Russia’s Unfazed by Falling Oil Prices

Marin Katusa, Chief Energy Investment Strategist

December 11, 2014

Oil is not quite as powerful a weapon against modern-day Russia as one might think.

By arguing that the slump in oil prices will finish off Russia just like it did the Soviet Union, Ambrose Evans-Pritchard, writing in the Daily Telegraph, is forgetting how far Russia has come since those dark days.

It is true that the USSR couldn’t cope with falling oil revenues and that Saudi Arabia is credited with helping to break up the former empire by dramatically increasing oil production from 2 million to 10 million barrels per day in 1985.

And sanctions could make it harder for Russian firms to access Western know-how, and ultimately affect Russia’s oil output.

But that’s only if they drag on for years—which is doubtful, given the price the EU is already paying. A cut in global oil supply—and stronger global growth—will likely rebalance the oil market in the meantime.

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http://www.caseyresearch.com/articles/russias-unfazed-by-falling-oil-prices