Energy

Scenarios For Resolving Kremlin’s Oil Issues

Analysis 20 March 2020
Scenarios For Resolving Kremlin’s Oil Issues

The truly difficult times Russia has faced amid the dramatic fall in oil prices are forcing Moscow to act by two scenarios. The first proceeds from the question “Who is to blame?” and another one — from the question “What is to be done?” — in line with Russian classical literature.

Given the fact that the scenario has pretty much been the same historically, we can predict further developments in this drama.

Answering the question “Who is to blame?” we can easily predict the scenario that will be developed with respect to the person appointed as “responsible” for the crisis. He’s the new feed for the dogs, figuratively speaking. In Soviet times, he might have been just executed. And it is not difficult to guess that Igor Sechin will become that person to blame. In fact, he initiated the crisis by arrogantly throwing a “dare” challenge to Saudi Arabia.

Moreover, Igor Sechin as a skape goat will satisfy absolutely everyone — both the elite and even the Russian plebs. Especially the latter, who, one way or another, needs a sacrifice to take out malice on. After all, they can’t just go blame Putin, right?

The answer to the question “Who is to blame?” is more or less clear as we are already seeing loads of stones being hurled at Mr Sechin — by media and competitors, represented by LUKOIL Vice President Leonid Fedun, who is predicting oil at $15 per barrel. But the question “What to do?” is lacking such a definite response.

The fact is that Russia, for a number of reasons, is unable to comprehensively and effectively resist the plummeting oil prices. This is due to the direct dependence of the country’s budget and the entire economic system on the pricing for “black gold”, as well as the serious vulnerability in terms of feasibility of production at a number of deposits where oil is extracted with the use of obsolete technology, while the degree of depletion of deposits doesn’t allow suspending pumping. Another problem is that even the very demand for Russian oil is falling significantly among traditional customers.

Russian oil is uncompetitive today. And no political, economic, and especially production and technological methods will help Russia cope with the latest crisis. But, they might choose another option, applying their traditional, but effective tools like blackmail and terror, in varying interpretations.

Of course, for Russia, the optimal solution to the problem on the oil market is to pull Saudi Arabia out of the game. This can be done in two ways, either by creating the same state of emergency on the market as in 2019 amid a missile attack on Saudi oil refineries, where drones, Iranian cruise missiles, and Yemenite Hussites were used, or by intensifying by magnitudes hybrid piracy in the Strait of Hormuz, again through the potential of the Islamic Republic.

In fact, the cost might come out as not too high — a $5 billion loan for Iran.

On the other hand, besides outright terror, its interpretation may be involved, of the same aggressive nature, in particular, through sowing external or internal chaos, which could at least distract the population and elites from financial problems. It is certainly more complicated with the elites, but masses in Russia are very easily distracted by some ephemeral external or internal threats. And Russia has a great many of them, stating from the ‘Kyiv Junta’, which is ‘plotting an offensive on ‘young republics’ and the ‘prosperous’ Crimea, to the insidious NATO at Russia’s vast borders and foreign agents within.

The only question is what the Kremlin will consider to be more effective and financially justified — to initiate aggression against Saudi Arabia, or to arrange a hybrid hunt for hybrid witches within their hybrid borders.

In any case, the use of any of these scenarios, and possibly several at once, only proves that no civilized, modern methods of problem-solving have long been and will long be inherent in the Kremlin leadership, and neither were they accessible.

The article was initially published by intercourier.com.ua.

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