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What Rankles Russia
Putin's Energy Weapon Cuts Both Ways

Putin hasn’t been shy about using his country’s energy exports as a geopolitical tool in recent months, but that energy weapon is a double-edged sword. As Reuters reports, Russia’s global oil and gas clout also makes it vulnerable to the vagaries of hydrocarbon pricing:

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.

The International Monetary Fund warned in May that Moscow had no contingency plan for such a scenario, so a sustained tumble in the price of crude could even undermine Putin’s grip on power.

“If the oil price goes down to $75 and stays there for a few years, Russia will have regime change,” said a prominent Russian economist who asked not to be named.

Putin has been playing his hand very well these recent months. But in many ways, his position in Russia, and Russia’s position on the geopolitical stage, is precarious. The country’s economy is no juggernaut, and roughly 40 percent of Moscow’s budget is derived from oil sales. Even a relatively small $10 dip in the price of oil would cost Russia 5 percent of its budget revenue, and 1 percent of its GDP.

Lower oil prices aren’t the only threat to Russia’s economy. The country’s hydrocarbon output, though formidable, has stagnated in recent years. Siberian fields, which make up 80 percent of the country’s production, have matured, and their output is falling. Moscow has been slow to invest in new plays, and in new technologies as well. This is most apparent when it comes to shale, a resource about which Russia was seemingly in denial as recently as August of last year. Since then, Russia has woken up to shale realities, but the latest round of Western sanctions is aimed at keeping the technology necessary for unlocking these reserves from a belligerent Moscow.

For better or for worse, Russia’s strength is strongly entwined with its ability to ply its hydrocarbons.

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  • Duperray

    In your obsessive Obama-driven hate of Russia, many media-writers let their phantasms get lose (perhaps just to expel untold internal fear to see US lose its world supremacy).
    It is a childish attitude.
    Russia has been able in 10 years to absorb the soviet-to-multi-party transition trauma. With twice as much (little explored) land (with no desert) as US and half its population, natural resources are not a concern. With China as immediate near-by customer and fund supplier, they have all elements to perform a huge economical development.
    China is far more stable and long sighted partner. On top of that, they have no sea-navigation vulnerability.
    In the while, what did America do? Not drawing history lessons from Vietnam, they foundered themselves into Irak quagmire upon fallacious pretexte and are close to again do the same in Ukraine. Now, under Democrat delirium, CO² is “the worst enemy of mankind”, as a result, despite huge coal/oil/gas resources, the politically correct dominant moto is to gradually kill them and jobs by the way.

    America is a very strong exporter of software and Hollywood production (your two major $ export items), while Russia and China became undoubtfully the most advanced nuclear energy technology exporter states. This is a solid and useful export item, while entertaining people with videos and key boards looks superficial: How can US or Europe keep previous nuclear leadership with most of federal agencies and population no longer wanting nuclear?

    Look how deeply demoralized US population is: More than 50% do not pay federal tax ! Exactly same level of decay as France is today and many economists thinks that the latter cannot recover but only further dip. On top of that, media 99% Leftist oriented are step by step destroying the american values we like so much.

    Russia does not need external Cassandra previsions (as usual always wrong) as they are on the rise. US is not and you know it very well. Better to care for your country as Kennedy told “Don’t ask what America can do for me, but ask yourself What can I do for America”.

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