The Price of Oil and Changes in Russian Politics

Much of Vladimir Putin's bellicose actions in Crimea and Ukraine have been motivated by a desperate need to distract the Russian People from the rank corruption and mismanagement that are a hallmark of the Putin regime.   As a piece in The Economist discloses,  past Russian aggression has corresponded to periods when oil prices and hence revenues flowing into Russia have been high.  Now, with oil prices plummeting - when I filled up my car this weekend with premium (a drawback of a Mercedes) the price was $2.249/gallon - Russia's economy is reeling.  Thus, past behavior makes one wonder whether or not Russia may find it necessary to mollify nations it has been antagonizing of late or whether Putin will continue his Hitler want to be policies.  Here are some article highlights:

IN DECEMBER 1979 Soviet troops invaded Afghanistan. The oil price at the time was at its peak of $101 a barrel. The high price combined with fast-growing production of oil in Western Siberia provided the Soviet Union with unprecedented revenues. Instead of saving this money for a rainy day, the Soviet government financed foreign adventures and imports of food. Seven years later the Brent crude oil price fell to around $30 a barrel and Mikhail Gorbachev launched the policy of Perestroika (restructuring) and convergence with the West. The high oil price coincided with Soviet aggression, but as the price fell the Soviet Union became more democratic and friendly to the West.

That the oil price correlated with Soviet politics is not surprising – in the uncompetitive command economy oil and gas revenues accounted for 67% of all exports. But the correlation remained just as strong after the end of the Soviet Union and transition to a market economy, and oil and gas remained the main source of Russian export revenues. When Vladimir Putin came to power the price of oil was $25 a barrel. Mr Putin allied himself with America, did not object to NATO’s enlargement that took in the Baltic States and saw September 11^th 2001 as Russia’s chance to get closer to NATO. Seven years later the oil price was at $105 a barrel and Russia invaded Georgia and the relationship with America was at the point of nadir, but thanks to the global financial crisis oil prices fell to $67 a barrel and Russia accepted America's reset policy even though it soon went sour.

Russia’s latest and most serious foreign adventure in Ukraine and its annexation of Crimea took place when the price of oil was still over $100 a barrel. But as the oil price fell Russia has not (so far) become any friendlier to the West nor to its neighbours. Mr Putin seems determined to break that correlation.

Mr Putin seems determined to break that correlation. Indeed, he has offered the war and patriotic euphoria as a compensation for the falling oil prices and lack of economic growth. The only way to bend the trend is by escalating aggression. This year will see a contest between Mr Putin's regime and the oil price. It will not be a pretty sight.

 

NATO: Russians Open Fire in Ukraine

Vladimir "Hitler Want to Be" Putin seemingly is continuing to follow Hitler's game plan from the 1930's when Germany used the pretext of protecting ethnic Germans to seize Czechoslovakia.  New NATO reports indicate that Russian troops have opened fire within Ukraine's borders.  It's all part of Putin's feigned claim of sending "humanitarian aid" to those in need due to the fighting that has ensued between Kremlin backed separatists and the Ukrainian government.  It is telling that the supposed 200 truck convoy entered Ukraine without permission for Kiev or the International Red Cross.  One has to wonder when Putin will take the step of growing a Hitler style mustache.  The man needs to be removed from power and his supporters in Russian need to read their history books and recall the fate that Hitler brought to Germany.  The New York Times looks at the frightening developments.  Here are excerpts:

Russia on Friday escalated tensions with Ukraine to the highest level since its stealthy invasion of Crimea in the spring, sending more than 200 trucks from a long-stalled aid convoy into rebel-held eastern Ukraine over the objections of Kiev and, NATO said, conducting military operations on Ukrainian territory.

NATO officials said that the Russian military had moved artillery units inside Ukrainian territory in recent days and was using them to fire at Ukrainian forces. Russia has repeatedly denied sending troops or military hardware into Ukraine, just as it denied any link to the unidentified gunmen who paved the way for Moscow’s annexation of Crimea — until President Vladimir V. Putin stated in April that Russian troops were “of course” involved.

There has been “a major escalation in Russian military involvement in eastern Ukraine since mid-August, including the use of Russian forces,” Secretary General Anders Fogh Rasmussen of NATO said in a statement. “Russian artillery support — both cross-border and from within Ukraine — is being employed against the Ukrainian armed forces,” Mr. Rasmussen added. 

Russia’s Permanent Mission to NATO, in a statement, accused the alliance of indifference to humanitarian suffering in eastern Ukraine and described its protests over the entry of a Russian aid convoy into Ukraine without Red Cross escorts as “another cynical attempt to cover the crimes of Ukrainian authorities.”

The NATO statements added new pressure on Moscow before a flurry of diplomacy in coming days, including a visit to Kiev on Saturday by the German chancellor, Angela Merkel, and a scheduled meeting next week between President Petro O. Poroshenko of Ukraine and his Russian counterpart, Mr. Putin, in Minsk, Belarus.

Ms. Merkel spoke by telephone with the Russian and Ukrainian presidents on Friday and “expressed her great concern” over Russia’s unilateral decision to move its aid trucks into Ukraine, her spokesman said. She also spoke with President Obama and, according to the White House, both leaders agreed that the arrival of the convoy represented “a violation of Ukraine’s sovereignty and territorial integrity.”

“It is important to remember that Russia is purporting to alleviate a humanitarian situation which Russia itself created,” Caitlin Hayden, the spokeswoman for the National Security Council, said in a statement. “If Russia really wants to ease the humanitarian situation in eastern Ukraine, it could do so today by halting its supply of weapons, equipment, and fighters to its proxies,” she added.

[T]he arrival of Russian trucks — only 34 of which Ukrainian officials inspected Thursday evening on the Russian side of the border, and found to contain buckwheat, rice, sugar and water — appeared to be a Russian effort to stall an accelerating offensive by Ukrainian forces against beleaguered pro-Russian rebels in eastern Ukraine. 

The disingenuousness of the Russian statements is amazing and truly sounds like something coming out of Hitler's Nazi regime or the old Soviet Union.  Does Putin really think we are all so stupid that we believe his lies?