As oil prices continued to plunge last week, it was instructive to watch the disparate reactions of three governments whose whopping losses are likely to produce some of the biggest international stories of 2015.
There was the panicked scrambling of Venezuelan President Nicolás Maduro, who skipped his own state of the union speech for a desperate world tour in search of loans or promises of $100 oil. He got neither, even as rumors flew back home about whether he would be allowed to stay in office on his return.
There was the cool response of Vladimir Putin, whose ministers announced drastic cuts in government spending — except for defense. Russia’s proxy forces in eastern Ukraine meanwhile launched a new offensive.
And there was the energetic engagement by Iran’s foreign minister in negotiations on a nuclear deal that would lead to a lifting of U.N. sanctions. This followed an argument back in Tehran between the country’s president and its supreme leader about whether Iran should pursue an opening to the world or a warlike “resistance economy.”
Those snapshots fairly reflected the betting in Washington about the likely consequences of a sustained drop in oil prices for Venezuela, Russia and Iran, three troublesome nations that depend on energy exports for anywhere between 68 percent and 95 percent of their external revenue. Venezuela appears on the edge of a political chasm. Putin will try to fend off domestic upheaval with more foreign aggression. And Iran will make a fateful choice between forging a lifeline to the United States and Europe and consciously embracing isolation and harsh austerity.
Other countries, of course, will be hurt by the loss of oil revenue. But these three stand out for the way high-priced oil has bloated their geopolitical ambitions and financed their rogue behavior. Putin, attempting to reconstruct Moscow’s Soviet empire, has launched two military invasions of neighbors in six years. Iran, seeking hegemony in the Middle East, is fighting expensive wars in Iraq and Syria even while it builds the infrastructure necessary to produce nuclear weapons. Venezuela’s hopes of creating an anti-American bloc in Latin America have prompted it to deliver 200,000 barrels a day of heavily subsidized oil to 13 countries, including Cuba.
As revenue precipitously drops, the biggest blowback is to be found in Caracas, where lines eight hours long stretch outside state grocery stores for disappearing supplies of food and other basic commodities. With only $20 billion left in its reserves, and $50 billion in debt to China alone, Venezuela appears headed toward a choice between abandoning its oil giveaways and defaulting on its debts, or starving its own population to the point of revolt.
A recent analysis by Moody’s concluded that the Maduro government will be unable to pay for basic imports and its debts almost regardless of what it does. With Maduro’s approval rating in the 20s and the opposition preparing another mobilization, it’s no wonder Venezuelans are remembering past coup plots and popular revolts — and preparing for the worst.
The mood in Moscow appears more resigned: With substantial support from Russians and hundreds of billions still in his country’s reserves, Putin is relatively well positioned to weather a bad year. Still, the living standards of millions of state employees, including teachers and health-care workers, will plummet under the budget cuts announced last week, while regional governments — including volatile ones in the Caucasus — will be starved of funds.
That’s why it’s significant that the military is exempted from the austerity plan. Western observers take it almost as a given that Putin will use nationalism to deflect the pressure of domestic economic discontent, which probably means more fighting in Ukraine and maybe elsewhere in Eurasia. The alternative, a peace settlement that eases Western sanctions, would require Putin to abandon his ambition of bringing Ukraine back under the Kremlin’s dominion — a concession that might be more dangerous to his regime than the coming recession.
The most intriguing response to the oil price crisis will be that of Iran. A Jan. 4 speech by President Hassan Rouhani laid out one side of the argument among the leadership: Iran’s economy, he said, “cannot develop in isolation from the rest of the world.” Hence the seemingly heightened seriousness of Foreign Minister Mohammad Javad Zarif, who held extra sessions of talks on a nuclear deal with Secretary of State John Kerry in Geneva last week.
An answer to Rouhani, however, came days later from Supreme Leader Ali Khamenei, who argued that the West could not be trusted to lift sanctions and that Iran could thrive under an autarchic “resistance economy.” Perhaps a few months of austerity, and its domestic effects, will change Khamenei’s mind. Either way, Iran’s response to the oil crisis will shape this year’s events across the Middle East.
Plantagenet on Mon, 19th Jan 2015 4:29 pm
The WaPo assumes these countries will quietly change their ways and start being more friendly to the USA in response to the oil glut. However, it is just as likely that Venezuela and Iran will ape Russia, and lash out in defiant or aggressive ways.
dissident on Mon, 19th Jan 2015 4:59 pm
http://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS
Fraction of oil in the GDP of various countries. This Washington Post propaganda is transparent. It is utter BS.
bobinget on Mon, 19th Jan 2015 5:57 pm
China, for all intents has colonized Venezuela and for smaller measure, fellow OPEC member Ecuador.
Upshot here will be many fewer oil barrels going to the US. Enough one would suppose to service
Venezuela’s two CITCO refineries
http://www.reuters.com/article/2014/11/06/us-refinery-sale-citgo-pete-idUSKBN0IQ2AH20141106
However if these refineries and down stream (unprofitable) ‘gas’ stations are included in the package, who knows how much oil will come US way and how much need go for China’s debt service.
I’m reading Venezuela is already flooded with Chinese goods. Doubtless more will come.
Bad for US export businesses but enormous harm will become evident as gasoline and diesel shortages set in.
I can’t see China reneging of oil subsidizes for
Central American and Caribbean countries.
Additional markets for China’s trade goods.
Mark-up several additional loses of the US on account of this transparently synthetic ‘oil glut’.
Losing Venezuela’s oil is the dumbest, potentially
disastrous outcome.
Folks at FOX are no smarter then our State Dept.
But:
When they do figure out this blunder it will be Benghazi all over. The difference of course,
expensive, scarce gasoline is far more understandable then Mideast politics to Joe Sixpack. This issue could well swing the election.
FOX will blame Obama for ‘losing Venezuela’.
toolpush on Mon, 19th Jan 2015 6:31 pm
Canadian Tar sands is an excellent substitute for Venezuelan heavy oil. Keystone anyone?
andya on Mon, 19th Jan 2015 6:40 pm
This is a typical response when optimists can’t avoid glimpsing reality, a long rant of incoherent drivel. Most of the articles on PO and other sites follow a similar pattern. Lots of froth, and very little facts.
On the first day God created idiots, but that was just for practice; on the second day God created economists.
GregT on Mon, 19th Jan 2015 6:58 pm
Somehow I don’t think that God created economists, that would be somebody else………….
Makati1 on Mon, 19th Jan 2015 7:03 pm
Love the deniers (you know who you are) when they try to protect the ‘exceptionalism’ of the USSA. America ALWAYS points it’s finger at other’s problems but forgets that four fingers point back at themselves.
Looking at the headline, I would say that they will be fine after the dust settles. Of the USSA, I am not so sure. We shall see.
Makati1 on Mon, 19th Jan 2015 7:12 pm
There no economists in the Forbes list of the world’s billionaires. Seems to me they should be among the wealthiest, if they really knew what they were talking about. But instead, there are wrestling managers, lipstick salesmen, etc. Economist’ only view is in the rear view mirror. Ignore…
redpill on Mon, 19th Jan 2015 7:51 pm
Makati1 is full of shit.
That 7:03 post is pure raving. Rave away Mak, rave away…
On a serious note, I worry for the average people in Venezuela. They will not “be fine” as asshole states. Depravation is growing and their leadership is completely at fault. Either a military coup or something even worse seems inevitable.
marmico on Mon, 19th Jan 2015 7:58 pm
Canadian Tar sands is an excellent substitute for Venezuelan heavy oil.
Eagle Ford condensate is an excellent blender to make 32 degree refinery input on the Gulf Coast.
Go, Iraq, go. There is no geologic reason that Iraq can’t supply as much as Saudi (8 mb/d).
Makati1 on Tue, 20th Jan 2015 8:32 am
LMAO repill. you are a bad joke, like a few others here. Cannot take facts or truth in any form. Maybe you are just scared shitless?
Dave on Tue, 20th Jan 2015 8:40 am
It’s a good thing, that according to some, the law’s of economics only apply to our enemies or perhaps countries that MSM would like us to believe are our enemies. Meanwhile tar sand and fracked oil are apparently unaffected according to their logic. More pure BS from MSM.
Davy on Tue, 20th Jan 2015 8:55 am
Mak, Red and I know selective facts when we see them. Anyone that says they know the truth is an idiot. I guess that is all we need to say about you basically an idiot that says he knows the truth while using selective facts and statistics with an agenda. That is the definition of a propaganda bitch in my book.
bobinget on Tue, 20th Jan 2015 11:52 am
“Idiot” is a bit harsh.
How about delusional?
Hopeful?
Optimistic?
Distracted?
Sleepy?
Pessimistic?
Depressed… Yes, finally discovered my condition.
Davy on Tue, 20th Jan 2015 2:33 pm
OK, Bobby, I was harsh but Mak pissed me off. We had a truce and he broke it. We were going to lay off the geo-politics and focus on doomer issues. Makster could not stand being fair and objective and drifted back into his old ways. His foulness and disregard for the principals of truth required a response. I don’t claim to know the truth but the truth should be at the highest of levels of human respect. We can get closer to it and all other lessor affiliations must be subordinate. Science seeks the truth so our opinions should at least trend toward the fair, balanced, and objected just like the scientific method. If you are going to choose sides say so but don’t hide behind the truth. Mak, claims to know the truth and the facts. He says he has the line on the sources that are not influenced by propaganda so he says. We here know otherwise.
Newfie on Tue, 20th Jan 2015 6:05 pm
Why does every forum on the web degenerate into personal animosity and attacks ? Some of us just come here to hear various points of view. But then… Humans have been fighting with each other for all of recorded history and it’s safe to assume for entire three million years of our evolution from primates. Uh… We’re still basically monkeys I guess.
Makati1 on Tue, 20th Jan 2015 7:25 pm
Newfie, you got it! We have never really left the ape level. Some are a bit more advanced and some are less. A lot of what you see here is about indoctrination, not facts or truth. They think they are correct because they have been indoctrinated from birth to believe what they defend. If you think that cannot be possible, ask any Muslim, Catholic, or Protestant.
I saw that indoctrination in action this past weekend when the Pope visited the Ps. He got treated like God on Earth. No head of state EVER got or will get that kind of reception. They closed the airspace, canceled 300 flights, turned off cell phone reception in the areas he traveled, millions turned out in the rain to listen to him in an open air park in Manila. THAT is indoctrination like Americans get every day in the 50 states.
It took me about 55 years to see through the indoctrination and bullshit. Many never do. It is not their fault. I had to get out of the place where indoctrination occurs 24/7/365 before I could think outside the box, so to speak. It is still difficult to pick out the facts, if any, from the mountain of BS put out by the TBTF and the TPTB on every channel, movie, book, magazine and website. All I can say is:
“I would rather live surrounded by the exciting chaos of birth that is Asia, than the struggling chaos of death that is the West”. Josh Galt
Newfie on Wed, 21st Jan 2015 4:58 am
Monkey societies are hierarchies. Human hierarchies are built and maintained by indoctrination and cultural brainwashing. In the Philippines it is Catholicism. In Thailand it is Buddhism and the Monarchy. Etc… I don’t see any ideology-free zones anywhere on this planet.
Davy on Wed, 21st Jan 2015 5:56 am
Mak, you are the worst of the hypocritical because you now practice indoctrination. You preach against indoctrination then preach it. You are like a Jedi who has come to know the force and turn to the dark side in pursuit of an agenda. Yours is a message of hate and bitterness directed at a country where your life was a failure. You have nothing to show for your 70 years but a little ass social security check.
NewF, you can bitch all you like about personal animosity but this is life. You are acting sheeple by not wanting to hear the unpleasant. Mak is engaged in propaganda plain and simple. He is selectively using the facts to diminish one side and promote another side for a personal agenda. Mak, only cares about himself. His side winning supports his major life changing decision of leaving a life with the enemy. We have seen this in history where some of the meanest soldiers were the traitors. There is hated and anger in their hearts. This is who Mak is.
NewF, we are in a very critical time in history where we cannot enable hypocrites to distort the truth. The truth is paramount now for survival in a rapidly destabilizing world. A proper message must get out to counter the false messages from the top. People with agenda’s that use selective facts to distort this truth are just plain bad for the social fabric. Mak, is bad for efforts at reconciliation and common purpose. At least in the descent down before we go mostly local we have to work together. This spaceship we call BAU is going to fly apart before we land at the local without cooperation. Where we are now we can’t decouple because of mutual codependence of all locals on a common global.
We cannot allow a false truth to replicate. I don’t claim to know the truth but I generally can smell false truths, distortions, and agendas. I believe in compromise and acceptance of different sides but if I am attacked personally I will respond. Mak is mean and bad spirited to me and my people. He is an asshole. If Mak were around home here he would have his ass kicked for being a dick.
Newfie on Wed, 21st Jan 2015 11:37 am
Sigh…