Obama’s Invisible Hand

The ruble exchange rate with respect to the dollar and oil prices is probably the most-discussed economic topic today, but if the decline of the ruble against the dollar can somehow be explained by our regulators’ not-so-successful monetary policy, the causes of the decline in oil prices on the world market clearly lie beyond Russia’s borders.

Not that everything is so clear as far as the ruble goes. Many reputable experts have told me that international investment funds, so-called vulture funds, have been intentionally causing the ruble exchange rate to fall, and these organizations’ pursuit of easy excess profits is always counterbalanced by a desire to go with the flow of Washington’s policy.

But back to oil prices. I’m absolutely certain that the decline in oil prices is the result of a deliberate policy by the United States aimed at chastening a rebellious Russia that dared to not fall in line. I’m even almost certain that President Obama is the architect of this policy against our country.

And I can imagine that Obama, who had always criticized the Republican administration for its “excessive use of force in foreign policy,”* is even proud of the fact that he is using exclusively a “soft power policy” against our country. Bush would have already gone to war with the Russians, he says, whereas we are limiting ourselves exclusively to sanctions, an information war, a financial war, and bringing down oil prices.

One of the best oil and gas market analysts we have, Konstantin Simonov, very plausibly explains the mechanism by which Washington is acting against world oil prices today. The Federal Reserve today has simply stopped its so-called policy of quantitative easing.

That is, the Fed has stopped pumping into the American economy the huge amounts of money that, since the 2008 crisis, it had been channeling as aid to American financial institutions and the real estate sector. Consequently, the drop in oil price quotes is in no way connected to the balance of supply and demand in the sector.

Within the structure of crude oil prices, explains Simonov, the prices of oil futures account for no less than 80 percent, prices which are in no way connected to oil’s “primary market.” It is precisely the prices of futures that have fallen as a result of the Fed’s current policy.

So when Saudi Oil Minister Ali al-Naimi claims that oil prices on the world market are falling because Saudi Arabia doesn’t want to reduce its oil production quotas, he is, to put it mildly, making a public statement that is totally at odds with reality because even if Saudi Arabia and all of OPEC as a whole greatly reduced oil production, it would in no way be reflected in futures quotes.

However, the Saudi minister’s subsequent discourse is very interesting. He says that if Saudi Arabia reduced production, prices would go up, and the market share would go to Russia, Brazil and the United States. And so supposedly in order prevent this, Saudi Arabia will seek to reduce world oil prices to $20 a barrel.

Riyadh needs this in order to force the above-named competitors to cut production. The minister ended his statement with a panegyric to liberalism, “We want to tell the world that high-efficiency producing countries are the ones that deserve market share.”

In actuality, world oil prices have never taken shape in a market-based way. Even oil futures quotes are a financial superstructure built upon an absolutely nonmarket-based foundation: Saudi Arabia’s monopolistic collusion with the U.S. State Department. It is in this very way that the price of oil has been determined for no less than 70 years now, that is, since the end of World War II.

How did Washington manage to talk Riyadh into bringing down oil prices this time? Not only, I think, with the fact that, today, a cut in oil production can’t affect oil futures. There are persistent rumors that the Americans promised the Saudis to postpone the “shale revolution” for about five to eight years, leaving Saudi Arabia the opportunity to be the dominant oil producer and exporter during that period.

To be honest, I don’t really believe in the shale revolution. I’m still not convinced that it’s not a propaganda stunt. But that the Americans have decided to reactivate their own oil fields is a fact, and it’s a fact that, in my opinion, speaks volumes.

It seems highly likely that the U.S. doesn’t simply want to cut oil production in Russia and Brazil; it looks like with Saudi Arabia’s help they want to force us out of the European fossil fuel market altogether in the medium term, and not just out of the oil market, but the gas market too.

That is, today’s drop in oil prices is needed to at some point protect the Saudi-U.S. alliance’s monopoly position on the European market, followed, needless to say, by a very sharp price hike without Russia, of course. But that the Europeans will have to pay a whole lot more for oil; well, that’s their problem. The Anglo-Saxons, as is well-known, have neither friends nor enemies, only interests.

What’s behind this? Greed surpassing all limits that does in the person in the well-known criminal saying?** Or does the U.S. have an ace up its sleeve, like a program to move to alternative energy sources in about 20 years? In my mind, seeing the quality of the current American administration, the first scenario is more probable, but who knows.

At any rate, if Obama manages to pull down the price of oil to $20 a barrel, we really will have to leave the European market. The most we’ll be able to afford in such a situation is only to fulfill our allied obligations with China, and even then, exclusively on a nondollar basis. I’m not talking about simply moving Russia-China oil trade to the yuan. Chances are, at $20 prices we’ll have to settle accounts with China on barter or, at best, through commodity clearing.

But all that happens, happens for the best. If such a scenario becomes a reality, the reindustrialization about which our president speaks will become not just highly desirable, but a life-saving necessity.

It should be understood that we got hooked on the oil-and-gas needle not by the Russian authorities’ deliberate plan, but solely as a by-product of Gaidar’s “radical reforms.”

When the liberalization of prices was announced — and a landslide of a liberalization at that, without the opportunity for businesses adjacent on the processing chain to reach an agreement on a mutual pricing policy — only those businesses that had the opportunity to export their products in exchange for foreign currency survived. That is, primarily the oil and gas companies.

Even then, in the early 1990s, it was clear that such a situation couldn’t last forever and that it was necessary to revive the domestic market and the manufacturing industry, either on the basis of investment income from the export of oil and gas to the military-industrial, or rather, the scientific-industrial complex, as Sergei Glazyev proposed even back then, or on the basis of restoring the ties among agriculture, civil industry, and the fuel and energy sector, as Oleg Grigorev proposed.

Today, we are once again returning to these tasks. If the price of oil falls to $20, that will free up huge fuel and energy resources that can be devoted to the domestic market, primarily for use by a resurgent manufacturing industry. That is, such a fall in oil prices might turn out to be extremely beneficial for us.

However, this is all just a possibility. Insofar as it’s absolutely unclear whether there is a real threat in today’s Saudi-U.S. oil blackmail or whether it’s just a promotional/propaganda bluff.

*Editor’s note: Correctly translated, this quote could not be verified.

**Translator’s note: The author apparently refers to a saying popular among Russian criminals, which, roughly translated, means, “Greed did the sucker in.”