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Tuesday, 17 September 07:02 (GMT -05:00)



Business And Politics News

Oil Prices and Putin’s Fate


As oil prices keep going down, the international expert community is discussing the fate of Russia and Putin. Some of them look at the situation in Russia from the standpoint of perceiving President Putin as a stability guarantor by the Russian folks. Some contributing writers for major European editions, including Die Welt (Germany), are sharing their view on the deteriorating economic situation in Russia.
 

 

 

 

In particular, they that Vladimir Vladimirovich Putin (VVP for short) and GDP completely match in Russian as “ВВП”, which is subconsciously perceived by most Russians as some kind of guarantees of stability. While this is more like a joke, most Russians still do see the Russian economy as something that directly relies President Putin’s image and power. Apparently, the Russians feel like they have a lag to stand on by believing that it was Putin who made Russian recover after the disintegration of the USSR. A couple of years ago, the plain folks used to be even more sure that there is a direct relation between the president and the efficiency of the local economy.  However, this is when the Russian economy started going down into a new recession. These days, it is obvious for everyone that the Russian economy and standards of living are not a strong and high as they used to be at that time.
 
Still, the plain folks mostly believe that it is all about Western sanctions and and some anti-Russian conspiracy instead of the Kremlin’s political and economic mistakes. While this is partially the case, everything is much more complicated that it may seem at first sight.
 
Those experts believe that if you dive deeper into the topic, you will see that there is no point in calling Putin an outstanding politician who made Russia rose to its feet. They say it is more about luck and perfect timing – Putting came to power in late 1999 and became the Russian president in 2000. This was the time when the global energy market started another major bull run. If to consider the fact that Russia is a major oil and natural gas exporter, tis economy has been heavily dependent on energy exports.  When the prices were rising, Russia generated stellar revenues from exporting those energy carriers. However, the situation has changed and amid ultra-low oil prices, it is getting harder and harder for Russia and Putin to cope with all those economic and political challenges they are facing.
 
It is very painful for Russian and other oil exporters to see oil prices setting new major lows. At this point, the prices have already plunged below $30/b. Yet, more and more experts say this is no the bottom for the global market of crude oil.

 

 

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The bottom line is that Western experts and some international studies claim that Putin has no economic talents whatsoever. Instead, he has been lucky. When Putin came to power, oil prices were under $20/b for a short period of time. Over the next 9 years, the prices quintupled, thereby backing Russia’s economic prosperity. The Russian GDP gained 83% over the reporting period. However, chances are the plain folks are unaware of this fact, which is why they see Putin as they one who brought this prosperity to Russia.
 
They also say that the period of very high oil prices created a favorable environment for Russia to implement deep structural reforms to back a better future for the federation. However, the Kremlin ignored it and missed an excellent chance to change the economy for the better by becoming more efficient and less dependent on oil and gas exports.  At the same time, some the major achievements made by Putin is the creation of reserve funds while betting big on public corporations and ousting oligarchs from Russia’s big politics.   
 

 

As for the 2008-2009 crisis, it was overcome relatively easily due to the fact that retail consumption has been one of the biggest driving forces for the Russian economy. However, oil prices used to be relatively high at that time. These days, when oil prices are below $30/b and expecting a further drop, there are all chances to see the end of the consumption boom, which is why the bigger picture looks not as bright as one might think. 

 

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