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Some additional benefits of the massive price declines in crude oil, and keeping prices down really damages their ability to recover:
REASONS FOR THE GLOOM
The reasons for the sudden gloom, bankers and analysts say, are four-fold:
-- Russian oligarchs built up huge foreign debts by buying assets at home and abroad whose stock market value has now collapsed. Since the assets are in many cases key national companies, the Kremlin has to bail the oligarchs out
-- the country's once-mighty gold and foreign exchange reserves, which peaked at $597 billion in August, have slumped to $453 billion and are dwindling at a rate of $22 billion a week
-- prices of Russia's main exports, energy and metals, have collapsed in recent weeks to levels nobody anticipated. Russia's benchmark Urals crude was trading at $44 on Friday, less than half the $95 level anticipated in next year's budget
-- many small and medium-sized Russian companies are poorly capitalized and relied on easy bank credit; they have found themselves too short of cash to continue normal operations
I can't help but think of upcoming precedents that can and will empower nations abilities to wage war through economic means. Always looking for an angle...
Russia's economic woes starting to have a significant impact on citizens, and cheap oil should continue to accelerate their economic problems:
...radio ads two years ago encouraged citizens to invest in the initial public offerings of state-owned companies, Sisoyev lined up to buy shares, first in the oil-and-gas giant Rosneft and a year later in the nation's second-largest bank, VTB. In Rosneft's case, the IPO was also seen as part of a strategy to legitimize the company's controversial acquisition of the assets of the Yukos oil empire after the Kremlin jailed its chief, Mikhail Khodorkovsky, then Russia's wealthiest man and a prominent Putin critic.
Some foreign investment funds declined to put money into Rosneft because of legal and moral concerns -- critics compared the IPO to buying stolen goods -- but many Russians like Sisoyev saw its control of the Yukos oil fields as a selling point.
"I was hoping for justice," Sisoyev recalled. "With all the natural resources in the country, our lives should be much better. Instead, only a few people had benefited. I hoped the IPO meant a more fair distribution of profit."
Some major differences with the US, interesting article here from June 1, 2007 showing how Russia was starting to drive up oil prices via driving out BP (after using their expertise to set up operations):
On Friday, reports said Russia may cancel a contract it has with BP to develop a huge natural gas field in the middle of the country...the latest in a string of incidents generally interpreted as Russia strong-arming its partners into deals more favorable to the government. These moves, analysts say, could hurt worldwide production and drive up energy costs for consumers everywhere.
In December, a consortium led by Royal Dutch Shell agreed to sell its majority stake in the $20 billion Sakhalin II project off eastern Siberia to Gazprom, Russia's state-controlled natural gas firm, after facing heightened scrutiny from Russian regulators that many saw as politically motivated.
On Friday, reports said Russia may cancel a contract it has with BP to develop a huge natural gas field in the middle of the country...the latest in a string of incidents generally interpreted as Russia strong-arming its partners into deals more favorable to the government. These moves, analysts say, could hurt worldwide production and drive up energy costs for consumers everywhere.
In December, a consortium led by Royal Dutch Shell agreed to sell its majority stake in the $20 billion Sakhalin II project off eastern Siberia to Gazprom, Russia's state-controlled natural gas firm, after facing heightened scrutiny from Russian regulators that many saw as politically motivated.
WHen oil proces were high, Russia (and Venezzuela etc) were strong arming multinationals(MNCs) to give Russia a greater stake. Now, with the oil prices falling, the pressure from Russian govt may be temporarily less.
Problem with MNCs is that 70% of the oil reserves are now controlled by national companies (NOCs) like Aramco, PDVSA, etc. MNCs are desperate to link up with NOCs and provide them with technology - one of the few good cards MNCs have. Or, they need to wait tilll the oil proce is high again to justify ecpensive way-offshore drilling and production.
The waiting for a return of high oil prices is a much more significant problem for Russia and Venezuela than any other nation, or the NOCs. Each month creates significantly more hardship, and a year of low prices would be economically tragic for their countries.
This is Russia calling. Wanna do some oil deal?
Exxon, BP, whatever. HAHAHAHAHAHAHAHAHAHAHA
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