Experts call 2025 the year of the great change not only in world politics, but in economy as well. What will happen to oil prices? How do global trends affect Belarus? In what area can the opportunities be used? This is the subject of our conversation with BISR analyst, Candidate of Philosophical Sciences Vitaly Demirov.
— Vitaly, recently there has been a lot of information about changing global, in particular economic, trends in connection with the statements of US President Donald Trump. In your opinion, what is the reality of the situation?
— The global trend is that the world economy will slow down for objective reasons. The arrival of the new US president marked the advancement of the Republican Party's isolationist policy, which means the return of assets and capital to the States, as well as an emphasis on export trade and increased import duties on goods from a number of regions. The goal is to concentrate resources within the country and reduce the national debt. Therefore, Republicans are interested in actively exporting, in particular, shale oil. Hence Donald Trump's campaign slogan: "Drill, baby, drill!"
But not everything is so clear here. As with the increase in customs duties. Yes, imports will be more expensive, but the main thing for Republicans is protecting companies on the domestic market. Due to this, the state budget will be replenished, and competition between residents will decrease. Therefore, an increase in customs duties on imports, regardless of other circumstances, may lead to a slowdown in the global economy and some recession.
— Does this pose a threat to our country's economy?
— We have an export-oriented economy. Accordingly, with a slowdown at the global level, the price situation in global markets will not be the best. Therefore, our country benefits from global growth due to a quantitative increase in financial interventions that positively affect the price environment, including the export goods that we sell. As they say figuratively, a rising tide lifts all ships. And now the opposite situation may develop.
However, it should be borne in mind that since 2020, the structure of Belarus' export flows has also changed. Having increased sales in Russia, as well as China and some other countries of the far arc, we have to some extent found our price niche. Belarusian products are acceptable to our partners in terms of quality and service. This is the main calculation that will allow our exporters to sell, regardless of the market conditions.
Therefore, my forecast is this: given the reorientation of export flows, the Belarusian economy as a whole will cope and most likely reach the projected GDP growth rate, that is, 4.1%.
— What will happen to oil prices? Is the US President able to influence their decline by his decisions?
— Oil prices are subject to strong volatility, so it is better to discuss the scenarios that prices depend on. For example, when Donald Trump announced that it was necessary to drill new wells in protected areas of Alaska and increase oil production, he was talking about a new field where exploration had not yet been completed and there were no roads, pipelines, etc. Development requires time and substantial investments. It turns out that theoretically it is possible to quickly increase the shale oil production, but this happens, as a rule, in conditions of not the lowest prices, and high prices for rapid development. Shale oil production in the United States in 2024 remained profitable with Brent prices ranging from $46 to $66 per barrel.
Unlike other countries, the United States does not have fiscal cost reduction mechanisms. Therefore, there are two options.
The President of the United States may promise American shale companies that even if world prices are not high, they will be raised in the domestic market of the country due to subsidies from the budget. Let's say you can hold out like this for a year, but it takes about three years for the wells to pay off. Therefore, one year of low prices is not enough. There is a risk that all this is not a quick case. But Russia may well be able to withstand low prices over the coming year.
— How do you think another major oil exporter, Saudi Arabia, on which world oil prices largely depend, will behave?
— Over the past ten years, Saudi Arabia's response to declining oil demand has varied depending on market conditions and strategic goals, but there are two main approaches. The first is a reduction in production to stabilize prices, especially within OPEC+. In 2020, during the COVID-19 pandemic, Saudi Arabia played a key role in the OPEC+ agreement to cut production by a record 9.7 million barrels per day to prevent a price collapse. This was a response to an unprecedented drop in demand. At other times, such as 2016-2017, it also supported production cuts in cooperation with OPEC+ to restore market balance after the price crisis of the previous two to three years.
Another market condition is maintaining or increasing production to protect market share. In 2014-2015, when prices collapsed due to rising US shale oil production and falling demand, Saudi Arabia refused to cut production. Instead, it increased supply to maintain its market share and put pressure on high-cost competitors such as U.S. shale companies. This led to a long period of low prices, but allowed the kingdom to strengthen its position.
Since 2016, Saudi Arabia has increasingly resorted to coordination with OPEC+ to manage supply, especially in times of crisis. This is due to its dependence on oil revenues to implement the Vision 2030 economic diversification program. However, in the context of structural changes in the market, in particular increased competition from the United States, it may again switch to a strategy of defending market share.
So what will happen to global oil prices? They probably won't grow. With a slowdown in the global economy, demand for oil will decrease. Saudi Arabia's behavior, I believe, will follow the most typical pattern of the last decade, when, when demand weakens, this exporter simply reduces production. The kingdom's actions depend on its assessment of long-term risks to prices and the need to protect market share. Since the main message of our conversation is that protection from shale competitors will be less relevant than reducing the risks of a price drop due to falling demand from a slow global economy, the forecast for a decline in production looks quite fair.
— What opportunities are opening up for Belarus given the modern global challenges? Is there a chance to get ahead due to the digitalization of the country?
— Only now it has become conceptually clear what digitalization should actually be. This is not a story about increasing the number of digital services, but, on the contrary, about their quantitative reduction, which involves reengineering processes after their implementation.
This is only possible if we understand the “digit” not as an increase in everything related to the Internet and mobile applications. Digitalization is the creation of such platforms where blockchain technologies allow the automation of relations between economic entities using smart contracts that optimize the target functions of counterparties in the space of simulation modeling based on complete information. That is, since we are talking not only about self-executing (according to the conditions assigned to them by counterparties) contracts based on blockchain technologies, but also about the platform offering a variety of possible smart contracts that are most optimal from the viewpoint of the common goals and resources of counterparties, then the need to use AI technologies is also obvious. That's the point: blockchain plus AI.
For example, we will make ten thousand AI systems. Some will wash windows, others will plant potatoes, and others will transport goods. This cannot be called digitalization. It will be just a set of separate systems with artificial intelligence of a certain functionality. Equally, a dense network of smart contracts by themselves is not enough for digitalization - after all, they will not provide the effect of “end-to-end automation” of economic relations.. That is, only platforms that combine the functionality of blockchain and AI can become a starting point for digitalization.
— Do you mean robotics?
— Robots are also a necessary thing for digitalization, but not the main thing. Today, robotics refers mainly to machine tools. However, the machine has a narrow specialization, it is focused on a specific operation, and the robot, on the contrary, is a universal specialist. He can sew today, clean tomorrow, deliver raw materials the day after tomorrow, etc. This is the point, for example, of creating an android: it already walks, runs, jumps, has fine motor skills — it all depends on the software.
In the near future, the specialization and dynamics of demand in global markets will change dramatically, meaning that dependence on it will become colossal. With extremely high demand volatility, the supply market will be able to respond instantly by restarting the software of the manufacturing robot. For example, it was making trainers yesterday, and today it is going to produce refrigerators or even smartphones. In such an environment, giant enterprises with large machines will not be able to follow the dynamics of the market and will have to leave it. Therefore, it is already necessary to invest in universal machines during robotization. It is important that robots, among other things, will intensively enter the service sector. And this is a huge number of jobs. Therefore, such trends must be taken into account. In my opinion, it is possible to get out of the situation and overtake competitors through an AI system that will build a platform for blockchain relations between enterprises.
— Is this about using economic platforms with AI for analytics, risk management and decision-making?
— We need a unified system that implements interaction with customers and suppliers, taking into account internal resources. I mean the Open State Automated Platform (OGAP), which is really possible to create. The system itself is not yet available, but there is a vision of its concept, architecture and implementation trajectory. I believe that only such an approach will combine the existing platforms into one and will be able to fulfill the task set by our Government in price analysis to manage economic processes. We need not just data, but their analysis, which will automatically lead to the optimization of relationships with customers, suppliers, agents, etc.
The expanding processes of digitalization entail new business models and the structure of relationships in the process of production, distribution and consumption of goods, services and product and service systems. There is a need to create state corporations that are more flexible and complex than holding companies and, consequently, with less pronounced centralization.
The economic contour of the state corporation is the most favorable environment for creating the effect of digital integration of local, industry and corporate services. It will be possible to increase efficiency and competitiveness through collective processes of financial management, supply chains, human resources, product lifecycle, as well as detailed planning of needs, capacities and materials, the basic plan and production routing.
This kind of integration is necessary to automate business processes of the next level, where, on the one hand, processes within not only a single company, but also within the chain of economic interaction between counterparties and consumers become the object of automation, and on the other hand, the properties of self—adaptability and self-optimization of the business process arise. As a result, the quality of incoming information is improving, and its place in digital value creation and consumption chains is changing.
From a system with initially incomplete information, it is transformed into a more manageable and predictable mechanism of cyberphysical systems and digital platforms, in which a person ceases to be a direct participant in the process of creating, distributing and consuming added value, and becomes an arbitrator and beneficiary of economic processes.
Svetlana Sabilo. Observer
Source: NEFTEHIMIYA