Let’s pour oil on the fire

This phrase usually means making things worse. However, President Trump has hinted at the possibility of reversing its meaning.

Ostensibly speaking to the World Economic Forum at Davos but in reality to Putin and OPEC, he said: “If the [oil] price came down, the Russia-Ukraine war would end immediately.”

Don’t know about immediately, but Trump has a good point. Overlaying the historical graph of oil prices over that of Russia’s military forays one can see a different inverse relationship, as I’ve found out by following expert opinion.

Thus, the Soviet Union invaded Afghanistan in 1979, when the oil price was at a record high. Corrected for inflation it equalled $140 in today’s money.

In 2008 Russia attacked Georgia. The oil price was still high, about $130, again in today’s money.

In 2014, Russia annexed the Crimea and set the Donbass on fire. The oil price was stubbornly staying in triple digits, at about $110 a barrel.

And the price was still $110 a barrel in 2022, when Russia embarked on a full-blown aggression against the Ukraine, plunging Europe into a war the likes of which hadn’t been seen since 1945.

Since then the price has come down, to about $78. But it’s still high enough for Putin to finance the war by circumventing Western sanctions and dumping his oil at sale prices to anyone willing to do business, mainly China.

That relationship also works the other way: Russia tends to succumb to peace overtures when the oil prices dip.

In 1986 Ronald Reagan struck a deal with Saudi Arabia, the world’s biggest oil producer. The Saudis agreed to crash the price per barrel by stepping up their production. The prices went down from $140 a barrel to $30, and the button for Russian withdrawal from Afghanistan was pushed.

In January, 2015, the oil price dipped from $110 to $50 a barrel. A month later, Russia signed the Minsk agreements, which she broke the instant oil became more expensive again.

Oil economists believe that getting the price down to the 2015 level of about $50 will force Putin to sue for peace straight away. That strikes me as way too optimistic, the kind of optimism that can only ever be based on a deficit of knowledge.

If currently Russia is spending over a third of her budget on the war, a collapse in oil prices may raise that proportion to 50 or even 75 per cent. That would turn the Russian population into cold and hungry paupers deprived of even the bare essentials of life.

But that wouldn’t deter Putin, or at any rate wouldn’t do so immediately. Concern for the well-being or even lives of the people has never figured prominently on the Russian list of priorities, certainly not since 1917 and not all that much even before then.

Their conduct of the on-going war shows that treating lives with cavalier disregard hasn’t exactly gone out of fashion there. Putin’s generals are pursuing the war effort by paying no attention to the growing list of casualties. They are throwing wave after human wave at fortified positions, with their forces advancing through the puddles of their comrades’ blood.

Conditions in the rear haven’t yet reached catastrophic proportions, but the Russians are considerably worse off now than they were three years ago. Yet one doesn’t see any mass protests, nor any fiery headlines in the papers. Such is the nature of any totalitarian state – and of the Russian people whose tolerance of deprivations has been honed throughout their history.

Having said that, the avenue to peace that Trump hinted at looks promising. The president’s transactional talents may not work on the Russians, but the Saudis are more receptive to pressure. They may grab at any carrot dangled by Trump because they stand to lose a lot if he swings a stick.

Trump’s entreaty of “Drill, baby, drill” may produce the same effect: if America boosts her fracking effort, she can flood the markets with liquefied natural gas, which too is bound to push hydrocarbon prices down.

There is no reason for the oil price not to drop as far down as $30 or even $20. That would indeed crush the Russian economy, making any foreign forays unthinkable even for Putin and his accomplices.

The Saudis may scream bloody murder, but that’s where the carrot can come in. The US could offer OPEC countries any number of concessions that would make up for the lower price of their principal export. In any case, such a dip would only have to last as long as the war. Once it has ended, the prices may be allowed to seek their natural level.

Donald Trump is on to something here. He might have identified the only way for the Ukraine and her Western allies to occupy a position of strength in any negotiations with Russia. Instead of appealing to Putin’s nonexistent good nature, Trump could simply whip his trusted calculator out and show him a few simple sums.

Here, Vlad, this is what’ll happen to your economy at $50, $40, $30 or $20. And did I forget to mention it? Here’s a copy of my agreement with OPEC who are ready to do what it takes. So this is where you sign.

This approach has got to be more successful than trying to intimidate Russia with more sanctions they know how to circumvent, or to bully Zelensky with the threat of cutting supplies off. As a concomitant benefit, a period of cheap energy would inject some resuscitating medicine into the sclerotic veins of Western economies.

A footnote has to be attached to every pronouncement made by Trump, good, bad or indifferent. His words and his deeds have been known to go their separate ways, and he doesn’t always take the trouble of thinking before talking.

But I have a feeling that this time around he has found, and is prepared to act on, the right ploy for ending the war – not in 24 hours, not immediately, but soon. Best of luck, and do let’s hope the strategy will succeed.

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