This BBC podcast is supported by ads outside the UK. Androidsbeheer and international translation to return. Want to take big companies? Start for 1 euro per month and start today via Shopify.nl. today at shopify.nl. That's shopify.nl. It's time to see what you can accomplish with Shopify by your side. The UAE is leaving OPEC. Is it falling apart? It was a bombshell announcement. The UAE is the fourth largest producer in the group. And there's even speculation around, you know, who's next. Could other countries be set to leave the oil cartel? You have more incentive to be part of a cartel when you're in a growing market, right? But it's very different when you're working in a market which is shrinking. You're listening to World Business Report from the BBC World Service. I'm Ed Butler and today we're going to be examining the seismic decision by the UAE to pull out of the world's largest club of oil producing states. Was the war in Iran the catalyst for the move? And will it make a difference to future oil prices? Also, what Elon said on the stand today and why lab-grown diamonds may not shine quite so brightly as some claim. First, then, our main story, a surprise announcement that the United Arab Emirates has told the world it will be leaving the OPEC group of oil-producing countries. They're stealing a major blow to the cartel. The Gulf state's energy minister said the decision to quit after nearly six decades of membership would provide more flexibility to respond to a new energy age. Analysts say the move weakens OPEC's control over global oil supplies. It also widens the rift between the UAE and Saudi Arabia, which in effect leads the group. Let's begin by remembering what OPEC is actually for. Here's the BBC's Niamh McDermott. OPEC stands for the Organisation of Petroleum Exporting Countries. It's a cartel of oil-producing nations which aims to manage the global supply of oil. OPEC influences oil prices by increasing or decreasing the collective production of its members. And that can be controversial. President Donald Trump has accused it of, quote, ripping off the rest of the world by inflating oil prices. Until today's announcement, the UAE had been in OPEC for 60 years. Its exit reduces OPEC's membership to 11 countries. Six African states, Venezuela and South America, and four remaining Gulf states, Iraq, Kuwait, and the big beasts, Saudi Arabia and Iran. At its peak in the 1970s, 70s, OPEC controlled around 85% of global oil market and played the central role in the oil crisis of that decade. These days, it produces just 50% of global crude. But it still controls around 80% of the world's proven oil reserves, meaning it still has clout. But inevitably, the departure of the UAE means OPEC's market share will fall once again. There you go, Neva McDermott. With the context of today's announcement, well, Ayman Abaka is a journalist with the data and analytics platform Kepler. She's based in Dubai. I asked her if journalists in the Middle East had seen this announcement coming. The announcement was quite of a bombshell announcement. But years ago, it did have grievances over the fact that its quota was lower compared to the capacity that the country was building. By 2027, the UAE is expecting to have 5 million barrels per day and its current capacity is something like 4.8 million barrels a day. So keeping that spare capacity is something that the UAE has internally debated a lot. But for some time, I mean, they stayed within the OPEC plus group until the current situation that we're in, the current conflict and the war, which is still not resolved. We're in a situation where you have basically very, very limited to no flows from the Strait of Hormuz and you have shut in production from a number of countries in the region. We estimate it to be around maybe 12 million barrels a day that have been shut in. So after this conflict is resolved, the UAE feels that it is of their national priority to not have a quota and be able to supply international markets, but also supply its domestic markets without these constraints. I mean, that's right. The constraints, as you say, three to three and a half million barrels a day for UAE. It wants to go up to 4.8 or 5 million barrels a day if it can. But it can't obviously whilst the straits are shut. So essentially, you're saying this is just going to be a race to produce as much as possible once it can. It's not necessarily a race, but it all depends on when flows from Hormuz especially are resumed and back to normal. But what I understand from officials here is that they won't be flooding the market. But they will also, if the market does require extra barrels from the UAE, they're not going to be constrained by OPEC policy or a quota system. You called it a blow for OPEC. What difference will it make? Well, the UAE is unlike the kind of smaller producers that have left the group in previous years. And I'm talking about Qatar that left in 2019 and more recently we had Angola leave. The UAE is the fourth largest producer in the group. And it was a member of the eight states that were providing these voluntary cuts that the group was unwinding. So it does have a prominent position within the OPEC plus group. I mean, everyone is questioning cohesion within the OPEC plus group now and how that would work looking forward. And there's even speculation around, you know, who's next, who's going to leave the group if you know other states did have grievances over lack of cohesion with its quotas Kazakhstan for example is a country Iraq was another country that kind of struggled to keep within its quota Are those countries going to threaten to leave or actually leave? Overall, and looking at the big picture here, market management is still needed in oil markets. And you still have two big oil producers within the OPEC plus group. You have Russia and you have Saudi Arabia. And I think for the time being, they still attach a lot of importance to managing the market, making sure that, you know, there isn't volatility, making sure that there's still investment in upstream and so on. So I think the group will remain intact. But today and the announcement today, of course, did shake that kind of foundation of cohesion. The view of Amina Bakar of Kepler. Well, I've also been speaking about this with Jorge Leon. He's the head of geopolitical analysis at Ristad Energy. He's also formerly worked within OPEC itself. And I asked him what difference he thought that the move would make, in his view. It could have a significant impact on oil markets. And I think it very much depends now on what the rest of OPEC plus and OPEC members do, particularly Saudi Arabia. We've seen in the last few years how those two countries have started to drift apart geopolitically. First, with the war in Yemen, lately with some discussions and misalignments on OPEC plus quotas. We've seen also increasing competition in those two countries. You know, when it goes back to tourism and investment with Saudi Arabia opening their economy, there's been growing competition with Dubai, with Abu Dhabi. So there has been this growing misalignment between these two countries. And that was also felt inside the organisation. The Saudis, of course, have long pushed, haven't they, sometimes against the ambitions of other OPEC members to constrain production. They've regularly done this to keep prices high. there is a feeling, a reported idea, that the UAE, as one of the great kind of swing state producers within OPEC, the one that can really ramp up production quickly, it wants to push up from three, three and a half million barrels of data, five million as soon as it can, once the Straits of Hormuz are reopened, of course. Sure. And I think it goes back to the incentives or being part of a cartel such as OPEC, right? You have more incentive to be part of a cartel when you're in a growing market, right? Because you can cut production today and you can regain production in the future as the market grows, right? But it's very different when you're working in a market which is shrinking. The incentives to be part of a cartel are less and significantly less. And we all know that oil demand is going to peak sometime soon, right? I don't know if it's 29, 2030. and we all know that demand is going to keep declining in the 30s and in the 40s. So, the incentive to be part of a cartel is less clear there. You actually, if you can, you actually have the incentive to monetise your resources as much as you can. Right. So, what you're saying is, as you say, as oil demand gradually declines because of the green transition, the electrification of engines of all kinds around the world, that more and more those within a cartel are going to break ranks and say, we've just got to make as much money as quickly as we can whilst prices remain high. And while there is enough demand, right? So the last thing that these countries with vast reserves want to see is a world in 1960 where the oil demand is minimal and they left a lot resources on the ground. So that's the incentive in that world is to monetize and push production as much as you can, instead of coordinating production with other countries, right? Are you concerned now that there may be other members looking to break ranks? Probably, yes. Now, the important thing here is who might leave. And I think that there are some countries that are producing at max capacity. Think of Nigeria, Libya, Algeria. If those countries leave, then it's less of a problem, let's say. The important question, the key question is, what is Saudi Arabia going to do? Saudi Arabia, together with the UAE, the only countries that have spare capacity. So if the UAE leaves, is Saudi Arabia going to continue managing the oil market, continue having this central banker role in oil markets with fewer tools, of course? Or is Saudi Arabia going to say, right, my neighbor is monetizing resources as much as they can. I should do the same. The former OPEC official, Jorge Leon. Well, let's get a market reaction now. Jennifer Snyder is a financial advisor for Brighton Securities in Rochester, New York. Jennifer, a quick word on OPEC then. This withdrawal of the UAE, no doubt seen as a win in Washington. Donald Trump has long railed against OPEC pushing up oil prices. But how have the markets been reacting? I mean, does it really make any difference right now in the midst of a war? Yeah, so oil did go up today, but we've been seeing that back and forth quite a bit, obviously, since the start of the war and the beginning of the year where oil prices were significantly lower. But it's certainly the real driver. War and supply shock is really what's driving markets. And again, it comes back to the headline trading. So while this is short-term panic to some degree. The long term, it actually could be good for consumers that we're putting more oil back in there and not controlling and capping it and having a cartel control it of all things. So the way that the markets react is how they always do. It's going to be reactive to what we're seeing. And I think that this is a good play for UAE. And we'll see how this unfolds for us consumers in the future. Okay, away from the oil markets, regulators in the US have now ordered an early review of Disney TV broadcast licenses. This is after, of course, President Trump called over the weekend for the sacking of the late night TV host Jimmy Kimmel. Mr. Trump has urged ABC, which of course is run by Disney, to pull Kimmel's show after the comedian joked that the First Lady had the glow of an expectant widow. I'm quoting him there. I mean, this, I guess, looks like law That's what many in the media world will call it. But it feels significant for many broadcasters, I suspect. Yes, certainly. This kind of looks like a play with critics saying the FCC move. It looks more politically motivated, raises First Amendment concerns. That's something to be considering. And yes, when we start seeing governments scrutinize media companies, what effect does that have on the prices if it's driven more by regulation than rhetoric? An interesting story and it something that we continue to see with this administration and how the reaction comes from a very divisive group of people here in the US and abroad So this will be an interesting one to see how it pans out We'll keep our eyes on it. Jennifer Snyder, thank you very much. and start your own design studio in no time. Thanks to smart AI tools, you write perfect text and you can see the photos of your products and you can see the photos of your products. And while you buy, is the rest of Shopify, from the supply of supply and international processing to return. Want to take a big business? Start for 1 euro per month and start today via Shopify.nl. all while bringing your vision to life. Shopify helps millions of business sell online. Build fast with templates and AI descriptions and photos, inventory and shipping. Sign up for your one euro per month trial and start selling today at shopify.nl. That's shopify.nl. It's time to see what you can accomplish with Shopify by your side. You are with World Business Report from the BBC World Service. Now, as we were hearing yesterday, two tech billionaires, Elon Musk and the maker of chat GPT, Sam Altman, have been launching themselves into a federal court hearing in California this week. It's a case that could shape the future of artificial intelligence, some reckon. Mr. Musk is suing the OpenAI boss for allegedly swindling him out of millions of dollars and going back on promised to keep the company as a non-profit organisation. Mr Altman denies those allegations. Lily Jamali, our North America technology correspondent, is following proceedings in Oakland. Hi, Lily. Once again, back again, day two. So today, it was the first day of actual testimony. We should say that, wasn't it? It was Elon Musk, it seems, rather setting out his stall today. Yeah, we started testimony with a bang, with Elon Musk himself taking the stand, laying out his case. And pretty much the first thing his lawyers asked him was, why are you suing? And Musk said that he was doing it because he doesn't want a precedent to be set where other nonprofits like OpenAI could loot themselves basically to enrich the people involved. He said it's not OK to steal a charity, which is what he alleged alleges happened to him. So he's sort of positioning this as, you know, a case that has the public good in mind. And so far, we've only gotten through testimony between him and his own lawyer. We're looking forward to tomorrow when OpenAI gets a chance to cross-examine him. Yeah, I mean, we did hear Bill Savitt, didn't we, the OpenAI lawyer, say, Musk wants the keys to the kingdom. This was his opening statements, I think. All he cares about is Elon Musk being on top. and we're here because Mr. Musk didn't get his own way at OpenAI. That's the pitch from the Sam Altman side. But I was struck by Mr. Musk on the founding of the company. I mean, I don't know how much of this is open knowledge, public knowledge, but it's interesting, isn't it, how much he's portrayed himself as really the founding father of ChatGPT 10 years ago. That's really true. Musk portrayed himself as absolutely indispensable to the creation of this company saying that he came up with the idea for the name. He recruited key people. He said at one point, I taught them everything I know. And then he said, of course, he donated money to that, you know, very early, in those very early days of OpenAI, $38 million to help the company get started. So this is going to be a key part of his, you know, his allegation before these nine jurors that he, you know, there would be no open AI without Elon Musk. That's what his lawyer said, actually, in opening statements today. Yeah. And he also said his concerns were about Google's dominance, prompting him to move forward with forming the company. It's an interesting, isn't it? It's the whole thing, very much as perhaps others will portray it as this kind of arm wrestle between these two titans, two figureheads. Do you think this is a battle for the soul of the future of artificial intelligence? Or is it really just two players who've perhaps been dwarfed by others in recent years in this area? Am I allowed to say it's a little of both? Because I really think it is. These egos are gigantic, the people that we're talking about. As you heard, you know, he's not somebody who tries to be modest about his contributions as he views them. And Sam Altman, And we're going to hear from him soon. But, you know, also somebody who is not known for, you know, humility. But I think bigger picture, there is a lot at stake for OpenAI's future, which is when it's one of the biggest companies doing the development of AI technology. So if they come out in a way that sort of diminishes them, that could really damage them longer term. And then there's also this question of we're in the middle of this race for artificial general intelligence, the kind of AI that can surpass human intelligence. These companies and these men are duking it out to get there first. So that's part of the defense that's going to be leveled by open AI is that that Elon Musk is only doing this because he's behind and he wants to derail one of his top competitors. Right. So all of this just on day one. Where do we go next? I mean, briefly, what's the agenda? Yeah, I think that tomorrow, this would be Wednesday Pacific time. We're going to see a cross-examination from attorneys for OpenAI. That could be some of the most consequential testimony that we hear in this case. So we're very much looking forward to that. We're going to hear from Sam Altman at some point. We're going to hear from Satya Nadella, the CEO of Microsoft. And there are a number of Silicon Valley famous people, people who were really involved in open AI at various times in its history, who are also going to be taking the stand. So buckle up. Indeed, Lily Jamali will also be hearing you, no doubt, holding our hand through it all. Thank you so much. Lily Jamali there in Oakland, California. The slogan of a diamond is forever linking diamonds to everlasting love and ultimate commitment. It's been instilled for decade, doesn't it? But does it matter where the diamond has actually come from? In recent years, the term blood diamond has additionally been coined, describing an industry, especially one in Africa, that's been fuelled by war and corruption. Now, traditional diamond miners there face another threat, the emergence of the lab-grown variety. It's now some 20% of the global diamond market causing a 40 drop in retail prices over recent years On my recent trip to Sierra Leone in West Africa I been talking to local artisanal diamond miners there and considering the industry response to the lab gems I'm standing in an open valley. There are huge pits in front of me, pits filled with orange sandy water, men digging at the sand along the banks and others sifting, silting through the mud and the gravel all aiming for one thing to find the rich precious stones that lie abundantly naturally in this landscape whenever we come we take the the soil it is the gravel there we find the diamond it's a it's kind of like a bright blue yeah gray soil that you're crushing in your fingers now and Inside, you have the stones. I'm fingering it now. Yeah, sometimes the demo lies in it, like this. How much money do you make normally doing this work? For me? Well, I have not made a lot of money yet. Sometimes, for the whole of the year, you can't get anything. For the whole of the year, you can't get anything. Thin pickings then Decades of extraction mean the remaining worthwhile stones now lie mostly at a deeper level beyond the reach of picks and shovels and prices have been falling sharply over the last five years This is why lab-grown diamonds diamonds produced in factories either by chemical vapour over several days or by using high pressure and high temperature. India alone is producing perhaps 3 million of these diamonds a year, collapsing global prices by as much as 40%. I see a situation where people all over the world are going to get more conscious about climate change, about extracting too much from the earth. Rohit Mehta is CEO of FourLink Ventures. It's a commodities house based in India's diamond capital, Surat. He says that lab-grown diamonds aren't just cheaper, they're also more ethically and environmentally sourced. There's no blood on these stones, he argues. There may be a situation where the dependence of the industry on the naturally mined diamonds is going to be less and people will be looking more towards lab-grown diamonds and that is where a big boom in the lab-grown diamond industry is going to happen. There is a counter view. Stanley Mataram is a US-based environmental consultant. He completely rejects the idea that lab-grown is somehow better, either for the planet or for humanity. I would bluntly say it's untrue. It is factually not defined by science. These reactors run at the temperature of the sun. They're like data centres. That's the kind of energy that they require to operate these. and there's nothing really socially or environmentally responsible about this. Stanley Mataram also says that the allegations of environmental destruction leveled against artisanal diamond mining have been exaggerated. It's hard rock mining. There are no chemicals used. You're not talking about iron ore mining or gold mining. Diamond mining, classic hard rock diamond mining, is the cleanest form of mining. and when done correctly, not only does it provide a lot of social benefits, it's like these holes in the ground become future carbon sinks. And the most important thing, you uplift the lifestyles of women and children, education, the best significant benefits. The traditional diamond industry is trying to push back now. The British multinational diamond company De Beers has recently launched ads like this one, promoting the traditional stones. The diamond you choose should match your journey, match the patience you took to find each other, and match the resilience that formed the essence of your course. And that is a natural diamond. As well as TV commercials, De Beers has launched Gemfair, It's a venture in Sierra Leone aimed at giving artisanal miners better equipment and a fair price for their diamond finds. You might call it fair trade for diamonds, part of the campaign to change that difficult association some people have with war and corruption. Well, that's the intended message. But is it really being heard? The determining factor has been the price and the size of the stone. They're going for the biggest bling that they can afford, I guess. That's Doug Meadows. He's an Atlanta-based jeweler. At the end of the day, I have to give my consumer what they're asking for or looking for. Some of it's perception, you know, people coming in thinking of the idea of a blood diamond. The lab-grown community has touted it as being ethical and eco-friendly and all this kind of stuff. and to try to educate a consumer the value in a natural diamond, it's a new task, a new challenge that I don't know how we do it yet. I'm hoping the industry can give us some help. Back in the pit, Daniel Thibault is still digging and hoping for his first diamond find. I think I have one here. Whatever the taste and the falling value of diamonds on the global market, Daniel and tens of thousands of other Sierra Leoneans are still digging and hoping. For now, they say they don't have much choice. So unfortunately, there is no diamond here. I try my rock again. The artisanal miner Daniel Thibault speaking to me in the Cono Diamond region of eastern Sierra Leone. More from me on this story and much else besides coming up on Business Daily. Check that out wherever you get your BBC podcasts. That's it from us on the day that the UAE has made the shock announcement. It is leaving OPEC. But for now, from me and the rest of the team here on World Business Report, thank you very much for listening. Available now on The Documentary from the BBC World Service. Is Europe turning against net zero and pro-petrol cars? German electric car makers fear they can't compete with China. And in the Czech Republic, a party devoted to motorists is in government. Join me, Chris Bowlby, for assignment on a new force driving European politics. Listen now by searching for The Documentary wherever you get your BBC podcasts. you
