|By Peter Zeihan on March 23, 2022
I identified the likely challenges facing Russian oil production at the outset of the Russian invasion of Ukraine – chief among them Moscow’s inability to keep oil flowing in the absence of foreign investment and tech, but also buyers.
Without customers to send crude to, there’s little incentive for the Russians to pump it out of the ground in the first place. This was something I had originally anticipated happening 2-3 months into the conflict.
But the international community, especially the Europeans, have moved harder and faster than I had thought. Between a mix of bans on Russian energy imports, insurers wary of dealing with Moscow, sanctions on Russian banks, and a significant amount of tanker crews, port workers, and collective voluntary boycotting of Russian crude, Russia’s worst-case scenario seems to be already unfolding.
A handful of refineries across Russia have already announced reductions in output due to a lack of demand. This is not good news. If refineries don’t have customers, the oil fields and pipelines that supply them don’t, either. Ditto for storage. Which means oil stays in the ground. And pipelines lay idle. For a Russia without foreign investment, foreign oil services firms, foreign technology, and foreign buyers, the future looks bleak indeed.
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