Sanctions and Stones Won’t Break Our Bones, But Oil Prices Hurt.

Disclaimer: This article is originally from December.

In December, the Organization of Petroleum Exporting countries met in Vienna to “discuss” decreasing oil prices. The emphasis in the sentence should be put on the word discuss because, despite the increasingly unnecessary amounts of oil being pumped everyday by OPEC countries, no action was taken to stop such an economically disadvantageous situation.

Currently, the price of oil is lower than $65 per barrel; its lowest in an estimated five years. Countries such as Russia, Venezuela, and Iran suffered the most due to the dropping oil-prices, because their national budgets require their oil to be sold for at least $95 per barrel to be sustainable. Russia loses an estimated $12-14 billion a year in revenue for each $10 drop in the price of the oil per barrel. However it seems as if the countries of the OPEC, especially Saudi Arabia, UAE, and Kuwait are not concerned with the economies of those countries, and in fact a number of them are quite satisfied with economic downward spiral that Russia, Iran and Venezuela are in. With countries choosing to ignore the troubles of others, it seems as if every man for himself. At a closer look, however, one finds that all men are for dear Uncle Sam, attending to his every whim.

The US at the present moment is trying to punish Russia for its ‘annexation’ of the Crimean Peninsula. In its pursuit to punish Russia, particularly Vladimir Putin, the American government along with its European ‘colleagues’ (read: puppets) has attempted numerous attacks, mostly in the form of anti-Russia propaganda and sanctions, directed to harm Russia, its economy, and those people who happen to be in President Putin’s immediate circle.

Well, it is an acknowledged fact that US is trying to force the Russian Federation into a corner, however, their sanctions were not having a major impact on Russia’s policies, until the crash of the oil prices, which dragged the Russian currency, the Ruble, down with it. Russia’s economy is in a recession due to the oil prices’ 40% decrease. The budget is cut, and although the Prime Minister Medvedev announced that the government reserve funds are not going to be used in the near future, those reserves might eventually be forced prop up the Russian Ruble and it’s economy. As Vladimir Putin had put it in his annual press conference on 18th December, “Sometimes I think, maybe they’ll let the bear eat berries and honey in the forest, maybe they will leave it in peace. They will not. Because they will always try to put him on a chain, and as soon as they succeed in doing so they tear out his fangs and his claws.”

The present conditions of the oil market are depended on a number of factors, the main one of them being the dollar and the output of OPEC’s oil supplies. With the US Dollar being one of the most stable, tradable currencies on the market at the present time, it is no wonder that all countries, especially the European and Middle Eastern ones, are dependent on the Dollar, and thus are mere pawns of US. Saudi Arabia, although being a prosperous wealthy country, is dependent on the dollar, as it had negotiated a deal with the USA, which allows the former to sell their oil only in dollars, thus tying this Middle Eastern country with USA.

Although most people assume that Saudi Arabia, as the biggest, and most influential oil exporter in the Middle East, is causing the decrease in the oil prices to overwhelm the US shale oil production, thus causing it to shrink under the massive weight of the low oil prices, these outcomes might not be the main objective of their actions. Saudi Arabia has been a long-time opposition to the Assad’s regime and the Muslim Shias, thus imposing a financial crisis on Russia and Iran would kill 4 birds with one stone. Russia, who supported the Assad regime and had taken a part in the Ukrainian turmoil, would financially suffer due to the oil price drop, which is beneficial for both the US and Saudi Arabia. Venezuela is the country that suffers the most due to the astoundingly low oil prices. It has also been the subject of the American sanctions and an overall annoyance to America. Venezuela’s economic destruction would be quite beneficial for the USA, as it would allow for a perfect example of what USA can do to their adversaries. Due to the decreasing oil prices, Iran is more likely to cave under pressure to USA in their talks about the nuclear build up in Iran, and it would be weakened as Shia Muslim state in the Middle East, allowing Saudi Arabia to remain in dominance of this region. Once again, these outcomes are beneficial for both USA and Saudi Arabia. US shale oil price would suffer a major setback, even if it is only 15% of it’s value lost, which allows Saudi Arabia to regain it’s supremacy and totalitarian control of the oil industry, as the expensive-to-produce shale oil would have to decrease their price to match the dropping oil prices. This outcome might not be beneficial for USA, but for an economy as strong as Uncle Sam’s this is just a piece of cake to handle, especially since the dropping oil prices fill the pockets of the US citizens with an additional $75 billion to spend on other services and allows for cheaper oil imports.

The USA, in their attempts to minimize the power of Russia, is causing harm not to Putin and his oligarchs, but quite the opposite. Not only did the aggressiveness of European countries and USA caused an increase of Putin’s popularity at home, but also harmed those people who had nothing to do with Ukraine or Putin whatsoever. The average common people of Russia are now struggling to keep their families from starving, as the Ruble fell an approximate 45% in it’s value in the past 3 months. When the Ruble averaged around 100 Rubles to 1 Euro on December 16, chaos swept over the nation as businesses had to shut down in the middle of the day because they were uncertain which prices to put up. An average annual earning of a Russian citizen in 2013 was estimated to be 30,000 Rubles per month. After devaluation, that salary, converted to euros, drops to 300 euros per month. While the common people struggle to figure out how much they will have to save to afford new clothes for their children this summer, the Russian oligarchs’ net worth haven’t decreased in their value. The reason for this is that they are aware. The oligarchs know what is happening in the world and they have been prepared for such turnout of events for weeks now. Most of their assets are in foreign currency, thus making them immune to the financial crisis that struck the common folk of Russia and SNG regions.

The conditions of the average people are never considered when countries start waging geopolitical wars with each other. The men and women of Russia and Iran, are the ones who struggle, not the politicians and millionaires. Knowing people, who are directly affected by the devaluation of the Russian currency and the decrease in the oil prices, had pushed me to realize that something must be done, before innocents suffer. It had also made me realize that in this situation I am powerless and al I can do is stand back and watch my country, my people be trumped under the big feet of the politics.