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Page added on May 1, 2014
Putin signals that he’s ready for an oil war
The US and Europe have yet to fully deploy their bluntest weapon against Vladimir Putin. But if stronger sanctions are deployed against him, the Russian president is vowing to make life very painful for the western oil companies doing business in his country.
The US this week quietly targeted some Russian oil industry bosses in its latest round of sanctions, and Europe has altogether avoided oil in its list of new targets. But on April 29, Putin suggested that he’s prepared to mount an oil war if antagonized further.
“We would very much wish not to resort to any measures in response,” Putin said. “I hope we won’t get to that point. But if something like that continues, we will of course have to think about who is working in the key sectors of the Russian economy, including the energy sector, and how.” The remark appeared to be a swipe at lucrative long-term Russian projects being carried out by oil majors BP, Shell, France’s Total and ExxonMobil.
Obama administration officials have told the New York Times’ Peter Baker that Putin’s personal wealth is the “nuclear” option in terms of sanctions. But that is true only if personal enrichment is Putin’s central concern. If his driving force is instead historical glory, which is arguably the case, then oil—and its pivotal importance to Russia’s economy—is more important.
The revenue from high-priced oil exports is why Putin can prosecute his shadow war of territorial expansion in Ukraine. Russia’s future production in Siberian shale and Arctic oil will underpin the country—along with the political careers of Putin and his successors—through the 2020s. That future production is also why the western oil majors have all publicly said it is business as usual with Putin.
Specifically, oil and petroleum product exports account for an estimated 41% of Russian state budget revenue—$167 billion this year alone. Russia’s projected overseas 2014 oil and oil product sales of $275 billion will make up three-fourths of the country’s total exports.
But that picture could be altered significantly should the US and Europe sanction Russia’s two big energy companies, Rosneft and Gazprom, and thus prevent the western oil majors from helping Russia to develop the shale and Arctic plays. Many analysts believe that Russia’s ability to exploit the Arctic would be crippled without western expertise.
Further sanctions will be a central topic when US president Barack Obama meets for four hours in Washington tomorrow with German chancellor Angela Merkel. But, even if Obama is prepared to strike Russia’s oil companies, few believe that Europe will go along.
That hesitancy is at least partly why Russia and its supporters continue to swallow up town after town in eastern Ukraine as the days count down to competing elections to define Ukraine’s future—a May 11 referendum for the sovereignty of at least two Ukraine cities, and a May 25 Ukraine presidential election. Those elections are likely to make official what Putin has made plain: that he believes that eastern Ukraine is already his.
31 Comments on "Putin signals that he’s ready for an oil war"
Davey on Thu, 1st May 2014 9:34 am
Real politic in action and Putin appears to have the trump cards and motivation. If the west pursues this further the consequences will be dangerous for an already fragile confidence bellow the surface In the financial markets. On the ground in Ukraine we are seeing people power in action in Putin’s favor. I am doubting the hype on shale and Arctic. We know here the difficulties and cost especially in the hostile environment of Siberia and the Arctic. This will not come without pain to the Russian GP. Russia is now in recession with capital flight, investment decline, and increased inflation. The numbers on oil and it’s part in the Russian economy should be of worry also. That segment is already investment starved. Are we looking at another potential Venezuela ?
bobinget on Thu, 1st May 2014 9:34 am
I keep repeating: This Ukraine bidness is indeed oil-centric but not the way it appears, face value.
Putin will never invade Ukraine, that’s US or Israeli policy. Today’s ME boots OG conflicts are fought with/by willing political and religious zealots.
Putin ‘signaled’ his intentions years ago by aligning with Syria, Iran and Iraq. From this year forward these four nations rule Western world oil prices. As long as China continues it’s non military interventionist policy it will become the world’s largest oil consumer.
The best recent read on the subject: “What We Left Behind”
by Dexter Filkins in The New Yorker. 10,000 words that will change your thinking on the future of oil and Mideast politics.
April 28th issue or on line.
tahoe1780 on Thu, 1st May 2014 10:12 am
Another perspective: http://www.zerohedge.com/news/2014-04-30/battleground-ukraine-comprehensive-summary-russian-perspective
Plantagenet on Thu, 1st May 2014 10:34 am
@bobinget
Your claim that Russia will never invade Ukraine is very silly. Russia has ALREADY invaded Ukraine. Have you forgotten that Russian troops took over Crimea? Even Putin now admits he sent troops in to invade Crimea.
Sheesh!
Makati1 on Thu, 1st May 2014 10:36 am
Russia can take down the West anytime, and Putin knows it. You do not get high up in the KGB by being stupid.
Europe is not going to do anything that jeopardizes their already failing economies. Especially Germany, who will be expected to pay the Ukraine’s bills eventually if it is admitted into the EU.
This is nothing more than a last gasp attempt at world domination by a toothless empire. The Us lost it’s diplomatic ability when it invaded Iraq on a base of lies. Now it is up against real power and intelligence and all it can do is bluster and threaten ‘sanctions’ that will hurt the West more than Russia.
That’s how I see it from here.
Makati1 on Thu, 1st May 2014 10:39 am
Plant, are you really that blind? The Crimean people VOTED to go with Russia by an almost 100% majority (97%). I don’t recall any Russian troops involved other than the 16,000 or so that were at their military bases per previous agreement. No one was hurt or killed, unlike the Kiev Mafia sponsored by the US that are killing anyone they want. You drink too much US cool aid.
bobinget on Thu, 1st May 2014 10:47 am
Plant: Directing hundreds of ‘agents provocateur’
is not exactly ‘Shock and Awe’.
Putin aims lower. His intention is to keep Ukraine off balance, in a state of fear. This is pure slight of hand,
misdirection away from Iran and Russia’s main business
securing Syria in its anti Western anti Israeli, Saudi, Axis.
Read up guy, there’s a major power shift in progress.
(not the going ahead sort of progress)
Davey on Thu, 1st May 2014 10:48 am
Tahoe, I read that article yesterday and found it very interesting. Apparently lots going on behind the scenes of the global game. Yet, much more to it then the spooks and their games. There are millions of ordinary people trying to get by and many small to medium sized businesses at the grind of daily activity. The article reminded me of Arthur. Where are you Art?
Davey on Thu, 1st May 2014 10:52 am
Makie, you sound so dramatic about you poster girl Russia. You have an issue with exaggerations. We will forgive you and when we read your posts divide it by Pi !
Kenz300 on Thu, 1st May 2014 11:50 am
Every country needs to develop a plan to become more energy self sufficient………….
A transition to alternative energy sources like wind, solar, wave energy, geothermal and second generation biofuels made from cellulose, algae, and waste can go a long way toward reducing dependence on outside sources. It will also provide local jobs and help the local economy.
It is time to reduce reliance on major oil exporting countries and the major oil companies.
baptised on Thu, 1st May 2014 12:28 pm
Could it be that Putin just wants to keep another civil war from happening? especially on their border. I saw a picture with the original leader, the one that was overthrown, with a stupid look on his face like he did not have a clue of what was happening. While Putin is setting beside him with his head in his hands. I say this because everybody projects on another person the way they view things themselves. And everyday we the USA become more about “gaming” to get what we want or need. I don’t know if it is because of the stock market, war hawks, fine print in all service contracts that ends up saying they are not liable for anything or not actually making anything anymore or all of the above. Let me be clear I do not know this, but neither does others that claim Putin is a, genius, evil genius, or egomaniac.
Makati1 on Thu, 1st May 2014 12:54 pm
Davey, delusion or paranoia? You seem to have a twisted idea of my position on world events and a definite bias re Russia and China. No problem. I see the world one way. You see it another. That’s life. ^_^
Plantagenet on Thu, 1st May 2014 1:02 pm
@Makatai Are you really that blind?
Referendums conducted under military occupation are against international law. There were tanks on the street corners and masked Russian gunmen at ever polling place in Crimea!!
chilphil1986 on Thu, 1st May 2014 2:46 pm
Crimea voted to join Russia via referendum and fewer than ten people died directly relating to violence during the process. This is rehashing old news, but the demographics of eastern Ukraine are different from that of Crimea proper. Putin can’t simply waltz into open arms like he did a month ago, and logistically and tactically speaking, it’s far more difficult to defend miles of borders that could potentially be redrawn versus a two mile strip of land that divides Crimea from everything else.
tahoe1780 on Thu, 1st May 2014 2:49 pm
Plant – Source? Where was International Law during the coup that started this mess? (BTW, Who do YOU think was behind it?) Under what conditions will the general election be held?
Plantagenet on Thu, 1st May 2014 4:21 pm
The dishonesty here is amazing.
If it was OK for regimes to invade neighboring countries on the basis of “demographics” then Mexico could invade California, Russian could invade certains boroughs of New York City, and Spain could re-invade Latin AMerican and South America.
peakyeast on Thu, 1st May 2014 4:48 pm
Why wouldnt EU be interested in a war?
There has been serious speculations that Germany at least partly went into war because of the lousy German economy. Its always nice to able to blame the problems on someone else and today the propaganda machines are finetuned and always active to help this viewpoint.
chilphil1986 on Thu, 1st May 2014 5:13 pm
Because the ‘going to war boosts the economy’ hypothesis no longer holds true like it did in the 1940’s. Oil is $80 per barrel more expensive and the points of extraction ARE the battlefields versus the 40’s scenario of oil being plentiful enough to be extracted in meaningful quantities from ‘the backyard’. After the Soviets going bankrupt after a decade in Afganistan and the US going into recession after five years in Afghanistan and Iraq, there’s more examples of war being detrimental to a country’s economy than the converse. Vietnam and Korea helped out Dow Chemical and whoever produced choppers, but otherwise didn’t do squat. Oil is the blood of mechanized warfare. Without it, we go back to sailboats, horseback and chariot.
rockman on Thu, 1st May 2014 5:15 pm
Peaky – I had the same thought. I doubt Putin has been motivated by a potential increase in domestic popularity but that seems to be developing. And now he can blame Russia’s poor economy on the “sanctions”. A lot of Russians might not buy it but many probably will use it as some sense of self justification..
DC on Thu, 1st May 2014 5:49 pm
Hey Plant&Co, the 1950’s just called, they want their Red-Scare Paranoia back. You should spend more time worrying about the very real schemes being cooked up and acted upon by your own home-grown zionist oligarchs now, as opposed to the make-beleive scenarios and machinations of those ebil Russians. Keep going on about ‘invasions’ that never happened and an ‘international law’ that your own country breaks each and every single day. Besides the u$, its media info-tainment complex and a few of its most loyal satraps(IOW nobody credible), no one else is singing the ‘annexation tune’. Suggest you get over it. If you amerikans keep going like you are, the Ukraine your elites hoped to annex (for themselves), is going to end up a tiny patch of an dirt poor rump state that even the Moldovans will be calling a basket case….
Perk Earl on Thu, 1st May 2014 6:18 pm
Putin’s doing what any good General does, probe the front lines for weaknesses and at the same time intimidate, with an end desire of scooping up the Ukraine. I say ‘desire’ because he’s playing this one close to the vest, not going head long in like an imperialist, but instead trying to get it by nibbling away at the fringes.
He’s also probing the West’s resolve to protect the Ukraine now intimating FF will be on the line if there are any more sanctions against Russia.
He’s a savvy one, testing, probing, intimidating, pretending to be a peace maker, etc. Wouldn’t it be ironic if Russia stopped NG to the EU next winter and the US was expected to make up the shortfall? One good side effect is NG prices would rise, incentivizing more fracking.
Perk Earl on Thu, 1st May 2014 6:19 pm
Not that fracking is good necessarily, just that the old mantra of NG prices being too low would no longer hold.
tahoe1780 on Thu, 1st May 2014 7:49 pm
Who’s invading? Did I miss something? Last I heard, the number of Russians in Crimea were below the number authorized by treaty and located on their naval base. After the vote and petition, Crimea was peacefully annexed. Can anyone point to an independent source verifying that Russian National troops are fighting in Ukraine proper? If you’re calling the pro-Russian Ukrainians “Russian”, what do you call the pro-western Ukrainians who displaced the democratically elected president? Who benefits from a pro-western Ukraine? Beware another false flag.
Makati1 on Thu, 1st May 2014 8:15 pm
tahoe, you are correct. By all the articles and sites I have been reading since the coup by the US sponsored mafia, Russia has had at least 6,000 fewer troops in the Crimea than it was allowed by agreement with the real Ukraine government. But, the US Ministry of Propaganda has totally brainwashed the sheeple to believe that it is all that dirty Rusky’s fault.
tahoe1780 on Thu, 1st May 2014 8:31 pm
From Eastern Ukraine:
Dear N and R,
Thank you for your attention to us. We are fine. A picture on TV is not always equal to reality. We live as usual. I’m sorry for not answering you quickly. We had a lot of work in Olympic committee — our main activity. April is always busy.
A conflict in Lugansk is localized near administrative buildings in the city center and does not directly concern us. We don’t see neither Russian nor Ukrainian military and can sleep calm for now.
For my opinion, the main point of conflict in Ukraine is that protests in Kiev on Maidan in November — February against Yanukovich were not peaceful. People occupied buildings, threw Molotov cocktail on police, used guns. In February they won and their leaders got the governance.
But those who protested are not the whole people of Ukraine. As for the eastern part of the country, most of the people here were against Maidan. The main thing that people on the East don’t like is nationalism which was propagandized on Maidan.
After the new people began to rule, they have done the following:
– put their people to rule in the eastern regions
– proclaimed the policy to European Union, which will need hard economical reforms and will lead to worse real standards of living. The economy of eastern regions is closely connected with Russia and it can result as an economical collapse and unemployment if those relations are stopped.
– tried to cancel a law about Russian language as a regional one
The people on the East are more inert than people on the West. So people here need more time to start doing something, but it is hard to calm them down after that.
The peaceful demonstrations on the East against the policy of the new authorities didn’t have any result. And so the «mirror» effect of Maidan started here. People occupy administrative buildings, create military formations.
I think that if the current government wants to save unitary Ukraine they could execute eastern people demands:
1. Russian as a second state language.
2. Elections instead of direct assignment of regional governors.
3. Referendum about main policy of a country
Instead they try to use army and special military formations against people and accuse Russia in everything.
Most of the people that protest now want to have more regional power but not to be a part of Russia in fact. Russian flags on barricades is more the symbol of an opposite opinion. There were Europe flags on Maidan, there are Russian flags here on the East.
We don’t know what will be in the future, but we hope that common sense will win and we avoid open military conflict.
In Friendship,
Tanya
Makati1 on Thu, 1st May 2014 9:00 pm
FYI:
“…The Pentagon has no “great solution” to reduce its dependence on a Russian-made engine that powers the rocket used to launch U.S. military satellites, the Defense Department’s top weapons buyer said…”
http://www.zerohedge.com/news/2014-05-01/pentagon-admits-no-solution-replace-russian-rockets-launch-us-military-satellites
LMAO!!! ^_^ And we need them to take our astronauts to the space station.
alokin on Thu, 1st May 2014 9:50 pm
The German industry is against sanction, they sell very well in Russia and the Ukraine.
And wouldn’t be a gas price spike be very handy for the US? They could sell to Europe then and keep fracking.
rockman on Fri, 2nd May 2014 5:38 am
Alokin – Given that the US imports about 7% of the NG we consume I wouldn’t think a price spike would be good for the county’s economy. Of course, it would be great for the Rockman’s economy. LOL.
Bor on Fri, 2nd May 2014 5:59 am
The US is sooooooo confused…
Just very recently we did not even know where the Ukraine is. How about now?
Tom on Fri, 2nd May 2014 7:46 am
Oil, energy, is the issue. Specifically, fossil energy. The smartest move is to embark now on a “to the moon” alternative energy program. Start taking the value out of oil and avoid the obvious future resource conflict problem. It will make the U.S. much more competitive and secure. It will change local and world politics. A business powered by solar energy, that it owns, will be able to predict it’s energy cost and will see an immediate balance sheet and cash flow benefit. It will be able to depreciate the solar capital asset. Why continue to be dependent on a energy resource that can quickly become unreliable and expensive? It is time to solve the problem.
tahoe1780 on Fri, 2nd May 2014 9:35 am
Tom, I’d like to see it too. I haven’t seen any methods to build out that solar infrastructure (panels, batteries, backup, electronics, distribution, etc.) that doesn’t use copious amounts of fossil fuels though. The other issue is the warranty (useful life) period. Its not a build and forget. There’s also that liquid fuels, energy density thing…