#dnaEdit: Rouble trouble

Struggling to get out of the 2008 recession, North America and the European Union (EU) are only too happy with the free fall in oil prices. This has been helped by the new fuel source — shale gas and oil in the United States.

The traditional oil-producing countries in the Organization of the Petroleum Exporting Countries (OPEC), which include all of the Arab kingdoms as well as Iran in West Asia, are taking the hit with gritted teeth and waiting for the price cycle to do its job. Russia, the other major oil and gas exporting country, has not shown the stamina of the Arab countries. The plummeting oil prices have undone the economy. The rouble has fallen precipitously because it is not any more backed by the black gold. Russia is on the verge of a financial meltdown, not for the first time since the collapse of Soviet Union in 1991. Jeffrey Sachs, an American economist who served as an advisor to then Russian president Boris Yeltsin, presided over the crisis in the mid-’90s. He prescribed indiscriminate market reforms, which included garage sales of Soviet-era public sector enterprises.

It does not require one to be a Marxist to understand the Machiavellian uses of oil price volatility. The United States wants to achieve many political goals by leveraging its shale gas and oil production. It wants to force the Iranians to reach an early agreement on abandoning what is perceived to be Tehran’s nuclear weapon programme. By breaking the Arab monopoly over oil, the lifeline of industrial West, Washington also wants to check political muscle-flexing of the Arab rulers with regard to the Palestinian-Israel conflict. The US extends the economic advantage of low oil prices to checkmate Russian President Vladimir Putin for his claim over Russian-populated eastern Ukraine, including Crimea. Russia, like Iran, is already a victim of Western economic sanctions.

In its aggressive engagement with West Asia and Russia, the US does not seem to have taken into consideration the resistance it would face from the other side. Russia would endure the economic plight with its well-known stoicism. The bid to humiliate Russia would end in strengthening the resistance of the Russian people. It has happened with the Iranians as well who have held for more than 20 years. And the forces of the economy will derail American political stratagems. The US knows only too well that it cannot enjoy an economic boom unless the rest of the world absorbs its dollar investments and keeps the markets open to US business ventures. China provides a good example. The West needed Chinese markets both for investments and for doing business.

Western economic experts and political strategists are unduly exuberant over low oil prices, and they think that this is the moment to teach lessons to the Arabs, Iranians and the Russians. They are being too short-sighted in their irrational elation. Europe is caught in the recessionary squall, and the turnaround in the US economy can be sustained only through Asia and Russia. An economically prostrate Russia is not good news either for Europe or for the US. It is being argued that Putin has reduced Russia to an oil exports-based economy, and if the oil prices go down so will the Russian economy. The assumption could prove to be a huge mistake which the US is habitually prone to make. Low oil prices do not presage an economic boom either for the West or to the rest.