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Russian Sanctions + Low Oil Prices = Pontential Trouble For The West

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snake devouring itself

“This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.”

 

No doubt there are many in our government who are delighted at the perceived damage that the West’s sanctions are having on the Russian economy and doubly delighted at the crushing effect the current low oil prices must be having on not only Russia, but also countries like Iran and Venezuela, which are not friendly toward America. Those effects are very real. However, it is a serious mistake for the West to believe that they have won this economic war against Russia. An enemy _ perceived or real _ is most dangerous when backed into a corner.

That Russia’s economy is a tiny fraction of the combined economies of the West does not mean that Russia is without options to counter attack. Russia’s ace in the hole is that is a major supplier of oil and gas to the world market; especially to Europe. No, Russia would not foolishly stop providing oil and gas to Europe. It has a much more devastating option, as explained in this excellent article (H/T to Frankenstein Government).

According to the author of the article, Russia will continue selling oil and gas and Uranium to the West, but will only accept gold in exchange.

Right now the West spends much of its efforts and resources to suppress the prices of gold and oil. Thereby, on the one hand to distort the existing economic reality in favor of the US dollar …and on the other hand, to destroy the Russian economy, refusing to play the role of obedient vassal of the West.

Today assets such as gold and oil look proportionally weakened and excessively undervalued against the US dollar. It is a consequence of the enormous economic effort on the part of the West.

And now Putin sells Russian energy resources in exchange for these US dollars, artificially propped by the efforts of the West. With these dollar proceeds Putin immediately buys gold, artificially devalued against the U.S. dollar by the efforts of the West itself!

There is another interesting element in Putin’s game. It’s Russian uranium. Every sixth light bulb in the USA depends on its supply, which Russia sells to the US too…for dollars.

Thus, in exchange for Russian oil, gas and uranium, the West pays Russia with dollars, purchasing power of which is artificially inflated against oil and gold by the efforts (manipulations) of the West.  However,  Putin uses these dollars only to withdraw physical gold from the West in exchange at a price denominated in US dollars, artificially lowered by the same West.

This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.

Do yourself a favor and read the whole well written article. To this humble observer of the asylum we all have to live in, this kind of move by Russia makes perfect sense under the circumstances created by the West.

If this story is true, and, if China and the BRIC countries join the game, the West could be in serious trouble.

Well, that’s what I’m thinking. What are your thoughts?

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  • Fred Chittenden

    The low oil prices are in many ways led by the Saudis and others in the MidEast.

    It’s likely that one significant unsung reason for the flooding of markets with low cost oil is because low oil prices may well bankrupt ISIL via making it fiscally unsound for ISIL to restore their oil production facilities that have been destroyed by opposition forces.

    Add to this the unlikely help from Iran and others in fighting ISIL — they all fear an ISIL run amuk. Low oil prices is a relatively easy way to destabilize ISIL.

    When ISIL collapses because it’s fiscal foundation of oil is gone, expect oil prices and marketing in general to return to “normal”. It may not take too long, in MidEastern time frames…

    As such, the snake swallowing itself will be of short duration…

    Energy markets, politics and policies are not static. Canada is moving to open oil exportation on the East Coast to Europe, and it’s quite possible for the US to change it’s oil (and energy) export policies to keep Russia’s Europe energy dominance sensitive to marketplace realities, much as ISIL may be pushed to the edge by the Saudis.

    One might call this one chapter of the World War Oil…