Big Future in Small Change

Breakup of Yukos hits output in Russia

It's often the small changes that indicate trends of profound importance for the future.

Russian oil production is no longer increasing, and it seems as if the next few years will bring no change in this respect, with the risk that there will even be a decline thereafter.

The reason is that old production fields are starting to mature and decline, and that there hasn't been enough investment in either transportation infrastructure or in the opening up of new production fields.

This is not likely to change in the near term. With the Kremlin determined to control more and more of the oil sector, few foreign investors are likely to rush in. The Yukos affair has been a watershed for Russia.

The geopolitical implications of this are immense. If there a few years ago was the hope that we could start reducing our dependence on oil from the Middle East by relying more and more on Russia, this no longer seems a viable option.

The problem is that there are hardly any other viable options. The growing appetite of a growing global economy - not the least rising Asia - will have to be meet by increasing production around the Persian Gulf.

Our global dependence on this volatile part of the world is set to increase in the years ahead. It's not an entirely comfortable prospect.