The words of US President Barack Obama during a radio interview two days before the end of 2014 were interesting. He said that the main factor in Russia’s ability to maintain the stability of its economy, despite the sanctions imposed on it, is its oil revenues. Obama’s words attracted much attention from observers, especially after the prices declined by 50 per cent. Statistics indicate that Russia’s oil revenues totalled $174 billion in 2013, which represented 70 per cent of its imports, and covered 50 per cent of the Russian budget revenue; the figures were based on the price of oil being $100 a barrel.
What Obama did not say publicly can be inferred from the initial results of the lower price per barrel for Russia, which exports 7.2 million barrels of oil a day. Moscow’s income has been reduced by around $350 million a day ($100 billion pa). In addition, there has been a decline in economic activity and investment as a result of political and security factors. The indicators have also recorded a decline in growth and development, and the value of the Russian rouble has gone down by 45 per cent against the major foreign currencies. The decline in the oil price has had an impact on the banking sector, with the withdrawal of tens of billions in investments forcing the government to intervene in order to save Russia’s third largest bank, Gazprombank, with liquid assets.
Despite the bleak economic and financial situation in Moscow, Russian President Vladimir Putin insists that the crisis can be overcome in two years by means of what he called “appropriate” measures taken by the government and the central bank. He stressed that urgent and effective action is being taken to cope with the difficulties but is clear about the cause of the crisis.
“We all see the lowering of the oil price,” Putin said. “There’s lots of talk about what’s causing it. Could it be the agreement between the US and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”
The crisis is an economic one but the objectives are political. It can basically be described as a new Cold War emerging between the United States and Russia. The current calm conflict between the two superpowers is taking on various forms of pressure and the utilisation of all means in order to achieve their goals; political pressure will be exerted in areas where both countries have influence, especially in the Middle East in places such as Iraq, Syria and Lebanon. In Europe, pressure will be put on Ukraine. This could be a strategic point following the loss to Russia of a key area of influence in Cuba; the US president quietly pulled the rug from under Moscow when he announced after a telephone conversation with Cuba’s President Raul Castro that diplomatic ties have resumed between the two countries after over 50 years of sanctions and boycott.
Putin may not have lost all of his political cards though; during his most recent visit to Turkey he tried to open channels of communication, while his alliances with China and Iran remain. Perhaps 2015 will be a crucial year for Putin to respond and retaliate against Obama’s targeting of Russia’s oil. Will further geopolitical tension in Ukraine, the Middle East and Russian ally Iran’s sphere of influence in the Strait of Hormuz be Moscow’s response in an effort to raise the oil prices once again? Or will this be the year of US-Russia understandings and settlements in order to share power and influence in these areas?
Translated from Al-Araby Al-Jadid, 7 January, 2015
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.