But it might move Putin's focus away from Ukraineby Bronwen Maddox / January 21, 2016 / Leave a comment
“If oil falls to $20 a barrel, Russia will look to get out of Syria. We won’t be able to afford it.” One Russian government adviser on the conflict took a gloomy view of his country’s financial resilience—but one that might seem to suggest that cheaper oil will raise the chance of a ceasefire.
If only. The apparently endless slide in the oil price is just one nagging thought—and far from the most important—in the minds of ministers in Russia, Saudi Arabia and Iran, the main countries in what has become a proxy war fought out through roaming bands of jihadists whose identity and allegiances constantly shift and reform. Their actions are shaped far more by old, deep rivalries and modern calculations of power.
But to the extent that oil does play a part, it’s hard to see that it will be on the side of peace. Alright, there is the reminder embedded in that remark from the Russia adviser that the war is expensive and the oil price has left them strapped for cash. But if all three of those big players want the price higher, and the most likely reason it will rise is outright conflict between them—for which they have endless opportunities—then it’s hard to see that cheap oil leads to peace.
It’s hard to remember that oil (taking the price of Brent crude, one of the benchmarks) reached $145 a barrel in July 2008, and was around $112 in mid-2014. Since then it has lurched down, to around $32 now. Goldman Sachs and Morgan Stanley are both reckoning it could reach $20, driven by China’s weakness and the dollar’s strength.
As Anatole Kaletsky describes above (p16), cheap oil has been an unalloyed blessing for the countries which import it, a positive shock, in economic jargon, tempered only by the disruption it may have brought to their plans for renewables or fracking which suddenly look less appealing. For the big oil producing countries most entangled in Syria, it has been an unexpected economic blow which has followed other causes of real social and political…