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 hasincreased 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 Fogh 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?
Endnotes
[1] http://www.theguardian.com/world/2014/oct/24/sweden-calls-off-hunt-submarine-stockholm-archipelago)