With Oil Debacle, Putin Suffers His ‘Greatest Defeat’ Ever – OpEd

Economically, the oil price deal announced by OPEC+ two days ago was “not a defeat for Russia,” Sergey Shelin says; “but in a political sense, this was a capitulation that our regime has not once made in the 21^st century, a clear defeat for Putin and his team that everyone can see.

Oil prices have collapsed because of a collapse in world demand, not because of Moscow’s ill-timed effort to affect them, the Rosbalt commentator says; and the agreement that has been reached is nothing more than an effort to share the pain of those declines among  oil-exporting states (rosbalt.ru/blogs/2020/04/14/1838298.html).

But the unprecedented deference Putin showed to the Saudis and especially the speed with which he backed down from his position is a clear political defeat of “the former ‘energy superpower’” which has now humbly agreed to become “a part of a union of several dozen oil-exporting countries, led in fact by the United States and Saudi Arabia.” 

Despite what many Russians think, “oil prices fell not as a result of the March price war” Moscow started “but because the coronavirus epidemic in the course of a couple of months reduced demand for fuel by 20 million barrels a day or 20 percent. This is a historic record.” The exporters have been compelled to respond, but why did Russia act as it did?

The reason Moscow entered into an oil war is that it assumed it could win, but of course, “the probability of success from the very beginning was equal to zero” because demand continued to fall making the Russian play meaningless and even counterproductive. They fooled some in Russia but few elsewhere into thinking they not the Saudis and the US were dominant.

The deal that emerged was not that bad for Russia, but the fact that Moscow hurried to agree rather than holding out for longer suggests that the Kremlin feared that if it didn’t defer, the West might impose sanctions on Rosneft, a political threat it couldn’t tolerate but one that its failure to tolerate showed its own much-reduced political position.

Thus, Shelin continues, what has happened is “a political and not an economic defeat of our regime.” Its failed ploy highlighted what Moscow has most wanted to conceal: it can’t always set the weather. In certain areas, including oil, the market and other players are simply too powerful for it to do so.