US, WASHINGTON (ORDO NEWS) — The fierce rivalry between the Trump administration and Putin’s Russia is the most little-known geopolitical news story of our time. While many American Democrats are still firmly convinced that Trump is in Putin’s hands, the Kremlin has embarked on an expensive and risky strategy, the goal of which is to undermine the dangerous, as it seems to him, strengthening of American power and influence.
In recent weeks, this struggle has become more intense and intense, as Russia sacrificed its long-standing allies to Venezuela and Iran in a desperate attempt to thwart the efforts of the Trump administration, which wants to redraw global energy markets and weaken Moscow’s power and influence.
A new chapter began in this story when Saudi Arabia entered the price war, trying to force Moscow to cooperate with Riyadh and prevent prices from plummeting. The Kremlin refused to support the Saudi strategy to reduce production in order to stabilize prices, and then Riyadh announced a record increase in production during a period of declining global oil demand. Probably, the Saudis hoped that a fall in prices would force Russia to agree to OPEC quotas.
Putin’s response has shocked Saudis and oil traders around the world. The Russians announced that they themselves will increase production. After that, oil prices fell to $ 20 per barrel. This is a serious sacrifice given that oil revenues provide 40% of the Russian state budget.
But this new strategy is fraught with political and economic costs for Russia. Iran and Venezuela, Moscow’s most important allies, are even more dependent on oil exports, and the collapse of oil prices has been a crushing blow to their fragile economies. These countries were already experiencing serious difficulties due to lower oil revenues. In Venezuela, due to socialist mismanagement and corruption in the state oil company, oil production declined by two-thirds in the past two years.
In Iran, which before the revolution of 1979 exported more than 5.5 million barrels per day, before the introduction of American sanctions in 2018, the daily export volume was already 2.3 million barrels, and today it has fallen to about 250 thousand barrels.
Like Venezuela, Iran is forced to sell a significant amount of oil at a discount on the black market, bypassing sanctions. And in an hour of difficult trials, when he moaned under the yoke of American sanctions, suffered from a terrible outbreak of the coronavirus and watched with fear as his economy fell into a tailspin, Moscow stabbed him in the back.
Why does the Kremlin take on these costs and risks? The increase in oil and gas production in America poses a direct threat to the Russian government and the stability of the Putin regime, and under Trump, the United States mercilessly took advantage of this.
The President not only supported and promoted hydraulic fracturing; he imposed sanctions against the Nord Stream 2 gas pipeline, at least temporarily stopping the laying of a second direct branch from Russia to Germany.
Since November 2019, the United States has been the world leader in the export of liquefied natural gas to the EU countries, and the volume of US exports to China and Japan (these are also important markets for Russia) continue to grow.
At the same time, the administration is pushing for changes in the rules and regulations to make it easier to extract and transport oil and gas, as well as the construction of pipelines and LNG terminals.
The OPEC-led Saudi oil production restriction strategy kept prices at a certain level, and high prices helped America increase shale production. Putin hopes that a total price war will bankrupt the American shale, whose production costs are much higher than in Russia.
The shale industry already suffered from high debt costs. If revenues decline even further, many companies will not be able to fulfill their obligations and become bankrupt, and new investors will shun the oil sector.
It seems that at the moment Russia is gaining the upper hand in this brawl. Texas oil workers want to ask the Texas Railroad Commission (Texas’s chief oil regulator, oversees and regulates drilling, production and transportation of oil – a note from the InosMI edition ) to introduce restrictions on production in the industry. And Trump stepped back from his earlier statements in support of cheap oil and called Putin to talk about stabilization in the oil markets.
Now the question is what should America do to protect an important industry for the country from a hostile foreign power pursuing political goals. For Democrats, who continue to regard Trump as Putin’s puppet, and hydraulic fracturing as a mortal sin against Mother Earth, the answer is clear. If Moscow destroys this industry in the USA, it will do a great service to America and the entire planet.
The administration supported the proposal to help American oil production, adding to the strategic reserve of 77 million barrels of oil in the amount of three billion dollars. But it was not included in the bill for assistance in connection with the coronavirus for a total of two trillion dollars, because the Democrats condemned this measure, seeing it as an attempt to save large US oil companies.
This problem in itself will not go away. Opponents of hydraulic fracturing technology will have to seriously think about the place of energy in American foreign policy. Concerns about climate change and other environmental dangers posed by this technology have become a topic of discussion. But the issue of the geopolitical significance of the American oil and gas boom is also being discussed. Do we want to live in a world where Iran, Russia and Saudi Arabia will form markets for their own benefit and with the help of oil wealth will influence the course of world events? Do we want to forever connect ourselves with Middle Eastern oil suppliers whose values and interests run counter to ours?
This is a paradox, but Democrats’ objections to hydraulic fracturing technology provided Putin with a dominant position in his confrontation with Trump.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.