The Democrat-media complex will ignore this bombshell report, which completely counters their 4-year-long narrative that President Trump is “in Vladimir Putin’s pocket.” According to this Saturday report from Bloomberg News, the Russians are upping oil production to counter the economic leverage against the EU and Russia that President Trump has brought to bear, thanks to his deregulation and unleashing of the US oil and gas industry.
Russia’s energy minister … Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%.
For over three years, President Vladimir Putin had kept Russia inside the OPEC+ coalition, allying with Saudi Arabia and the other members of the Organization of Petroleum Exporting Countries to curb oil production and support prices. On top of helping Russia’s treasury – energy exports are the largest source of state revenue – the alliance brought foreign policy gains, creating a bond with Saudi Arabia’s new leader, Crown Prince Mohammed bin Salman.
But the OPEC+ deal also aided America’s shale industry and Russia was increasingly angry with the Trump administration’s willingness to employ energy as a political and economic tool. It was especially irked by the U.S.’s use of sanctions to prevent the completion of a pipeline linking Siberia’s gas fields with Germany, known as Nord Stream 2. The White House has also targeted the Venezuelan business of Russia’s state-oil producer Rosneft.“ The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank.
It looks to be real, as there are signs of an oil price war ahead, as reported by CNBC Sunday night:
Oil prices plunged 30% in early trading after OPEC’s failure to strike a deal with its allies regarding production cuts caused Saudi Arabia to slash its prices as it reportedly gets set to ramp up production, leading to fears of an all-out price war.
International benchmark Brent crude futures plummeted 30% to $31.02 per barrel, its lowest level since Feb. 2016. U.S. West Texas Intermediate crude dropped 27% to $30 per barrel, also its lowest level since Feb. 2016.
This is a major policy shift with worldwide implications, including on the US shale industry in particular. One of my long-time pals and a keen observer of the geopolitical scene summarizes the situation perfectly:
These are very significant developments. Dynkin’s institute is state-run, so his commentary is an accurate reflection of Putin’s thinking. America’s recent energy independence across oil, gas, nuclear, and wind/solar is providing unprecedented flexibility in our foreign policy. We can no longer be held hostage under denial threats by producer states like Russia, the Arab-dominated OPEC+, or Venezuela. And it is that revolution in US energy production that is a key ingredient in powering US economic growth while at the same time providing the Trump Administration with massive leverage on the world scene.
In fact, as the world’s #1 producer of oil and natural gas, America can instead manipulate the global energy market by itself to minimize considerably the revenues of rogue states like Russia and Iran so that they will have little surplus funding to expand or modernize their militaries or afford to send paramilitary forces like Iran’s Islamic Revolutionary Guard Corps (IRGC) to meddle in various Middle Eastern countries. In addition, driving a wedge between Russia and Saudi Arabia is salutary to U.S. interests over the long haul.
The critical inflection point will come if/when European states turn away entirely from Russia as a politically unreliable oil/gas provider and instead buy their energy from the US or from alternative producers in less controversial parts of the world.
Both Putin and President Trump understand the strategic economic importance of the Nordstream 2 pipeline. Servicing the oil requirements of the former Soviet Bloc, including Poland, Slovakia, the Czech Republic, Hungary, and (East) Germany, the Druzhba oil pipeline has been operational since the mid-1960s and periodically modernized and expanded since then (e.g., Baltic Pipeline System 2). To service the future natural gas needs of Germany and potentially other European countries, Nordstream 2 is Gazprom’s export gas pipeline running from Russia to Germany across the Baltic Sea. Gazprom is the Russian-led multinational energy company headquartered in St. Petersburg, Russia. An $11 billion construction project, the pipeline is nearly completed, and gas is expected to start flowing from Russia to Germany by June of this year. The Germans are pretty much all-in on the project, but other European nations would like to see different options than Russian gas and the geopolitical leverage that Russia has by being able to “turn off the gas.” That’s where the US gas industry factors in and what the Trump Administration is enabling.
The Nordstream 2 gas pipeline is just one aspect of the never-ending geopolitics of oil and gas, with Putin’s decision to break with OPEC+ on oil production quotas another chess move in Russia’s efforts to leverage their natural resources for their own strategic ends.
Vladimir Putin understands economic leverage. Thankfully, we have a president who understands that, too, and is the first one in many decades to actually use our economic leverage to America’s advantage.