The Kremlin Panics
“We must defend ourselves, since this is our revenue base, both from oil and gas.”
— Russian “President” Dima Medvedev, December 11th
It’s hard to imagine a single act the Kremlin could take that would more conclusively demonstrate its total failure of economic policy, and its abject panic as a result, than to announce it is considering becoming a member of OPEC — which is exactly what the Kremlin did last week. Medvedev sounded like the Nazi hordes were at the barricades and it was Moscow’s 11th hour.
And maybe it was.
Openly admitting that Russia is fighting for its life, that its ability to sustain itself depends totally on the price of a commodity set by international markets, “President” Medvedev indicated he had no choice but to undercut Russian sovereignty still further by ceding the decision as to how much oil Russian can sell and when to the Arab petrostates.
By doing so, Russia would not only give up a massive amount of control over its own economic policy, it would burn its bridges with Europe and the United States, becoming a formal part of an organization which, subsequently, would be viewed no differently than the Warsaw Pact was during the cold war with the USSR.
And make no mistake: There is no “solution” in OPEC membership for Russia, only a desperate bid to delay collapse. Russia cannot afford to simply stop selling oil for long periods in order to bid up the price, as the OPEC nations can. Russia is not like them. It has a huge population that is desperately impoverished, and it is trying to wage cold war with the West through an arms race.
The Russian stock market seems to know this. Although the price of oil spiked up after Medvedevstarted talking about OPEC last Thursday, on Friday the stock markets took another massive hit, with both the MICEX and RTS exchanges down over 5% and the RTS oil and gas index down nearly 8%. The markets were once again shut down to halt implosion.
And the Kremlin is getting desperate. The ruble had its worst week in nearly a decade last week, and no amount of neo-Soviet propaganda can conceal that fact from the population. Even its own officials are left with no choice but to admit that the economy has entered a massive recession, and Putin himself is clearly showing the strain. Russian desperation and panic is also very clear from the Kremlin’s pathetic efforts to silence reporting on the crisis.
So perhaps the Kremlin is prepared to sell Russia to the Arabs. After all, the Kremlin has courting Islam for years now. It has been willing to provide nuclear technology to the radical Islamicists of Iran, weapons to Syria and cash to terrorist groups like Hamas and Hezbollah. Maybe Russia is prepared, since its population is already becoming Muslim, to go all the way. Who knows, maybe “president” Putin is prepared to convert, if that’s what it takes to stay in power.
Tsarist Russia became Soviet Russia. Soviet Russia became KGB Russia. Maybe KGB Russia will become minaret Russia?
But this begs the question: Can Russia afford to cut back on oil sales in order to help manage the price?
The answer is simple: It’ can’t. No matter how you look at it, OPEC is a path to destruction for Russia, another step on the nation’s inglorious slide into the dustbin of history.