Russia » Economics
Author`s name Michael Simpson

Iraq War: Price of the Problem

British Prime Minister Anthony Blair came to Moscow to persuade Russian President Vladimir Putin that Russia should support the US in the UN Security Council. As is known, three permanent members of the Security Council, France, China and Russia, strongly object to a war operation in Iraq. If Russia finally gives up, the USA will be more successful in pressing France and China. But why should Russia agree to war with Saddam Hussein? Especially that Russia is greatly interested in the Iraqi oil business. This time we will unlikely trust insignificant promises of US top-officials that Russia’s interests will be protected by the US department of State. The Department of State will probably do, but it is a question if American business bigwigs will do as well. However, the problem is really very delicate for Russia, as the budget for the next year is based upon the oil price.

British Daily Telegraph comments on the present-day situation today. The influential newspaper thinks, Russia is objecting to war in Iraq because of consequences it may bring to the world oil market. It is an open secret that Russia’s economy is strongly dependent upon oil export, and even more upon the price for hydrocarbon raw stuff. In this respect, Russia’s interests are very much close to OPEC’s, which is doing its best to prevent a drop in oil prices. At that, Russia and the USA declared their allied relations and even concluded kind of an energy treaty. The US propaganda machine has already worked on the first supplies of Russian oil to the US strategic reserve. However, this is just propaganda.

In fact, interests of the two newly declared energy partners are really very different. The USA needs not only low oil prices and control over the oil market. It is clear why US governmental officials speak a lot about energy safety of the country: America needs complete control over Iraqi oil supplies. And when it gets it, America won’t care at all what would happen on the world fuel market. The USA will get as much oil from Iraq as it wishes, and it won’t care whether the prices are high or low. Russia, on the contrary, is extremely anxious about a forecasted great drop in oil prices. If the oil price drops, the Russian budget, which is already scheduled for the next year, will go to pieces. This means that Russia won’t be able to meet its engagement in foreign debt settlement, not to mention what consequences the price drop will bring to the domestic situation on the whole. It may resemble chaos after a strong earthquake.

Russia oil magnate, president of the Yukos oil company Mikhail Khodorkovsky said at the State Duma today, if a military operation begins in Iraq, oil prices will drop to 14-16 dollars per barrel at best, and to 12-14 dollars at worst. If the operation won’t last long and America achieves its objectives rather quickly, low oil prices can remain for an indefinitely long period. The oligarch is sure, this will have a disastrous effect on the budget and Russian oil industry on the whole. Certainly, with the course of time oil prices will get back to 27 USD per barrel. But this period, although not extremely long one, will completely destroy the Russian economy.

Daily Telegraph says that drop in oil prices will mean beginning of a financial catastrophe for Russia, where much finance is currently spent on economic reforms. The British newspaper wrote that on October 9, 2002 the Kremlin said it was ready to allow a military operation in Iraq, but asked for a rather high price at that.

American mass media inform with reference to undisclosed diplomatic sources that Russia has already named the price of its consent to wage a war in the Persian Gulf. It is reported that Russian authorities would like to get the following for its support to the USA: contracts to the sum of tens billions of dollars for restoration of Iraq’s economy; speeded up incorporation into WTO; abolishment of the Jackson-Vanik amendment; wide access of Russian goods (not only oil and gas) to the American markets and US’s indulgence to possible operations carried out by Russia in the network of anti-terrorism struggle (not only in Georgia).
 
Until now, experts supposed that the USA would agree to the claims with some stipulations, but wouldn’t get a move on with realization of the claims. Right before his trip to Russia Anthony Blair gave an interview to BBC which broke this assurance. He said, Russia would undoubtedly ask for significant financial guarantees in exchange for its support to the anti-Iraq campaign. “Russia evidently has interests of its own, but I doubt this is the question of price only,” Anthony Blair said. “This is the question of providing guarantees to the whole world. We should look after interests of all countries, including Russia.” However, the British politician isn’t quite right with the statement, as Russia’s interests currently  hinge on money only. 

That is why this is just the question of price and guarantees. In exchange for another collapse of its economy caused by US-led “small triumphant war”, Russia quite naturally wants to get a sure governmental contractual work in volumes necessary to prevent ultimate break-up of the economy. This is the price Russia wants.

In other words, this is some kind of joined financial maintenance of Russia from western developed countries in exchange for its support to a military campaign in Iraq. Unfortunately, this is too expensive. Even if  the USA meets Russia’s every claim, this will have an effect in 2-3 years only, if it will at all. But Russian economy may collapse any moment as soon as the world oil prices drop. And the things which are supposed to stimulate stagnating American economy, will turn out ruinous for the Russian one. 

 
Moreover, this will also cause danger to Vladimir Putin’s second presidency term, to Russia’s further democratic development and so on. There is no reasonable politician in the USA who can say that when America gets Iraqi oil, it won’t care what nationalist patriots and generals with nuclear missiles atilt are doing in Russia.

That is why, despite Blair’s visit to Russia (or probably due to it), an unknown committee of solidarity with Iraqi people is going to organize a protest action against war in Iraq in front of the US Consulate Office in Russia’s St.Petersburg tomorrow.

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