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MENAFN - Arab News - 20/04/2014
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(MENAFN - Arab News) It is not an academic debate or even one within think tanks but a simple statement stating the obvious that politics are governed by the economy where oil occupies a central position. and for that it is saudi arabia that can tip the balance.

the message was transmitted quickly through the airwaves given the fact it is said by no other person that vladimir putin russia's strong man and at a critical time where the western capitals were wondering what to do given moscow's recent moves in ukraine.

though it was the twelfth session of q & a on a television program between putin and his audience the russian tsar was speaking calmly like a businessman who knows where he stands in reality vis-a-vis his rivals given the competitive edge he enjoys.

in a cold tone he said that the west could try to hurt russia through its efforts to influence the energy market but such efforts would 'backfire.'

he pointed to the fact that europe depends on russian gas supplies to meet one-third of its needs which makes it impossible for european capitals to stop buying russian gas.

moreover if prices are to drop that will not affect russia alone but also the burgeoning us shale oil and gas industry and more seriously it will affect the green pack which is the main currency used by the world oil and gas market.

the debate on possible western sanctions against russia looks tempting given the fact that moscow is depending more and more on oil and gas revenue.

last year's figures show that more than 50 percent of the country's national budget depends on these two revenue sources. oil netted 191 billion last year to the country coffers while gas contribution amounted to 28 billion.

that brought to the fore the simple question whether the west can apply sanctions as it did with tehran. but russia is not iran.

moreover europe in particular depends on russia more than it depended on iran. that brings in some question marks about the moral standing of the much talked about and practiced sanction.

as it stands it seems they are fine to apply if they did not end up with countries imposing them shooting their own foot and are mainly directed to satisfy the domestic scene.

and that is why sme of the western strategists advised that riyadh be persuaded to cut its oil production to help punish russia.



regardless of what putin said about the '"warm and candid" saudi-russian relations the question is whether it is in the interest of the kingdom to pursue goals set by others.

some of the think tankers were suggesting that washington should persuade riyadh to apply such pressures and went even to say that the kingdom did something similar against russia in the early 1980s following the soviet invasion of afghanistan. that is simply not true or mere coincidence.

then the main concern for riyadh as far is oil is concerned was how to reduce oil prices which it sees were threatening the long-term interest of the oil producers and the kingdom in particular.

to push for lowering prices riyadh opted to engineer a glut through opening its taps to pump 10 million barrels per day (bpd) and force lowering prices which eventually happened.

aside from the oil embargo of 1973 following the arab-israeli war oil more or less was kept away from direct engagement with politics. even the price war of the mid-1980s was carried out on purely business terms to do with the way the oil market was performing.

the bottom line in all this is the ability of riyadh to carry out an oil strategy to ensure its commanding position through number of steps like having spare production capacity different export facilities flexibility in raising and lowering production and even deciding on the type and quality of the oil to be produced to meet the market needs.

however such qualities and abilities are not to be used at the request of others or to serve others' interests without even considering some issues that are of concern to the kingdom like the arab-israeli conflict and the failure of western capitals led by washington to exercise some pressure on tel aviv.

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