In many ways Vladimir Putin is the Reverse Obama. Where Obama has campaigned on alternative energy, and has sought (stupidly) to make gas and energy prices higher, to his domestic disaster, Putin depends on high gasoline and oil prices. The recent Financial Times report shows that Putin can only survive with high oil prices, with a zero account surplus as early as the end of the year if oil prices decline to $110 a barrel. Read the whole thing. The take-away is:
- Russia is not attracting capital, it is leaking it to the tune of $84 billion in 2011, 5% of GDP.
- Russians are spending a lot on import, to make up for Soviet and Post-Soviet deprivation.
- Excluding petroleum exports, Russia exports nothing of value and remains a hostile place for foreign investors.
- To gain support, Putin has pressed for an additional $171 billion in wage increases for workers.
Of course, there are off the books expenses for thugs and goons, the patronage network, and the current account surplus is shrinking from 5.5 per cent of GDP down to about zero, fairly rapidly. If oil stays at $100 a barrel, the IMF predicts Russia will have a current account deficit by 2016.
Do the math. Putin cannot afford cheap oil. His support for Iran now makes perfect sense. Putin may be many things, but stupid about his own survival is not one of them. He rose up in the “fail and get shot” KGB, Obama smoked dope and survived as an Affirmative Action hire and retread in NYC, and then the Chicago political machine.
Obama is who he is. He will keep on dreaming Green Dreams of windmills and solar panels and recycling farts, until he’s dragged out of office. That is what he knows. Putin is who he is. He knows jump-starting Iran into armed conflict with the US, and with Russian backing, will allow him nearly risk-free (because Obama is weak and cowardly when confronting America’s enemies, as opposed to its plumbers, police, and Mestizo gun owners) to pump oil for years above $150, maybe even $200. Iran is aggressive and confident they can close the Gulf because they know they’ll have Russia’s backing, and Obama will not do anything but fold against Putin.
Expect action soon, Putin knows his best chance is before a Republican take-over, as any of the current Republican candidates will be eager to rebuild the Navy and take the Gulf by force. Fill up your tank now.