, after the mosquito-borne virus was declared an international health emergency.

Tata Motors, part of the Tata Group, one of India’s largest conglomerates, said it would decide on a new name for the hatchback after a few weeks. It is due to showcase the car in the biennial New Delhi motor show starting Wednesday.

The World Health Organization has said Zika is “spreading explosively” and could infect as many as 4 million people in the Americas.

Tata Motors is seeking an image makeover with the curvaceous hatchback, which is being endorsed by that is endorsed by world soccer player of the year Lionel Messi.

India’s fifth-biggest automaker, which owns the Jaguar and Land Rover brands, has struggled to dispel perceptions of cheapness since releasing its Nano cars seven years ago costing under $3,000.

(Reporting by Devidutta Tripathy, editing by Louise Heavens)

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Oil slips below $33 as hopes for production cut fade

NEW YORK Oil fell sharply for the second straight day on Tuesday as hopes of a deal to curb one of the worst supply gluts in history continue to fade, with concerns about weak demand amid a mild winter deepening the rout.

The oil markets erased most of last week’s four-day rally, when soared almost 20 percent from the lows touched in mid-January, after Russia’s Energy Minister said OPEC kingpin Saudi Arabia suggested a production cut.

This week though, those hopes have dimmed as no deal has emerged and talks between Russia’s energy minister and Venezuela’s oil minister on Monday failed to result in any clear plan to reduce output.

The front-month contract for U.S. West Texas Intermediate (WTI) CLc1 fell $1.21, or 3.8 percent to $30.41 per barrel by 12:55 p.m. EST (1755 GMT), after falling to as low as $29.81.

Brent for April delivery LCOc1 was down 92 cents at $32.32 a barrel after touching a low of $32.23, down 5.9 percent, in the session.

With forecasters projecting the weather in the United States will moderate during the last eight weeks of the November-March winter heating season, U.S. heating oil futures HOc1 were down 2 percent and gasoline RBc1 6 percent lower.

“For whatever reason, there’s a lot of hope that some deal will be pulled off,” said John Kilduff, partner at Again Capital LLC in New York.

“As they continue to disappoint, we’re going to trade lower, until the market forces them to do something and I think that’s at a much lower price than here.”

Goldman Sachs said it was “highly unlikely” the Organization of the Petroleum Exporting Countries would cooperate with Russia to cut output, saying the move would also be self-defeating as stronger prices would bring previously shelved production back to the market.

Prices are in danger of returning to the $20s unless there was concrete reaction on the supply side, said Thomas Saal, analyst at INTL FC Stone in Miami, Florida.

Still, Citi called a bottom on prices on Tuesday, saying that even while a deal may not materialize, the current lows will be short lived.

Oil stockpiles are still on the rise, with Russian output hitting a post-Soviet high in January, while U.S inventories forecast to have added 4.8 million barrels to record supplies last week.

The American Petroleum Institute (API) will release its data at 4:30 p.m. EST (2130 GMT), ahead of the government’s report on Wednesday.

Meanwhile, the prolonged downturn in crude prices has crushed the oil majors’ results.

Exxon Mobil Corp (XOM.N), the world’s largest publicly traded oil company, reported its smallest quarterly profit in more than a decade and said it will cut 2016 spending by one-quarter, while BP (BP.L) reported to its biggest annual loss and announced thousands more job cuts.

(Additional reporting by Simon Falush in London, Keith Wallis in Singapore and Felix Bate in Paris; Editing by Chris Reese and Marguerita Choy)

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A new global oil deal could draw lessons from 1998

LONDON After a year of secret diplomacy and hushed-up private talks around the world, OPEC’s mighty Saudi Arabia and rival Venezuela were persuaded to cut a deal by non-OPEC Mexico which overcame mutual acrimony and led to a much-needed rise in oil prices.

It was 1998, trust had long broken down within the Organization of the Petroleum Exporting Countries and it took outside mediation as a last resort to stop the squabbling to clinch deals at secret meetings in Riyadh, Madrid and Miami.

Now, with oil prices touching their lowest level since 2003, OPEC officials and deal brokers are looking back nearly two decades and asking whether a behind-the-scenes deal to curb oil output between OPEC and non-OPEC Russia could be struck.

Some see OPEC rifts as insurmountable and Russia as a wild card that cannot be trusted, but others say economic necessity to boost oil revenue could overcome acrimony and distrust and lead to a global deal to cut supply and mop up the glut.

There are plenty of reasons, however, to dispel optimism.

Unlike in 1998, the challenge goes beyond rebuilding bridges between just two OPEC producers.

It pitches the interests of Saudi Arabia alongside fast-rising OPEC producers Iran and Iraq as well as non-OPEC Russia, the world’s largest oil nation. All four are involved in conflict in the Middle East but also desperately need money to keep their oil-dependent economies afloat and meet social costs.

“The 1997/98 deal brokered between Saudi, Venezuela and Mexico took over a year to negotiate and it was touch and go as to whether it would get done or not,” said veteran OPEC-watcher Yasser Elguindi of Medley Global Advisors.

But low prices are making producers desperate. Prices sank to below $30 per barrel this year from as high as $115 a barrel just 18 months ago due to one of the worst oil gluts in history.


This perfect storm was due to a boom in the extraction of oil from shale rock in the United States and a decision by the Saudi ruling elite to ramp up crude supply to regain market share from higher-cost producers.

Saudi Arabia has pushed its output to record highs over the past year above 10 million barrels per day, almost equal to Russia. Iraq also raised production sharply above four million bpd over the past months as foreign investment in oil fields paid dividends. Iraq expects to raise output further in 2016.

Meanwhile, Iran says the removal of European sanctions in January should allow it to claw back oil production and a deal with OPEC is unacceptable until output reaches four million bpd.

“You cannot have a deal with non-OPEC, until you achieve a credible OPEC framework which at the moment is not possible because of Iraq and Iran. Until there can be some framework between Iran, Saudi and Iraq, all this non-OPEC talk is just noise,” said Elguindi.

Saudi Arabia’s Oil Minister Ali al-Naimi, who has been in office since 1995, has said the kingdom would join cuts if key OPEC and non-OPEC players cooperated.

But insiders say, Saudi Arabia and it Gulf allies Kuwait, Qatar and the United Arab Emirates are all deeply skeptical that a workable consensus can be reached. “Iran and Iraq remain the main challenges inside OPEC and Russia won’t agree to a cut and is not to be trusted,” a senior Gulf OPEC delegate told Reuters.


In the past month, however, all parties involved have sent signals suggesting the world oil dynamic may be changing.

Iran’s main oil export official, Mohsen Qamsari, said in January he did not want a price war and might increase shipments gradually to avoid hurting world prices.

And Iraqi Oil Minister Adel Abdul Mahdi also said his country would support an extraordinary OPEC meeting if a joint cut with non-OPEC could be agreed beforehand.

“It is useless to go to a meeting without deciding up front. We said ‘yes’ if others are willing to go but we have to decide before. Otherwise this will backfire on us,” he said.

The statements by Iran and Iraq coincided with a change of rhetoric from Russia where the head of its pipeline monopoly and close ally of President Vladimir Putin, Nikolai Tokarev, said joint action was possible to halt slumping prices.

For years, Russian officials said oil production cuts were technically difficult after an ill-fated deal with OPEC in 2001, when Moscow agreed to cooperate but raised exports instead. It was this that created the mistrust that exists today.

But back then Putin was only at the start of his first presidential term and had little control of the oil industry, split between various oligarchs following the chaotic privatization after the collapse of the Soviet Union.

Fast forward 15 years, and the oil industry is mostly owned by the Kremlin and Putin has almost absolute power.

“You have to take this seriously now. Key will be if Russia can deliver,” said OPEC watcher and founder of U.S.-based Pira Group Gary Ross, who was involved in the 2001 Russia-OPEC talks.

Putin and his ally, head of Kremlin oil major Rosneft (ROSN.MM), Igor Sechin, have yet to speak about the recent talk of a joint move with OPEC.

But Sechin in the past said he would not support cooperation by Russia, where one popular conspiracy theory maintains that the low oil prices of the 1980s were orchestrated by Saudi Arabia and the United States to undermine the Soviet Union. Sechin has also said OPEC had “lost its teeth”.

A year ago, Putin said it was possible that the current price crash was orchestrated in the same way as the crash of the 1980s, which effectively led to a collapse of the Soviet Union – a huge tragedy, according to Putin.

“There is a lot of talk today about why it is happening. Maybe it is a Saudi-U.S. plot to punish Iran, or put pressure on the Russian economy or Venezuela,” Putin said back then.

But with the Russian rouble sinking to a record low and a parliamentary election this year and a presidential election in 2018, pressure is rising on the Kremlin to protect state revenues and limit public discontent.


Russia’s latest rhetoric has left OPEC watchers and Kremlinologists guessing if it is just a verbal intervention to lift oil prices or whether it is part of a real deal for Putin, which may also involve a compromise with Saudi Arabia over Syria or indeed any other “Grand Bargain”.

Putin has dispatched heavyweight veteran foreign minister Sergei Lavrov to the Middle East this week. Lavrov, who has almost never spoken about oil, will travel to Oman and the UAE to discuss the oil market.

Meanwhile, Venezuelan Oil Minister Eulogio Del Pino will visit Russia, Qatar, Iran and Saudi Arabia this week to drum up support for a joint cut in oil production.

And just like in 1998, behind-the-scene talks are gathering pace. When Putin met the Emir of Qatar last month in Moscow, oil was on the agenda, according to a senior source in the Gulf.

And just as in 1998 and 1999, when it took two years and many secret meetings in Miami, Madrid, the Hague, Amsterdam and Riyadh to clinch two decisive supply cuts, the process in 2016 could be equally painful.

The head of Kremlin-backed Russian Direct Investment Fund, Kirill Dmitriyev, said a deal between Russia and OPEC was possible but at the right time, “maybe within a year”, when the markets rebalance and it became easier to reach agreements.

Goldman Sachs, which is bearish on oil, said it believes cooperation between OPEC and Russia would be “highly unlikely” and also self-defeating as higher prices would bring shelved output, including in the United States, back onto the market.

But skeptics could do well to read a paper by Robert Mabro, founder of the Oxford Institute for Energy Studies who helped to broker the 1998 deal. Mabro wrote at the time: “Changes in policy are always possible, even likely, when significant revenue losses are at stake”.

(Additional reporting by Rania El Gamal, Writing by Dmitry Zhdannikov; Editing by Peter Millership)

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