Who says pumping more American crude oil only makes profits for American big oil? Â It’s also a factor in keeping the dictators of the world who finance their regimes with higher oil prices at bay more effectively than saber rattling ever could. Â Take Russia, for example.
Oil prices, which fell below $60 per barrel on the international Brent crude index for the first time since July 2009, may be the main culprit for the ruble’s year-long slide. Putin’s government derives roughly half its budget from oil and gas revenues, and many analysts are predicting a Russian recession in 2015.
The ruble exchange rate follows the price of oil, and “it’s always been like that,” Vladimir Dmitriev, chairman for Russian state-owned bank Vnesheconombank, recently told German newspaper Der Tagesspiegel. He estimated that the Russian economy lost $100 billion when oil prices fell from $110 per barrel to $80.
And asÂ Sam Ori, executive vice president with Securing America’s Future Energy, said of Russia and its ambitious leader Vladimir Putin, it may just hand-cuff plans for 2015. Â To make matters more dicey, the Russian Central Bank hiked interest rates overnight and currency traders were not amused. Â The Ruble fell even further against a strengthening dollar.
Together with tough sanctions from the west, falling oil prices may well keep a lid on Russia’s advances on the west and in Ukraine. Â Time will tell if Putin understands economic reality well enough to pull back on the military spending.