Cheap Oil And The Russian Revolution

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The sitting government in Russia has not had this much fun since Vladimir Lenin died.

Falling oil prices, now sitting well under $40 a barrel. are forcing the Russian government to shut down almost every non-essential program it has in the works. The billionaires who bribe Putin’s people are felling poor. A regime without kickbacks is a regime without power.

The sharp drop in oil has moved Putin from being a man who could invade his neighbors at will and carry on war games with Chavez in Venezuela to a fellow who is fighting to keep his job.

According to The Wall Street Journal, "The drop in oil prices is eroding the Kremlin’s ability to replenish its gold and foreign-currency reserves just when it needs them most." The ruble is falling as fast as the popularity of the government.

Russians like to take to the street from time-to-time in a attempt to overthrow those seated in the Kremlin. It is a sort of blood sport filled with vodka and killings. But, it has a way of bringing about reform even if the new bosses look the same as the old ones.

There is a great deal of irony in the fact that the one global economic event which could help pull China, the EU, and US out of a deep recession–a sharp drop in the cost of energy–could cost the Russians a significant part of their power base. Oil is no longer good currency for holding adversaries hostage.

A big recession is like that. Fortunes can turn the wrong way in an instant. Putin never saw it coming.

Douglas A. McIntyre