Russia/US-- Europe

[Crafty_Dog]

The Oil Weapon Against Moscow
In 1986 the U.S. and Saudi Arabia raised production. That move contributed to the Soviet collapse.
By Andriy Yermak
March 26, 2024 4:09 pm ET



Russia’s economy depends on the country’s natural resources, as it did in the Soviet era. Its growth depends on the price of oil—which contributed to the collapse of the Soviet empire and will determine Vladimir Putin’s current bid to restore the regime. It is oil that can thwart the Russian dictator’s revanchist ambitions.

In 1984, 613 million tons of oil were extracted in the Soviet Union—3 million tons less than in 1983 and well below that year’s target of 624 million tons. The Soviets sustained enormous financial losses because of the shortfall, exposing the vulnerability of the economy, which was depleting old oil deposits. To increase production, the U.S.S.R. needed Western technology. It also needed Western money, which it funneled into its military-industrial complex to threaten the West. When Mr. Putin turned energy into a geopolitical weapon, he was using an old Soviet playbook.

Then, the West saw an opportunity to erode Moscow’s finances by lowering oil prices and increasing output—as it should today. In 1986, President Ronald Reagan and King Fahd of Saudi Arabia developed a plan to lower the price of oil. A reduction of $10 a barrel would mean a $10 billion loss for the Soviets over a year. Saudi Arabia, the most influential player in the Organization of the Petroleum Exporting Countries, bucked OPEC’s consensus and increased production. The U.S. also stepped up production—and imposed an embargo on technology exports to the U.S.S.R. Oil prices plummeted even more than expected—to $12 a barrel. The colossal losses, combined with massive military spending, undermined the Soviet economy.

What happened later is well known: The U.S.S.R. collapsed in 1991. The world’s largest nuclear arsenal couldn’t save it.

But history shows that when Russia is flush with oil money, it tries to reassert its global dominance. Russia’s growth under Mr. Putin is thanks to soaring oil prices. In 2011-14, oil and gas revenue in Russia exceeded 50% of federal revenue. In recent years, oil and gas have accounted for up to 60% of Russia’s total goods exports and 40% of federal revenue.

Billions of dollars in oil and gas profits fuel the Kremlin’s imperialism and revanchism. The West must ratchet up sanctions to make Russia’s oil trade less profitable, while also increasing Saudi and U.S. oil output. The West should also cut off Russia’s access to technologies, including by imposing sanctions on intermediaries. Lowering oil’s price to $30 a barrel would help. But without new supply sources, price caps won’t work. Ukraine and the world need Saudi Arabia and the U.S. to take the lead. As in the 1980s, increasing production will tame both Moscow and Tehran, which is the key to peace in Europe and the Middle East.

I co-chair an international working group on sanctions with Michael McFaul, a former U.S. ambassador to Russia. According to estimates by our group, restrictions on Russian oil, including the European Union embargo and Group of Seven price cap, have cost Moscow $113 billion in export revenue since the invasion. Russia still allocated $102 billion for military spending in 2023, keeping the war machine well-funded and giving Mr. Putin scant incentive to negotiate. For Ukraine to prevail, oil prices must come down significantly.

The Kremlin is incapable of engaging in equal dialogue—it only pretends to do so. From 2014 to 2022, Ukraine conducted some 200 rounds of negotiations with Russia, seeking a peaceful resolution to Moscow’s attempted annexation of Crimea and temporary occupation of parts of Eastern Ukraine. Every time, Russia violated any arrangements. As long as Moscow refuses to recognize Ukraine’s international sovereignty, efforts at peace are futile.

Mr. Putin’s Russia, fueled by oil revenue, has no incentive to pursue peace, but instead aims to restore the U.S.S.R. and its sphere of influence. Mr. Putin isn’t bound by ideological principles other than a lust for power and will support extremists around the world to promote chaos. Pursuing this malign agenda requires oil revenue.

To save the world from another century of turmoil, the West must replicate the successful example from the 1980s. Once again, it can outmaneuver Moscow and Tehran and reclaim the initiative.

Mr. Yermak is head of the Office of the president of Ukraine

[Crafty_Dog]

April 8, 2024
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NATO Weighs Its Future Ukraine Support
The alliance isn’t ready to back down.
By: Antonia Colibasanu

NATO marked its 75th anniversary last week. The moment was naturally accompanied by talk about the future of the Ukraine war and the alliance’s support for Kyiv. On Wednesday, NATO Secretary-General Jens Stoltenberg proposed creating a 100 billion-euro ($108 billion) fund to provide military support to Ukraine over the next five years, a move that would mark a significant milestone in the alliance’s backing for the country.

The idea was met with mixed reactions. Until recently, voluntary Western support for Ukraine has been coordinated through the Ramstein group (formally the Ukraine Defense Contact Group), a U.S.-led coalition of 56 countries, including all 32 NATO members. While NATO allies are expected to discuss the proposal at their gathering in July, European members seem set to approve it to send a message about their continued support for Kyiv.

Many of the details are up for debate, but Stoltenberg’s plan envisages a fund comprising contributions from NATO members with the aim of providing financial assistance to Ukraine over the next five years. The money would supplement U.S. support for Ukraine, while Congress holds up a key $60 billion aid package. For Europe, the main reason for the plan is that they worry that if Donald Trump wins the presidency in November, the position of European countries within NATO could be compromised. Indeed, Trump’s appearance at the Conservative Political Action Conference in February – where he spoke of his desire for retribution against people, countries and organizations he believes mistreated him – seems to have compelled European governments to push for more action on Ukraine, as European NATO members are near the top of Trump’s list of adversaries.

At the same time, domestic politics in the leading European countries, most notably Germany and France, have also played a role. In Germany, some 82 percent of respondents in a recent poll said they believe NATO is important to securing peace in Europe, while only around 10 percent consider it is unnecessary. Even among supporters of populist parties that have been critical of NATO, such as Alternative for Germany and the newly founded Sahra Wagenknecht Alliance, only a minority are in favor of dissolving the alliance. In addition, seven out of 10 Germans believe the danger to European peace and security is serious or very serious, up significantly from five years ago. The result of this rising unease appears to be increased support for NATO, which has backed Germany’s plan to rapidly build up its military. Following Russia’s invasion of Ukraine in February 2022, Chancellor Olaf Scholz established a special budget worth 100 billion euros to modernize the Bundeswehr. The majority of the money is tied up in orders for expensive military equipment. Furthermore, according to recent surveys, Defense Minister Boris Pistorius is by far the most popular politician in Germany.

The situation in France is somewhat different. The leadership’s concern for Ukraine seems to outweigh that of the French public, which is more concerned with the country’s socio-economic problems. According to surveys, French business activity decreased for the 11th consecutive month in March, as demand for French goods and services weakened and employment fell. Moreover, Paris is trying to reassure financial markets after official numbers released last month revealed that the public deficit for 2023 exceeded government targets. With France already seeing high interest rates and Europe’s highest ratio of taxes to gross domestic product, the administration is considering reducing social benefits and local government budgets, a politically sensitive move in a country that values its social safety net.

Thus, it seems that French President Emmanuel Macron may have been trying to distract public attention by asking for more help for Ukraine, even calling recently for troops on the ground. France’s fiscal realities may hinder Macron’s call for further joint borrowing to fund European security programs, but his ambitions to lead Europe in a time of war remain. After all, unlike Germany, France has long had a formidable military and doesn’t need to rebuild it. Paris’ focus, therefore, is on public perceptions as it tries to assert itself as an important player in Ukraine – which will be key to boosting its posture in Europe and within NATO. France also recognizes the possibility that the U.S. may soon expect Europe to assume more of the burden for Ukraine (especially if Trump becomes president), which would require a transfer of responsibility from the U.S. to its European partners.

NATO’s potential future focus on burden shifting, rather than burden sharing, is also why France has tried to underline its efforts to help Kyiv. According to the French Ministry of Defense, the value of French military equipment delivered to Kyiv by the end of 2023 was 2.6 billion euros. Paris contributed a further 1.2 billion euros to the European Peace Facility, bringing its total spending on Ukraine to 3.8 billion euros.

The U.S.’ contributions still eclipse France’s, however. According to the Washington-based Council on Foreign Relations, the U.S. has spent the equivalent of 69.1 billion euros in financing and equipment for Ukraine, 18 times more than Paris. However, according to estimates from the Kiel Institute for the World Economy, EU institutions combined provided the most military, humanitarian and financial help to Ukraine, followed by individual states like the United States, Germany, the United Kingdom and Denmark. These figures show that Europe is already in a good position to boost its share of the burden.

Government Support to Ukraine

(click to enlarge)

Russia, meanwhile, will certainly exploit these measures in upcoming election campaigns in Western countries, painting the West as the aggressor and the main obstacle to a settlement to the conflict. All of this will be carefully considered as NATO gets closer to the July summit.