Punishing Putin’s Russia – the current oil crisis

I like some weird theories that highlight the roots of the current global crisis.

First, the current problems started with the resurgence of the American New Right (Project for New American Century a.k.a. the NeoCons), with their desire of returning US to global dominance and the understanding that it must be achieved through the control of global oil and direct American military involvement. Invasion of Iraq, Afghanistan and other oil-focused conflicts are a direct result of that policy – oil masked as “democracy”.

Second, the NeoCon agenda requires the defeating of rising superpower alternatives (US competitors), primarily China, Russia and EU. The EU has been challenged successfully and is currently being flooded by middle-eastern migrants from a region, which was stable prior to the involvement of US policy and the resulting negative consequences of “Arab spring”, which became not a drive towards freeing-up the Arab citizens and instead, becoming the source of destabilisation in many countries and resulting emigration (not “migration” as some would like to make us believe).

Third, The Russian crisis, started by themselves in Crimea, followed by Ukraine and the Malaysian airliner (shot down over Donbas) and now culminating in Russia’s involvement in Syria. The Russian resurgence to regional (not yet global) dominance has created a Western need for Russia to be punished and its leadership embarrassed until it loses the elections. As a primary resource producer, Russia’s budget is oil and gas dependent, so hitting its primary budgetary revenues will bring the country to its knees – no one can be a hero with empty bank coffers. This is not the first time – a few years ago Russia had major ambitions, and then the oil collapsed by half and the Russians went quiet. So, people know that Russia can be pushed into submission through the virtual “global markets”, which independently set the world commodity prices and Russia as a primary resource producer (seller) is required to accept externally imposed prices or… sell no oil. These international markets for money/commodities are:
– Virtual and distributed;
– Controlled by Western power (people and organisations);
– Un-destroyable with Putin’s bombers and navy (how can you bomb a distributed computer network?).

How is this “punishment of Russia” done?
ISIS and Syria are a threat to the Middle East, including the US-friendly oil states, which are dependent on continued US protection and military presence. Syria is close by and ISIS is occupying huge territories across previous “national borders”. The US makes a phone call to Saudi Arabia along the lines of “want protection from ISIS and Syria fall-out, then increase your oil production to lower world oil prices to hit Russia, which has no financial reserves”. Oversupply on world markets assures low price of oil and thus low revenues for oil-producing states. The Arabs, undoubtedly squirmed initially before their (UK educated) analysts understood the additional consequences (benefits to the Saudis):
– Low prices pose a challenge to the emerging Iranian production, whose economy and infrastructure is starved of investments, and low prices make it less economically viable (this price war is also a religious war between the two Gulf states);
– Low prices challenge other producers, most of whom have to exert massive efforts to produce “their” oil (bottom of oceans, deep drilling inland, etc.) – this means UK for example with its fixed 30 USD per barrel production costs deep underneath the North Sea;
– Low prices challenge the underdeveloped oil producers for whom oil is the main source of foreign currency (e.g. post-soviet states which are trying to establish themselves as independent states);
– Low prices challenge even internal US oil producers and, especially, US natural gas producers, who have to undertake sizeable expenses (in research and drilling) before gas flows from frakked rock layers 2000 metres underground.

As a sensible country, the Saudis have not spent all of their oil money on stupid megalomanian projects, so they should be able to survive longer than their competitors, especially post-Soviet oil-dependent states with simple economies, no secondary or tertiary industries. Simarly hurt will be the African and Central/South American oil producers.
All that is needed for the world to undergo a massive economic/oil earthquake is for oil to stay at 35USD per barrel for 2016 and most of 2017. Even 50USD will challenge many national budgets, which grew fat and lazy on 85 USD or more per barrel.

We are seeing a major global power play in action – the glut will lead to economic collapses or such major problems that current Saudi competitors will take many years to recover after the prices improve. What we see is a game of “who can withstand the pressure longer”. Of course, citizens and non-oil economics will suffer, but who cares about that?

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