MOSCOW — Global oil prices have been plummeting, and Russian President Vladimir Putin on Thursday offered a theory why: politics.
Oil prices fell to a four-year low this week, and that has further tightened the screws on Russia’s economy, already hit hard by sanctions and fears of recession. The Russian ruble has been plummeting, in part because the country’s economic well-being is so closely tied to the price of oil. On Thursday alone, the ruble dropped 3.64 percent against the dollar.
With tensions again spiking in Ukraine, Putin has been quick to lash out against perceived enemies. Accusations that oil prices are being manipulated to hurt the Kremlin date to 1986, when Saudi Arabia unleashed a torrent of cheap oil onto global markets, hurting the Soviet Union when it was already teetering economically.
Putin said Thursday that the falling oil prices can be blamed on increased production and decreased consumption – but also on other, less visible causes.
“The obvious reason of the decline in global oil prices is the slowdown in the rate of economic growth, which means energy consumption being reduced in a whole range of countries,” Putin said in written responses to questions from Chinese news outlets that were released Thursday.
“In addition, a political component is always present in oil prices,” he said. “Furthermore, at some moments of crisis it starts to feel like it is the politics that prevails in the pricing of energy resources.”
The claim that Saudi Arabia increased oil production in the late 1980s to hurt the Soviet Union has been advanced by none other than Michael Reagan, the son of former president Ronald Reagan.
“Since selling oil was the source of the Kremlin's wealth, my father got the Saudis to flood the market with cheap oil,” he wrote in March.
(The truth is far less conclusive – the dropping oil prices in the late 1980s probably had little to do with the Soviet Union in the cross hairs.)
Still, with relations between the West and Russia at their worst since the Cold War, Putin appears to be accusing global oil producers of a modern-day repetition.
One of the only silver linings for Russia is that as the value of the ruble drops, each dollar it makes from oil sales can fund a bigger part of its domestic budget, because its budget commitments are in rubles.