February 03, 2015

Who's Out to Get Russia?

Who's Out to Get Russia?

What the Russian Blogosphere is Saying

For the last several months, world oil prices have been plummeting. As a result, Americans have received a pleasant surprise at the gas pump, but for Russians, the price drop has spelled trouble. The Russian ruble has tumbled in sync with oil prices, despite the government’s attempts to keep it afloat, and the oil industry’s troubles are resonating throughout the economy. Representing up to 30% of GDP, Russia’s oil and gas industry carries a lot of weight.

Down goes the ruble

“I really wonder,” one Yuriy Krupnov asks on LiveJournal, “why is it that people who are 100% wrong (that’s 2 times off) in their predictions of oil prices are called ‘economists’?”

So traditional economists are not to be trusted anymore. Faced with the prospect of economic instability, professional and amateur economists and political scientists took to LiveJournal this month, trying to explain the sudden souring of Russian fortunes. Their theories range from the reasonable to the bizarre, and their language varies from academic writing to journalistic sensationalism to profanity-laced vitriol.

The story – at least, as we know it in the west – is simple: supply has finally caught up to demand, prices began to correct downward, and then at a key moment Saudi Arabia vetoed the OPEC decision to cut back supply, protecting its own interests. But according to Russian bloggers, there are bigger, more nefarious plans at work.

One theory, which reaches conspiracy-theory levels of complexity, claims that it’s all about gold. User matveychev_oleg examines the major opinions (the US is punishing Russia for electing Putin vs. Saudi Arabia is dumping cheap oil on the market to push out the US), rejects both, and concludes that the deeper reason is that the US needs to depress energy costs to be able to keep producing and selling off gold, keeping its price low, and thereby keeping the dollar strong. But that’s not all: the post ends with a conversation with a probably-hypothetical American friend, “David,” who explains the US’s further plans:

“We will push India and China into war. They now have most of the world’s gold reserves. We will take on the role of presiding judge and help them fight each other. In exchange for gold. When the war is over, both countries will be weakened beyond belief. Each country’s gold will be ours. And the cycle will begin again.”

Too much speculation about the future? Then try this slightly toned-down version: user kungurov traces the price fall to a back-room deal between the US and Saudi Arabia, where the two countries agreed to a temporary drop in prices to push Russia and Venezuela out of the market, at which point demand would catch up to supply, prices would go back up, and both architects of the deal would win big. Sure, Kungurov admits, maybe the US is not making clandestine deals to get back at Russia – but it has that opportunity, and “having that opportunity, it’d be a sin not to make use of it. What else would you do if you were Washington?” This logical chain then inevitably leads to a revolution to topple Putin, then Western hegemony over Russian resources. The outlook seems bleak; the world looks like it’s conspiring against Russia.

But not to everyone. Former oil guy Mikhail Slobodin sees a set of far less menacing factors as the cause of the price drop:

1. There’s been a bubble in oil prices recently

2. The oil market is more sensitive to changes in supply and demand

3. Contrary to expectation, no wonder-surge in demand materialized

4. But there has been an incredible increase in supply (hello, shale oil!)

5. OPEC has been rendered immobile by Saudi Arabia’s veto

6. A lack of major geopolitical disturbance (revolution, war) has let oil prices cool down

7. And the dollar’s strong

Slobodin backs up his statements with figures, professional expertise, and experience gained in the North Dakota shale oil fields. On the other hand, he doesn’t even touch on who might benefit from these developments—or even how terrible it might be if the prices stay low.

The theories are out there. Who do you believe?


Image source: Flickr user centralasian, exchange-rates.org

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