THE BLOG

Russian Arms, Syria and the Price of Oil

06/04/2013 07:03 am ET | Updated Aug 04, 2013

President Bashar al-Assad of Syria, in a broadcast this Thursday past, boasted of the Russian arms deliveries to the Syrian regime that would include deliveries of a highly advanced anti-aircraft weapons system. Whether accurate or not, the Russians are clearly stoking the fires of the Syrian debacle and now risking its spread beyond Syria's borders. This in the face of the extensive efforts being made by the United States to organize a meaningful peace conference with all parties.

Immediate consternation to Russia's continued support of the Syrian regime was expressed by our State Department and Secretary of State John Kerry, and perhaps most succinctly stated by Caitlin Hayden, spokeswoman for the National Security Council: "Providing additional weapons to Assad --including air defense systems -- will only prolong the violence in Syria and incite regional destabilization."

It also places Russia squarely on the side of Iran and Hezbollah in their support of the Syrian regime and in a posture of increasing divergence from the position of the United States, Great Britain, France and much of the rest to the European Union, given their sympathy and diplomatic support of the anti-Assad Syrian insurgency.

Unquestionably the Russian government has a touch of dissociative identity disorder in that their actions are making a sham of the proposed negotiations to end the Syrian civil war that curiously Russia had been trying to organize together with the United States, and was to have been scheduled to take place sometime this month. Russian policy seems to be in full thrust of supporting their old friend in Syria, President Assad, thereby joining with Iran's massive support of the Syrian regime, all the while posturing under the guise of diplomatic reasonableness.

Curious behavior? But perhaps that's the object of the exercise -- to cause confusion and to leave the Middle East in a progressively dysfunctional state.

Russia is currently the world's largest oil producer and is shipping massive quantities of oil and natural gas mostly to Europe, but also to the Far East through a vast and expanding network of pipelines.

Oil has become perhaps the key mainstay of the Russian economy. Oil and gas account for two-thirds of its exports, half its budget revenues and nearly one-third of economic output ("From Pump to Putin" Financial Times 06.02.13). In addition, Russia's gas giant Gazprom exports massive quantities of gas to European consumers on contracts for which the price of gas is pegged to the price of Brent Crude, resulting in gas prices higher by a factor of more than three when compared to prices paid for American natural gas by American consumers and industry.

The sale of oil and gas, and their ability to deliver it to wherever the market dictates, together with the tie in between the price of oil and the price of gas in Russian gas supply contracts, has made oil a crucial element to the Russian economy and the Putin presidency. The Russian economy and "Putinism" has become deeply dependent on the price of oil.

In a refrain of that old adage "plus ca change...," an article in the New York Times back in 2012 ("An Embargo and a Boon" 02.17.12) commented, "The Russian oil industry was already reaping the rewards of higher oil prices from Iranian tensions..." Back then, the Russians were cashing in brilliantly on higher oil prices, while rendering support to Iran by such acts as vetoing or emasculating any and all meaningful U.N. resolutions that would have forced Iran to comply with the terms of the U.N.'s International Atomic Energy Agency mandates. Iranian adherence to those resolutions would have dramatically abated tensions, forestalled the boycott of Iranian oil and sharply reduced the price of oil.

Clearly there is a correlation between Middle East tensions and high oil prices. Are we seeing a replay of Russian policies that solidified Iranian intransigence on matters nuclear, thereby exacerbating those tensions to bring about significantly higher oil prices?

You be the judge.