Paul
Goble
Staunton, April 8 – Many in both
Moscow and the West believe that the US destroyed the USSR by driving down oil
prices and could do the same thing with the Russian Federation now, but in
fact, the West did not deploy the oil weapon that effectively in the past and
could not do so now or in the future, two Moscow analysts argue.
On the one hand, Vladimir Milov and
Valery Polkhovsky suggest in “Novaya versiya,” Russia has far more resources to
withstand any such attempt. And on the
other, the West is operating under far from constraints, domestically and
internationally, and could not continue any such policy long enough (versia.ru/articles/2014/apr/07/sideli_na_trube).
Thus, the two suggest, the only way
for the Russia Federation to go the way of the USSR, would be for its current
leaders in Moscow to make mistakes similar to repeat the kind of mistakes
Soviet President Mikhail Gorbachev did and to do so not just once or twice but
over an extended period.
Russia’s annexation of Crimea,
Tatyana Shestakova of “Novaya versiya” says in her write up of their comments,
has “provoked a new wave” of suggestions that the West will deploy the “energy
weapon” against Moscow by artificially cutting the price of oil as it
supposedly did at the end of the Soviet period and thus undermining the country’s
existence.
Milov, who heads the Moscow
Institute of Energy Policy, says such suggestions are based on a mistaken
reading of what happened a generation ago and a failure to understand how
different both Russia and the West are today.
“After the Arab oil embargo in 1973
and the prices rises of 1979-1981,” he says, “Western countries adopted
systematic measures” to reduce their consumption of oil and dependence on
imports from OPEC countries. As a
result, OPEC’s share of the world market fell from 51 percent in 1973 to 28
percent in 1985, and its price from 36 US dollars a barrel in 1980 to 28 US
dollars in 1984.
The
West itself thus “objectively benefitted from the decline in the price for oil
regardless of the fate of the Soviet Union,” Milov continues. And given the
large number of unknowns, it would have been “very difficult to predict what
effect all this could have had for the Soviet economy.”
The
fall in the price of oil certainly hurt the Soviet Union, but Milov argues,
Moscow could have undertaken the kind of reforms China did and survived.
Instead, Gorbachev sought to preserve “the ineffective old economic model” and
went ever more deeply in debt. Thus, not falling oil prices but rather “the
inadequate policies of the Soviet authorities” killed the USSR.
Nonetheless,
many in Russia and the West draw parallels between the situation now and that
of the 1980s and focus on “the dangerous dependence” of the Russian state
budget on the price of oil, a price that Moscow by itself cannot determine or
maintain, especially in the face of the dramatic expansion of US production.
But
Polkhovsky, an analyst with the FOREX Club, notes, “it is necessary to pay for
all this, as is well known,” and the advanced technologies which underlie the
growth of oil and gas production in the United States are “very expensive.” The
US couldn’t continue them for long if oil prices fell much below 90 US dollars.
Investors simply wouldn’t take the risk.
Consequently,
he suggests, the US would not take steps that would harm itself and its allies
perhaps even in the first instance. But even if it decided to try, Polkhovsky
continues, it would be “difficult to flood the world with oil,” and that too
operates as a constraint on what Washington might choose to do.
But
even if the US decided on such a policy and even if it found ways to implement
it, the FOREX analyst says, it “would not be able to achieve its goals by this
means.” That is because “Russia today is
not the USSR of the 1980s.” It doesn’t import grain but exports it, and it has
alternative sources of supply for many of the things it might not be able to
buy in the West.
“The
main thing,” however, Milov insists, is that Russia has the reserves to withstand
any such challenge for longer than it could be maintained. It has a small state debt unlike the USSR in
Soviet times, when “even Gorbachev’s financially irresponsible policy required
more than five years to push the country to the edge of bankruptcy.”
Polkhovsky
adds that there is another factor acting as a constraint on the United States
in this regard. Russia is “far from the main opponent of the US as was at one
time the USSR.” Any “sharp struggle with
the Kremlin” cannot be a Washington priority because “the main competitor of
the United States is China,” and the US will need Russia in that fight.
The
only thing an attempt to deploy the oil weapon might do, the two conclude, is
to force Moscow to carry out the kind of economic reforms that many economists
like themselves have been urging. But
any possibility that Russia will “repeat the fate of the USSR depends entirely
on itself” and not on anyone else.
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