Kuwait forced to temporarily cut oil output by public sector strike

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A strike on Sunday by public sector workers in Kuwait has forced the Gulf state to temporarily reduce its oil output, in a rare outbreak of industrial action that reveals a popular backlash to fiscal reform measures triggered by lower crude prices.

The Kuwait Oil Company said in a statement that it would reduce production to 1.1m barrels a day from its regular output of 3m barrels a day, while the state-owned refiner cut its production to 520,000 barrels a day from 930,000 barrels a day.

Kuwait is regarded as the most democratic of the largely autocratic Gulf states, meaning that, while rare, strikes are more common than among its neighbours.

The cabinet, led by Sheikh Jaber Al-Mubarak Al-Sabah, prime minister, described the strike as an “illegitimate act and a violation of the law” and promised legal action to bring “accountability to anyone involved in the disruption of the country’s vital utilities.”

The dispute arose over a plan to overhaul the payroll system for public sector workers that would cut wages and incentives. Kuwaiti officials said last week they would put the plans on hold and seek a compromise, but unions called for the reforms to be cancelled before launching Sunday’s strike. Expatriate workers have not joined the action.

The government dismissed the impact of the strike and said the country had at least 25 days’ worth of stockpiles of petroleum by-products.

The strike, which comes as Opec nations try to buoy oil prices by agreeing an output freeze, highlights growing resentment in the Gulf as cash-strapped governments seek to rebalance their oil-dependent economies.

Kuwait, Opec’s fourth-biggest producer, needs an oil price of above $50 a barrel to balance its budget — the lowest “break-even price” in the Gulf, but still higher than current prices.

While the country’s sovereign wealth fund has vast assets able to back reform efforts, the government has nonetheless decided to embark on reform efforts to reduce Kuwaitis’ reliance on public sector jobs — sparking resistance from a population reluctant to break with decades of patrimonial state support.

Last year, the government liberalised kerosene and diesel prices in the face of a popular backlash. It said in January it would expand subsidy reform to other fuels and utilities, but the measures have yet to be implemented. The government also plans to privatise some state-owned companies and build free-trade zones to diversify the economy away from hydrocarbons.

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