December 19, 2008
Cheap Oil And The Russian Revolution
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

http://www.247wallst.com/2008/12/cheap-oil-and-t.html