By Dave Anderson:
Matt Yglesias makes a simple point about Russia's incentives concerning Iran --- mild instability and uncertainty is great for the Russian budget:
wouldn�t Russia be the primary beneficiary of the strategic
and economic instability on Israeli attack on Iran would bring...The fact of the matter is that Russia, a declining
great power with a shrinking population and an economy oriented around
the export of fossil fuels and weapons, is an unlikely voice for
stability.
This basic analysis has been something that I have been following since 2004 and asking a question of why we do not see more instability encouragement by the large oil exporters. The security risk premium from Iraq and the system disruption in Nigeria took the marginal spare barrels of light sweet crude off the market for most of the decade. This led to windfall profits for Russia and every other large oil exporter. My initial guesstimates were that the security risk premium gave Russia an extra thirty billion dollars per year in revenue in 2004.
This presents an interesting dilemma for all of the major oil exporters
which are not part of NATO or NAFTA; stability in Iraq and in the
Middle East in general is a contiunuum of choices, and the extremes on
both ends have extremely expensive payoffs....Somewhere in between are less dire consequences and therefore more
desired states of being. This continuum of instability and its
resultant payoff matrix leads to some very mixed incentives that we see
acted upon every day...Some level of instability is extremely profitable to them [oil exporters], especially
an instability that so far has not resulted in the destruction of any
actual production or export ability.
Why have we not seen significant externally sponsored systems disruption of oil export infrastructure? The removal of several hundred thousand barrels per day of production will have a significant price impact. I could see either state sponsorship or if I am writing a bad novel, private sponsorship of significant systems disruption in the Third World where the state based retaliatory capacity is fairly low. Why have we not seen this in any significant degree? Is there a state of MAD in play?
This is the kind of analysis you get if you consider only one factor at a time. Instability = higher oil prices = good for Russia.
ReplyDeleteBut that instability would be on Russia's southern border, not too far from Russia's greatest source of instability - the Caucausus. And that's not so good for Russia.
It's pathetic that the MSM has dumbed its diplomatic reporting and analysis down to the level it has and very sad that teh dumb is making its way into the blogosphere.