(Written by Matt Ward)
There is a perfect economic storm rising in Russia.
Seventy percent of the Russian economy is dependent upon
oil. In order for the Russian economy to break even they need to be able to
sell oil at $109 per barrel. Right now the price is $59 per barrel. Despite
Putin recently winning: Russian Man of the Year for the 15th straight year,
he is in big trouble.
The one major failing of Putin since he came to power is
that he promised the Russian people he would diversify the Russian economy and
wean them off their over reliance on oil. He has failed to do so and this
failure is now coming back to haunt him.
Now, because of competition between OPEC oil producers in
the Middle East and the United States over American Shale production, OPEC has increased
the amount of oil produced each day and reduced the price of the oil
per barrel. Their intention is to flood the oil market with really cheap oil
and therefore kill off the U.S. shale market, which has considerably higher
costs per barrel in terms of production. This has crushed the Russian oil price
index.
This is exacerbated by unusually poor demand for oil in
2014, especially in Asia.
Russian actions in Ukraine and Crimea have drawn a reaction
from the United States and its allies in NATO that have surprised and even
shocked Vladimir Putin. The resolve and unanimity with which the West have
applied sanctions against Russia has substantially contributed to the
devastated oil price which is crippling the Russian rubble.
Vladimir Putin blames the West for the collapse of the
Russian rubble. Vladimir Putin has hinted that he could interpret these
financial actions as an economic attack on Russia, as an act of war.
This comes against a background of increased Russian
military mobilization in previous months.
Common place has been the headline of Russian long distance
fighters and nuclear capable bombers “probing” and “testing” both US and
western European air defenses by coming unusually close to infringing member
nation sovereign airspace. The Soviet Navy last month sparked a huge search and
destroy operation from the Swedish military after it was revealed they were
“90% certain” that a Soviet nuclear submarine had entered the country’s main
bay, just a number of miles from the capital Stockholm. [1]
This act was described as a blatant act of aggression by both
the Swedish military and by Nato’s Secretary General, Anders Rasmussen.
Parallel news reports also disclosed in the last month that
Russia may have developed a new game changing supersonic nuclear delivery
system that employs stealth technology. A system that has been
successfully tested. This would render all US and NATO first strike warning
systems, and therefore first strike retaliations, as null and void. It would
allow the Russian military the opportunity to deliver a devastating nuclear
first strike without fear of immediate nuclear reprisal.
At the same time Moscow, whilst the US and NATO are
downgrading and cutting back their nuclear arsenals, have been investing
millions in developing the next generation of nuclear weapons and in particular
in building a huge central command and control post deep under the city of
Moscow. This facility in itself at a cost of multiple billions of dollars (in
an economy already struggling)
Vladimir Putin is preparing for something. Putin now truly
has his back against the wall and has limited options for quickly reversing the
situation he finds himself in.
80% of the Russian public, according to recent surveys think
Putin is doing a good or very job. 85% of the Russian public unconditionally
support the Russian military. What are Putin’s options now?
He could further raise interest rates, but this could turn a
recession into a depression, or they could allow the rubble to continue its
fall, but this may trigger inflation. Putin could move closer to China…or he could
lash out and start a war.
In the past this has been his traditional fall-back position
when faced with extreme domestic issues. Does anybody remember when Putin first
came to power and his position was weak and unstable? He immediately launched a
full scale war in Chechnya.
Putin has worked hard to established close relations with a
significant number of major players in the Middle East region. Russia is deeply
involved in developing the Iranian nuclear program Israel has such issue with.
Turkey is now considered to be a major ally of Russia, both against the United
States and against Western Europe, who have denied Turkey membership of the
European Union.
Russia also enjoys substantial influence over Syria through
Bashir al-Assad, who Russia directly financed and protected during his most
unstable period 3 years ago (even going so far as to house Assad and his family
on board a Russian Naval Vessel in the Mediterranean so he would not be
assassinated during the initial stage of the Syrian civil war)
Let us also not forget the newly discovered Leviathan
Gas/Oil Field resting in the Middle East. A field so vast that by some accounts
it dwarfs fields found in Saudi Arabia, and will make the nation
controlling it the sole oil superpower for the majority of the next century.
And the Leviathan field is owned by Israel.
“And say, Thus saith the Lord God; Behold, I am against
thee, O Gog, the chief prince of Meshech and Tubal: And I
will turn thee back, and put hooks into thy jaws, and I will bring thee forth,
and all thine army, horses and horsemen, all of them clothed with all sorts of
armour, even a great company with bucklers and shields, all of them handling
swords: Persia, Ethiopia, and Libya with them; all of them with shield and
helmet: Gomer, and all his bands; the house of Togarmah of the north quarters,
and all his bands: and many people with thee.
Be thou prepared, and prepare for thyself, thou, and all thy
company that are assembled unto thee, and be thou a guard unto them. After many
days thou shalt be visited: in the latter years thou shalt come into the land
that is brought back from the sword, and is gathered out of many people,
against the mountains of Israel, which have been always waste: but it is
brought forth out of the nations, and they shall dwell safely all of them.
Thou shalt ascend and come like a storm, thou shalt be like
a cloud to cover the land, thou, and all thy bands, and many people with thee. Thus
saith the Lord God; It shall also come to pass, that at the same time
shall things come into thy mind, and thou shalt think an evil thought: And
thou shalt say, ‘I will go up to the land of unwalled villages; I will go to
them that are at rest, that dwell safely, all of them dwelling without walls,
and having neither bars nor gates, to take a spoil, and to take a prey; to turn
thine hand upon the desolate places that are now inhabited, and upon the people
that are gathered out of the nations, which have gotten cattle and goods, that
dwell in the midst of the land’” (Ezekiel 38:3-12).
Vladimir Putin is cornered. The pertinent question is this:
Is he going to lash out?
Is the hook in his jaw yet?
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