Putin's Three-Legged Stool
The Russian crisis has its roots in the Kremlin's dangerous reliance on oil, crime and nuclear weapons as the cornerstones of its power. By trying to maintain Russia as a superpower on this unstable three-legged stool, Putin has set up a destructive resonance from which it is proving difficult to escape.
The Russian economy is losing its fight against the American fracking industry. "We cannot ignore the growth coming from shale," IEA Executive Director Fatih Birol told reporters. It is threatening to drive some OPEC members into bankruptcy. "While Birol avoided directly saying what OPEC must do, the warning from the oil watchdog is particularly ominous for the oil group, which may be forced to continue holding back its own production to prevent prices from collapsing again, as they did in 2014."
Putin and the higher-cost OPEC oil producers are squirming at the end of a hook. They want to keep prices up but yearn to pump as much as they can to replenish their dwindling state coffers.
Russia is slowly being beggared. Worse, what money the Russian kleptocrats extract from oil has nowhere to go but the West, because you wouldn't deposit it in Moscow. London has the dubious honor of being regarded as the money-laundering capital of the world. The Russians must hate to become vulnerable to British bureaucrats but there is nowhere else to go.
In the aftermath of the Sergei Skripal poisoning there were calls to freeze the Kremlin's palatial assets in the posh neighborhoods of London. But like the Russians, the British were trapped in a marriage of monetary convenience.
This has driven Putin east to China in an effort to escape the squeeze. Russia is desperately building pipelines east to avoid a critical dependence on Europe. An oil industry watcher notes: "[T]he latest stage of Russia’s Eastern pivot: the launch of the expanded East Siberia-Pacific Ocean pipeline that would lift Urals crude supply to China twofold, to 30 million tons annually. Gazprom is on track to complete the Power of Siberia gas pipeline by 2019. The 2,500-km mammoth of a pipeline will pump 1.3 trillion cu ft of gas to China annually."
But heading east is no panacea. The Chinese have proved as calculating, if not more so, than their European counterparts. RT reports that China is looking to become co-owner of Russia's biggest oil company. CEFC China Energy is acquiring a $9.1 billion stake in Russian oil giant Rosneft. If Putin's not careful the Chinese will wind up owning him.
The other major story of the week is Xi Jinping's transformation into the modern emperor of China. When Putin looks away from Brussels the view is no improvement, for he sees a leader in Cathay incomparably richer than himself. China's sheer economic power can only remind him of how wretched Russia's position has become.