Rainbow Resistance...


COMMENTARY

Does Putin really have his pants down?

Rana Bose


Photo Courtesy: www.redbubble.com

Policy makers in the West and Europe seem to be happy and elated with the idea of Oil Price deflation.

1. Proposition: Russia and Putin are cornered by the sanctions and the oil price deflation and the Russian economy will go down the tubes and Russia's arrogant, egotistical and aggressive attitude towards some of its neighbours will consequently suffer an irretrievable head wound. As a result, the growing opposition to a US and Europe-dominated world economy, a single-power world political scenario, will receive a terminal blow. So, the West's strategy is - one step at a time - first bankrupt and outflank Russia, then outdo China and the BRICS-type consolidation will automatically collapse. Fact Check: Yes, the Russian economy will be deeply affected. The ruble will be catastrophically devalued, as is very clear every day. Russia's sovereign bond market has been hammered.

But! The Russians are not today's fools. They have been around for centuries. Since the collapse of the Soviet Union, the dismembering of Yugoslavia and the "no-Fly" tactics over Libya, as well, they have learnt a few other lessons. They had already started taking counter measures for a long time. As certain journalists have recently remarked, Russia has clearly pivoted to China, Asia, even India and Latin America; they have made deals with Turkey, switched off the plans for the South Stream pipeline to supply Europe. Russia's debt is only 200 billion dollars, approximately. The US debt is approximately 18.3 trillion dollars, as of this moment. The US national debt increases by 2.43 billion dollars per day. So let's put the entire discussion into some perspective. Who is actually bankrupt and who will be bankrupt, maybe soon? In the short term, meaning the next few years, Russia will suffer. The US economy on the other hand, is a runaway train going downhill, trying desperately to find an uphill terrain somewhere down the road to slow down its descent.

1) Oil price deflation is good for the less well-endowed. For the poor of this world. Less energy prices mean less inflation, lower commodity prices. It is good for the general public. Which is 99 per cent of the world's population. Laissez-faire economists, the business press and government spokesmen in advanced countries and aspiring, emerging nations, especially those who do not depend on oil/exports say that this would spur lowered business costs, greater margins; will stimulate business, will give households greater savings and thus boost the economy.

Fact Check: This is a nearly asinine, simplistic pipe dream that has repeatedly been busted in the past business cycles. Oil price deflation has always been accompanied by the rise of the US dollar and a corresponding decline of currency in the emerging markets. Even developed nations like Norway, who depend on energy exports to a great extent, have seen serious currency devaluation. And of course, so have Brazil and Australia. Not to mention Russia, Venezuela and Nigeria. And now the Indian stock market is beginning to crash. So, when the emerging markets cannot buy/import, whose economy will prosper?

China, incidentally, reduced its export-dependent economy after the 2008 meltdown, by nearly 20 per cent. So, if China and the rest of the Non-Aligned Nations (120 countries) have a hard time buying US goods and services, who will suffer? Europe is also in a recessionary mode. This is already leading to injection of liquidity, funds from banks into various economic sectors. As has invariably happened, such injections often lead to feeding stock market and bond asset bubbles. And finally, it is the oil and energy assets that have performed well in the stock markets. The collapse of financial assets linked to oil could have a domino effect on all other assets. The financial instability that will result will be contagious. In the new "globalised' world we live in, even the lower middle class have invested small amounts of money for their future. And that will all come crashing down. Bankruptcies will happen everywhere. Small businesses will suffer or close down. The notion that reduced energy prices is automatically a blessing, is myopic.

When US currency ascends, the investors will run away from emerging economies and invest typically in an already volatile US market, perhaps real estate. What else is there to invest in? There will thus be a compounded credit squeeze on emerging economies. The much sought after FDIs will drop off and as well real income in emerging economies will suffer.

2) With the shale gas success, dirty oil in Canada (tar sands, etc.) and the disastrous fracking adventures going on, there has been great elation in the US about energy self-sufficiency. The US has become energy independent. The Sheikhs have been beaten back!

Fact Check: Not! Shale, tar and other such sources of crude oil and gas cannot operate below 60$ a barrel. Already tar sands companies are laying off workers. Shale production will be cut short. This in turn will bore into associated industrial production, which has been the hope of re-energising the US economy and keeping Canada humming along. In any case, much of the drilling and fracking has been facilitated by high-yield junk bonds, leveraged loans and they will come crashing down. So, once again the temporary elation of seeing Putin with his pants down will overlook the fact that the West's own underwear will soon be soiled. The stains will appear soon on the outerwear. The housing crash of 2008 will resurface as an energy crash. The Sheiks of Arabia are wily enough that do not always follow US diktat. By not cutting production, they have effectively not only caused a glut in oil reserves, squeezing Russia, they have also effectively jacked up US currency and essentially estranged it somewhat from energy-based valuation. Now what will happen to "petrodollars" as our generation has long been associating dollars with? Will gold be back? Does the US have enough gold? It is a big secret, is it not? Meanwhile, the speculation is that China may have much more gold than the US. And for sure, the drop in oil prices is a great boon for China, which is one of the largest consumers of oil and gas. So will the mighty currency of world exchange be forced to depend on gold reserves? Is it advantage China? Putin may put in capital controls, to prevent the flow of capital out of Russia and the West will again start barking about autocracy, plutocracy, oligarchy and all the "-cracies" that the West is famously known for highlighting to others.

So, what next? War with Russia? There is a slight possibility. Border provocations, skirmishes, assassinations. Except that the US' allies in Eastern Europe today are discredited oligarchs, like Ukraine's Poroshenko. Remember Obama's famous "Poland will never stand alone. Estonia will never stand alone. Latvia will never stand alone. Lithuania will never stand alone. Romania will never stand alone."? Well, they are all run by parasitical oligarchs, corporate head honchos or simply brought up in the US and transplanted. What is going on is already war. It's the new war of this century. It's a hot cold war. It is a CIA war. False flags, propaganda dissemination to a country's elite through planted stories, manufactured opinions. It is what the CIA has been attempting in Latin America in Venezuela, Argentina, Brazil, Chile, Bolivia and Ecuador ever since they realised that bribing a coterie of tin-pot military dictators would not work anymore. So sabotage the economy by other means and spread disaffection. It's a proxy war, which the mainstream media is so pig-in-shit happy about, to discredit Russia and Putin. But, here's the problem. The world in general does not want a war against Russia or China. The West does not seem to understand that 90 per cent of the world does not buy into its chest thumping morality crusades. You can try as hard as you want, but you cannot make the people of Asia, Africa and Latin America side with the West against Russia and China.

It may not be really outrageous to say that a shirtless, pants-down Putin will turn out to be a greater visionary who will tough it out far longer, than a lame-duck Obama, whose shine and swagger only appeals to the conservative monetarist and evangelical mindsets of stiffs like Merkel, Cameron and Harper.

The author is an engineer, writer and playwright.

Tags: Oil price, shale gas, Russia, China, US economy


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