War against Ukraine would allow Putin to maintain oil and gas prices

March 9th, 18:00

The Kremlin may be using its dirty business in Crimea to hide an attempt to save its economy and to maintain its export of energy sources.

Many pundits have forgotten about the global aspect when discussing the economical component of the Russian invasion into Crimea. Yury Shubin focused on this very point.

Certain agreements concerning Iran came into force on January 20th. Iran is promising to reduce its nuclear program, while the West will have abolished sanctions by June 20, 2014 as well as its oil embargo. This would lead to an increase in Persian oil supplies by 1 million barrels per day to the level of 4 million barrels per day by June, which could considerably decrease the price per barrel. That is disadvantageous for Russia, because its budget was made using the price of 90 US dollars per barrel, and a price of lower than 60 US dollars may lead to an economic collapse. It is not so hard to imagine that the uneasy socio-political situation in Russia may become more intense (or even revolutionary).

Generally, trends concerning Russian oil and gas extraction are disturbing. The shale gas revolution cannot be subdued. The Wall Street Journal recently published results on an analysis of the global energy market which show that the US is leaving Russia behind in terms of oil and gas production. In June 2013, oil and gas extraction and the corresponding combustibles in the US saw daily volumes exceeding 22 million barrels while Russia produced only 21.8 million barrels. This was the first time that the US produced more gas than Russia. This means that the US is a real enemy in an economic sense rather than in imaginary military sense. According to forecasts of the Institute of Energy Studies of the Russian Academy of Sciences, starting in 2015 the export of Russian gas may decrease by 25-30% which may lead to a Russian GDP reduction of 100 billion US dollars.

Prices for oil and gas are defined by many factors including global demand, speculative pressure on the financial markets, and geopolitics. Demand is gradually rebounding after the recession, but not very quickly. In addition, the market will be pressed by additional volumes coming from Iran. So, the remaining factors are volatility on oil prices, and volatility in stock markets caused by various crises, especially military ones. We should also take into account that it is not in the interest of the OPEC states to let the prices on oil go down by squeezing quotas on its export, and that this could blow up the Russian economy. If this were to happen, Putin would risk having his own Maidan at the Kremlin.

Translated by Shara Anatoliy, edited by Matt

Source: espreso.tv




2 thoughts on “War against Ukraine would allow Putin to maintain oil and gas prices

  1. Pingback: Nasul TV » Euromaidan PR | Primul obiectiv al lui Putin nu este doar Crimeea, ci întregile părţi de sud şi est ale Ucrainei

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