MOSCOW (Reuters) - For all the sanctions Western leaders can throw at Russia, the biggest threat to President Vladimir Putin's ability to back separatists in east Ukraine is something beyond his or their control: the price of oil.
With Russia's $2 trillion economy heavily dependent on crude exports, oil prices are always closely monitored by the Kremlin, but the government is particularly wary now as tensions with the West mount and sanctions ratchet up.
Such conflicts often push up crude prices, but as long as oil, which accounts for 40 percent of state revenues, remains above the average $104 per barrel written into the 2014 budget, Moscow has little immediate need to worry.
The alarm bells will start ringing if it falls significantly below $100, forcing the government to pay more attention to propping up an economy already close to recession.
The International Monetary Fund warned in May that Moscow had no contingency plan for such a scenario, so a sustained tumble in the price of crude could even undermine Putin’s grip on power.
"If the oil price goes down to $75 and stays there for a few years, Russia will have regime change," said a prominent Russian economist who asked not to be named.
"Two years ago I would have said $60, but now, given the lack of growth, the increase in corruption and sanctions, $75 would be enough."
I think the geo political situation in Ukraine is indicative of just how fragile the financial system and the post cold war era was/is.
I agree with David McAlvaney when he talks about how Washington has exacerbated the problem with it's monetary and foreign policy. It is obvious, this conflict is about natural gas resources. But does Washington have to be so blatant about it? We helped overthrow an elected government in Ukraine over it's close ties to Putin/Russia. We used our State Dept. and CIA to place a facsist man less supportive of Russia and more friendly to Washington and Western Europe in his place. Within in days of those changes, we have Joe Biden's son brought on to the Board of the largerst natural gas company in Ukraine.
If I were a Russian, it would look like an obvious amateur adventurism on the part of Washington. Could Washington state it's energy interests in a less obvious way? I think so as you have clearly pointed out. Could it be done in a way that averts war instead of instigating it? I think that too is clear.
Politics has become a dirty affair where politicians pimp their Rolodex's and by gaining a wealth advantage for their families through their political connections, give a black eye to our nation and the American people.
Surely their is a better way, even if it requires that myself, as a market speculator, must pay a price to avoid physical war. Frankly, I don't think small speculators have the effects on the global energy market that most think they do. Governments on the other hand have a huge position in the speculative side of energy markets as do large commercial banks and hedge funds. It seems to me, these entities are more interested in war than considering any reductions to their bottom lines.
