EDITORIAL: Russia, Running Dry

EDITORIAL

Russia, Running Dry

According to a stunning, nearly 200-page analytical report released last week by the United Nations (see page 24):

The threat of depletion of Russia’s proven and accessible oil resources in 20-30 years time has become a real threat, mainly because of inadequate exploration in the past decade and more difficult extraction conditions, which require work in remote regions with harsh climate. Even during the recent boom years (2002–2008) the depletion date came nearer (from 26.3 to 21.9 years) (Figure 1.8). Reserve replacement is progressing very slowly and the crisis has clearly worsened the situation.

The situation with natural gas reserves is better, mainly due to huge deposits, which are sufficient for 70 years of production. But the expected depletion date for natural gas has moved closer by 9.4 years in the last decade, canceling out reserve replacement.

You read that right:  Within this century, Russia is likely to totally exhaust its reserves of both gas and oil.  Crude oil, by far more important to Russia in terms of generating essential foreign exchange, may be entirely gone as soon as 2030. 

Let’s repeat that:  Within two decades, three at the most, there will be no more crude oil for Russia to sell abroad unless new sources are found or the current rate of is drastically curtailed.  Within one generation, Russia’s gas resources may also disappear (if the last decade’s trend continues in the next, Russia’s gas will likely exhaust in 2070).  Russia’s hard currency reserves, before this century is out, will rapidly dwindle to nothing, the value of the ruble will plummet, the stock market will collapse and the price of imported goods will soar far beyond the means of ordinary people, an apocalypse in a country which produces virtually no worthy consumer products of its own.

The reason is simple:  Russia is guzzling oil and gas in a pathological manner because its industry is profligately wasteful and the climate demands extreme consumption which the Kremlin must vastly subsidize since it rules an impoverished population.  And Russia is selling oil abroad at a frenzied rate in order to bolster its flagging domestic economy and to fund the savage cold-war aggression of the KGB Kremlin.  By contrast, Russia is failing to invest energy proceeds in development of new energy assets, squandering them instead on cold-war politics.  This wicked one-two punch to the nation’s economic solar plexus will soon bring the national economy to its knees.

Little wonder, then, that the Kremlin is flailing about with desperation moves like seeking gas reserve on the Arctic sea floor. Even if it could recover such reserves, which is laughable, they would only slow Russia’s descent into an oblivion where it must act like a normal country and produce marketable goods for sale, something Russia has proved time and time again that, because of its benighted leadership, it simply cannot do.

A shocking one-quarter of all Russian GDP is produced by Moscow, a city with just 10% of Russia’s population.  What does that say about the productivity and living standards of the other 90% of the country?  It’s a prospect almost too horrible to contemplate.  Just as in Soviet and Tsarist times, the Kremlin is usurping the nation’s wealth for political adventures and corruption, leaving the vast majority of the population to wallow in extreme poverty and degradation.

As we’ve shown many times before, Russia’s economy has not been diversified at all by the Putin regime, and depends utterly on energy revenues to maintain itself.  The world gaped slack-jawed in horror at what happened when, because of the global economic crisis, demand for crude oil fell dramatically.  The loss of revenue severely undermined the foundations of the Putin economy, and sent Russia into the worst tailspin of any major nation on the planet.  The stock market collapsed, losing 80% of its value over the course of a couple of months.  What will happen to Russia when the country has no more oil at all to sell on world markets?

Quite simply, the economy will implode just like the USSR’s did not so very long ago.

Oblivious of these facts because they have allowed their government to implement a shocking crackdown on civil society, liquidating independent media and seizing total control of the TV news from which most Russians get their information, like bleating sheep Russians continue to “baa” their approval of the Putin regime even as it hurtles them towards a bottomless abyss of failure and despair.