Why Russia’s Unfazed By Falling Oil Prices -- Zero Hedge
Oil is not quite as powerful a weapon against modern-day Russia as one might think.
By arguing that the slump in oil prices will finish off Russia just like it did the Soviet Union, Ambrose Evans-Pritchard, writing in the Daily Telegraph, is forgetting how far Russia has come since those dark days.
It is true that the USSR couldn’t cope with falling oil revenues and that Saudi Arabia is credited with helping to break up the former empire by dramatically increasing oil production from 2 million to 10 million barrels per day in 1985.
And sanctions could make it harder for Russian firms to access Western know-how, and ultimately affect Russia’s oil output.
But that’s only if they drag on for years—which is doubtful, given the price the EU is already paying. A cut in global oil supply—and stronger global growth—will likely rebalance the oil market in the meantime.
A measure of Russia’s improved prospects is that the population is growing again for the first time since 1992. In fact, sanctions notwithstanding, Russia’s finances look pretty stable for now.
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My Comment: Regular readers of this blog know that my nationality is Russian .... and that I am always trying my best to stay current on everything Russian even though I no longer live there (with the exception of the odd trip for about a month or two each year). What's my take on this plunge in oil prices and it's impact on Russia .... as I have said many times in this blog for the past few months .... for the short term it is going to be rough, but Russia is fortunate to have deep financial reserves and an economy that continues to grow. To put it bluntly .... the subways and trains will continue to run on time, pensions will be paid, social and medical services will be available, and the government will continue to function. The real problem will be if this crisis continues for two or more years .... because if that happens Moscow will then be forced to make some hard decisions .... namely what to cut .... but I sincerely doubt that such a point will be reached.
4 comments:
This is part of the trend of the Western Media and Politicians fixating on an image of Russia that was 1980's-1990's, not the Russia of today. This mindset is going to lead to big big problems.
I concur James. The perception that Russia is like the old Soviet Union is totally wrong. Russia is now something that is completely different .... and like China .... is now focused on policies that are no longer ideological (Thank God for that).
Yes WNU, no longer does the world live in terror of the Lada and Trabant!
My first car was a LADA James .... and it's unique feature was that the heater only worked during summer. (air conditioning .... only a dream in my mind at that time).
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