THREE times in the last 35 years, Russian military forces have crossed international borders – in Afghanistan in 1979, Georgia in 2008 and the Crimea earlier this year. As Simon Derrick, the currency strategist at BNY Mellon points out, each occasion coincided with a peak in the oil price. And each incursion was followed by a very sharp fall in the price of crude (see chart).
Now of course, one can’t say the Russian actions caused the oil price fall. However the oil price peaks, by boosting the economy, may have bolstered the confidence of Soviet/Russian leaders and thus encouraged the military action. The subsequent declines simply show that the Russian government has very bad timing. Indeed the weakness of oil in the 1980s (and the sapping effect of the Afghan conflict on morale) played its part in the downfall of the Soviet empire; this time round, the Russian economy is already showing signs of crisis. If the previous episodes are any guide, oil has a fair way to fall.
eugene on Sat, 22nd Nov 2014 8:05 am
I think it’s called coincidence. Personally, I thought it was the price of apples.
Makati1 on Sat, 22nd Nov 2014 8:25 am
Hmmm…. lost interest at the assertion that Russia crossed into the Crimea illegally. By previous treaty, Russia could station up to 25,000 troops there. Same as the 32,000 we have stationed in Germany today. I get tired of the Western BS about the Ukraine.
Boat on Sat, 22nd Nov 2014 9:02 am
Russian troops surrounded military bases until they surrender. Same with ports. These bases has Ukrainian troops stationed there. Facts on the ground will never change even if you label them BS.
Plantagenet on Sat, 22nd Nov 2014 10:55 am
Good to hear that Russian invasions are followed by economic pain for Russia. So there is some justice in the world after all!
Boat on Sat, 22nd Nov 2014 12:04 pm
I feel bad for the Russian people. Putin’s little man syndrome will cost his country.
GregT on Sat, 22nd Nov 2014 12:49 pm
“Russian troops surrounded military bases until they surrender.”
Russia stopped a bloodbath in Crimea. Sadly for the people of Eastern Ukraine, the fascist Kiev Junta forces along with independent Neo Nazi militias, continue to kill their fellow Ukrainians for attempting to exercise their basic human rights to self determination. Hundreds of thousands have been forced to flee to Russia, while their supposed government continues to bomb their towns, cities, and lands into rubble. The West is complicit in what can only be described as an act of ethnic cleansing, or genocide.
turningpoint on Sat, 22nd Nov 2014 12:55 pm
Coincidence.
Russia is not doing these incursions because they are emboldened by high oil prices. Russia does it when they feel a former soviet Republic on their border is in danger of becoming an EU or NATO member. Ukraine in particular is their soft underbelly. They need Ukraine as a buffer to protect against possible invasion. They know their history.
If we were to stop threatening Russia, they would settle down.
.
Davy on Sat, 22nd Nov 2014 12:56 pm
Boat, it depends on what is coming. Czar Putt is making a big gamble that may pay off. He is risking the health of his economy but if a global depression is coming then the economic damage will be a price worth paying to establish a new economic focus. If his effort to construct a new power block in Asia and among the Brics succeeds he will have diminished Europe and the US and strengthened his economy with productive neighbors. China and Russia have allot of potential in a collapsed world.
At the moment Russia’s pivot to China is not going to threaten Europe and the US in regards to their trading positon with China. Russia is small in comparison to Europe and the US. China’s biggest trading partners are the US and Europe.
The winning gamble is if BAU ends and Russia has constructed a new arrangement that has greater strength then would have been Russia’s position in a collapsed BAU. It is still unclear if Russia will continue down this path. Forces within Russia may force Putt’s hand. Leader’s popularity can turn overnight. Putt is riding high now but look at O who went from historical highs for a US president down to historic lows. Putt gamble will unfold in the next year or two I have a feeling. I give him even odds.
GregT on Sat, 22nd Nov 2014 1:12 pm
Davy,
Russia is merely responding to circumstances imposed on her by the west. Watch Putin’s speech from two weeks back. Russia wants peace, but is more than prepared to go to war if the west keeps pushing her. Our so called Western ‘leaders’ are playing a very dangerous game.
nemteck on Sat, 22nd Nov 2014 1:40 pm
The notion to link the Russian activities to the oil price is nonsense. The drop in 2008/2009 occurred not because Russia invaded Georgia and the present drop is not because Russia annexed the Crimea. The reasons are mostly economic ones and perhaps some political ones if you give value to some conspiracy theories in the latest event.
Boat on Sat, 22nd Nov 2014 2:05 pm
A long line of dictators thought like Putin and had to be removed from the world stage. If he chooses to inflict enough pain and trouble he will be dealt with. This is still early in the warning stage. For the sake of the Russian people I hope he gets his act together.
Davy on Sat, 22nd Nov 2014 4:06 pm
Greg, Russia has been playing its hand all along. The west went all in and Russia responded but to say the west imposed on Russia unilaterally is superficial.
Russia has been interfering in Ukraine for many years. The west saw an opportunity to damage Russia for sure and has succeeded partially. Russia gained it’s prize Crimea.
The game has yet to play out for the big winner. Allot will depend on the course of the economy and oil prices. Putt is paying an economic price but also gaining respect for bold action. He may succeed in an Asian pivot with improved security and economic power. Russia may crash and burn with a dimminshed economy. It will take 1-2 yr to play out.
Makati1 on Sat, 22nd Nov 2014 6:50 pm
Boat, the world’s most dangerous dictator is in Washington DC and sleeps in the White House.
Putin has made Russia a power to reckon with after the destruction to it’s economy by Yeltsin. The West had its chance to control Russia and, like everything else since WW2, they blew it. Now they can deal with the new Russia (and China) or be nuked into the stone age.
Davy on Sat, 22nd Nov 2014 6:55 pm
Mak, check out this new China and tell me what you think:
http://www.zerohedge.com/news/2014-11-22/hard-landing-imminent-china-reminds-residents-it-illegal-jump-tops-buildings
radon1 on Sat, 22nd Nov 2014 10:33 pm
“Good to hear that Russian invasions are followed by economic pain for Russia. ”
Pain for whom? Ivan6pack may not be able to afford his European tour any longer. But big papas only need to devalue ruble – which they did – and go on enjoying life, making a good buck along the way on the volatility.
Who certainly benefits from it – is the US consumer. Not their fault, definitely, but not a point of regret either, is it.
J-Gav on Sun, 23rd Nov 2014 3:44 am
Hey, I noticed that every time my dog farts 3 times in a row, the stock market dips by 5%!
Makati1 on Sun, 23rd Nov 2014 5:01 am
Davy, check out the stats on the world’s largest debtor country by far, number one, the good old USSA. I know what the Western media are saying about China and it is expected as they are on the Empire’s “bad guys” list. They are attacking the US financially and economically all over the world, and causing serious hurt. As the East grows, the West declines.
You are like the rooster that sees the fox taking out his competition and crows about it, not knowing that he is next.
Davy on Sun, 23rd Nov 2014 5:58 am
Mak, this is simple please answer the $25Trillion China credit creation question and tell me what you think about my link above. Why is that so hard for you?
andya on Sun, 23rd Nov 2014 9:04 am
Wait Russia has invaded 3 countries in the past 35 years? Is that it? That’s no way to build an empire! That is if we consider the latest fiasco an invasion, which it clearly is not.
I laugh in the face of people calling Putin a Dictator et al, is this why the elected government in the US can’t get anything done? Everything is done by presidential veto, by the most unpopular president ever, as opposed to a unified government. LOL projecting a shadow much?
Davy on Sun, 23rd Nov 2014 9:57 am
And, Putt is a Czar over his oligarchs and his riches. I love how some on this site paint Putt as a great leader for pleasant human reasons. They believe his speeches like he is not the traditional lying through their teeth politicians.
Putt is a great leader but not for these reason. He is a great leader for Machiavellian reasons. He is a great leader for his typical Russian charm and wit. But please don’t blow smoke up my ass that Putt is a great leader for the higher human reasons. No, putt is a blue eyed devil in the same stock but highs quality then all the rest of them.