Russia Preparing To Use Energy in Economic War: DB

Russia Preparing To Use Energy in Economic War: DB
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An article in Deutsche Bank’s January 19th Konzept report suggests that if Russia feels it is losing its ongoing economic war with the West, it may take further steps to extend the battlefield to the energy trade. Author Peter Garber says it is clear that Russia is not wavering in its nationalistic stance on Ukraine, and Putin is apparently willing to sacrifice the nation’s economy in an attempt to make his vision of a 21st century Imperial Russia a reality.

Russia’s economy slipping fast

Economic sanctions by the West and most of all a 55% decline in the price of oil has brought Russia’s economy to it’s knees in the space of just nine months, despite Putin’s $450 billion war chest and desperate efforts to prop up a sinking ship. The Russian economy is expected to contract by at least 5% this year, and inflation is clearly picking up steam.

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Garber highlights that in a purely rational world, Putin would realize that his Ukraine adventure was a disaster and certainly not worth letting the economy of his country crumble, but Putin is clearly not rational and for him the strategic geopolitical import of keeping Crimea/Ukraine in the Russian circle of influence is worth almost any economic price.

Putin might unleash an “energy war” to try and divide and conquer if he feels cornered

Unfortunately, Garber makes a persuasive argument that Putin will not hesitate to use Russia’s leverage in the energy trade, as a cut off of gas (or gas and oil) to Europe in the wintertime would create huge problems. Moreover, a natural gas cut off would also serve to further fracture the EU as certain countries would inevitably suffer greater economic harm than others.

Garber explains why he feels that an energy war is Putin’s vest bet: “…playing the natural gas card is the only chance to reverse the strategic tide running against Russia in this economic contest. This scenario is a suggestion of the possible, not the probable. But if the geopolitical challenge dominates policy, trying to change its structure from a losing contest with a monolithic opponent into one against a collection of squabbling middle-sized and small countries would be a temptation.”

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