Jumat, 01 Agustus 2014

The Price Of Oil Is Putin's And Russia's Achilles Heel


Beyond Oil And Reserves, Russia Running On Empty -- Reuters

(Reuters) - For all the sanctions Western leaders can throw at Russia, the biggest threat to President Vladimir Putin's ability to back separatists in east Ukraine is something beyond his or their control: the price of oil.

With Russia's $2 trillion economy heavily dependent on crude exports, oil prices are always closely monitored by the Kremlin, but the government is particularly wary now as tensions with the West mount and sanctions ratchet up.

Such conflicts often push up crude prices, but as long as oil, which accounts for 40 percent of state revenues, remains above the average $104 per barrel written into the 2014 budget, Moscow has little immediate need to worry.

The alarm bells will start ringing if it falls significantly below $100, forcing the government to pay more attention to propping up an economy already close to recession.

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My Comment: Oil exports is what funds Moscow's social welfare programs for it's poor and elderly. These groups are also Putin's electoral power base. And while I do expect oil prices to remain at the $100/barrel range for the foreseeable future .... sanctions will have a detrimental impact on Russia's ability to get credit and expertise in developing it's Siberian oil and gas fields. In short .... no oil means less money, and less money will mean cutbacks to those who have always supported Putin at election time.

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