There has been some rather interesting articles in ”Die Welt” by Eduard Steiner and Gerhard Gnauck. Very inspirational.
Fact: For the time being 60% of all state revenue in Russia comes from energy export customs.
To some readers this concept of taxing exports is foreign: Export is something you subsidize, not tax! Well you are right if you are a half way functioning nation, then you would tax the profits of the oil companies.
But Russia is far from out of the middle ages – administratively speaking – so you tax what you can get your hands on and you will know quite easily what amounts pass through the pipelines or are loaded on board tankers – trust me: A super tanker in the gold fish pond is very hard to miss.
So naturally Russia has been doing what they can to make their energy export as independent of others as they can! They have built:
- A pipeline getting operational in Ust-Luga near Sct. Petersburg. This will bypass the need to transit oil through White Russia. Not that their petty pilfering wasn’t annoying: But if Russia is gang of thugs, then White Russia is a maximum security penitentiary for the criminally insane. This project has been muscled through in a very short time
- The Nord Stream gas pipeline from Russia to Germany under the Baltic sea, just to make it more secure. This is being extended into Poland thus securing Poland’s energy supply – which in time may go the other way – depending on how the oil shale pans out.
- The South Stream gas pipeline to Austria – avoiding the Ukraine whose mental stability is also in doubt.
Expensive? Oh yes; but you don’t muck around with 2/3 of your tax revenue!
Very few people realise just how dependent Russia is on their oil (and gas) exports.
Some paint the energy giant Gazprom OAO (PINK:OGZPY) as the sinister character – but let’s face it: Gazprom OAO is the Russian taxpayer! The present oil price of around 110 USD/barrel seems to give a balanced budget. In 2008 with oil prices of 60 USD/barrel the economy dropped with 8%.
Twenty odd years ago I was in a small way involved with prognosticating energy prices long term for an energy supply company – the various estimates were so diverging, that it absolutely made no sense. It is a subject where everybody has a considered opinion – if they are ignorant enough.
Let’s face it: It is not “the market” that sets the oil price – or rather the market is being played by far greater forces.
The USA has more than a little leverage on the oil price due to the country’s strategic reserves – the size of which is state secret. This gives the perfect opportunity to play the market: Buying and selling for future delivery will set the price more or less where it is desired – with no deliveries being made, as those forward positions can be closed any time.
The USA itself is reasonably independent of oil prices – true the American consumer gets quite uncivilised when the prices at the gas pump goes up – downright rude; but that is nothing they can’t avoid: They could f.i. buy smaller cars. Europe as a whole – while not unaffected by price – has to a large extent moved toward energy efficiency and diversified sources of energy supply.
No, the energy price sensitive economies are Russia, Japan, China and to some extend India. And they are sensitive in the extreme.
Russia has nothing but oil, Japan has no oil – and China and India are getting there.
Am I forwarding a conspiracy theory?
If you suggest a conspiracy means that the USA has a coordinated foreign and security policy – then yes.
Note that in the present situation it is in no way in the interest of the USA that Russia collapses economically as it did in 2008 – especially as the Chinese are the ones paying for it. There are a lot of arms reduction talks this year – where both parities might get substantial better budgets. It is in no way unwelcome for the US that Russia is tethering precariously economically – it just might open the mind to mutually beneficial solutions.
Come on: Both Obama and Putin know that neither Estonia nor the Slovak Republic is going to invade Russia any time soon!
Putin may be a cold hearted bastard; but he is not a Hitler – he is far to level headed and calculating for that. He rigged the election – so what – he probably overdid it; but Russia isn’t a horticultural society for retired persons.
Obama is not a screaming revolutionary, but he is pragmatic with few illusions about job creation and finance.
China on the other hand is blustering and very difficult to work with.
Fortunately within the last decade a new regulator has appeared with respect to China: Food. Formerly the USA had to choose between sides: High oil prices benefitted Russian and hurt China – and vice versa. Today the US do not have to make that priority any more – food is the new tool in the kit.
This gives a different perspective on the place that countries like Libya, Iran, Iraq and Syria have on the world arena. They are a challenge to diplomacy and a remnant of a cold war that was over two decades ago – and with no real purpose in life inferior dictators just run around making their populations miserable. Influence on the oil price – no, not really. But then both commodity traders and bankers tend to take themselves very seriously.
Let’s face it: We will have to live with oil prices at the 100-120 USD pr. barrel for some time – maybe even a couple of years. The Russians will have to pay their infrastructure (pipelines) and some investments in their agriculture and transport systems before it will fall again. For the time being Putin is the best bet.