Russia on a Pro-Oil crusade in Syria?

So as we know the Russian military has stepped forward from behind its pro-Assad proxies and is operating openly in Syria. In response the Anglosphere media is expressing shock and disgust at being caught off guard, while RT is showing off Russian cruise missile aggression against Syrian targets. Both sides have surprisingly similar narratives, one of Russia playing from a position of strength. But maybe not. Could it be that Russia is in a tight spot and Putin is fighting for survival?

Looking for deep causes to recent history, it’s hard to come to any conclusion other than in the past 50 years the stability of Russia has depended on a high oil price. So perhaps expanding the war in Syria is a last ditch effort to raise it again.

Shared interests

Intentions to defeat ISIS and bring back some sort of stability to Syria and the region could be pure (I mean, who doesn’t want ISIS defeated?), but history reveals a Russia that is swayed by factors far removed from altruism. In fact, Russian disrespect for sovereignty in the greater Mid East has been (like so many nations) atrocious. Russia spent the better part of the 17th through early 20th centuries fighting the Ottoman and Persian Empires, opportunistically absorbing chunks of new territory every now and then from the waning Mid East powers. In what is known as “The Great Game”, it split the ‘Stans up with Britain during the 19th century. And in the 20th century, the Soviet Union had a heavy footprint in the region, especially when it co-invaded Iran with Britain in WW2 and after the Suez Crisis propelled it into Cold War Mid East politics. So at least historically, Russia has been willing to fracture the Mid East to suit its interests.

However there is something much more pressing to the Russian state than territory or influence right now: oil is hovering around $50 per barrel. And that’s too low compared to the $100 we had come to expect was inevitable just a few years ago. Among large economies Russia’s is uniquely sensitive to the current and future prices of oil, and this fact is frequently unappreciated by foreign observers. Unlike the American economy which is dominated by consumers that can consume more domestic goods when the oil price is low or falling, Russia produces much more oil than it consumes. It exports so much it offsets the harm done to consumption, meaning its economy rises with the price of oil. Naturally, this aligns it with OPEC and other surplus producer nations that, in aggregate, also benefit from higher oil prices. Conveniently enough, this pro-oil alliance includes Saudi Arabia and the Gulf States (that have been anti-Assad). It also includes Iraq and Iran, as well as other struggling countries like Libya and Venezuela. All-in-all we can judge the pro-oil team to be fairly anti-Western and thus increasingly aligned with Russian interests.

And what’s more anti-Western and pro-oil right now as supporting Assad and cornering ISIS back into the oil producing region of Eastern Syria and Northern Iraq? If a $10 increase in oil price corresponds to a 1.5% increase in Russian GDP, this war may easily be self-financing. Furthermore, if the war permanently coalesces these countries into a cartel that can coordinate supply cuts that gets the price near $100 per barrel again, even better for Russia! None of this would be without precedent, shared interests among producers are what lead to the oil embargo in 1973.

An empire resting on an economic fault line

But why does any of this imply desperation on Russia’s part, and why do I think Russian politics is particularly brittle with regards to the oil price? According to former economic minister Yegor Gaidar, a failing oil price was what brought down the Soviet Union (pdf). To summarize when the oil price falls abruptly as it did in 1985 (and now again in 2014), the money to play strongman is suddenly gone.

The Soviet economy was humming along until the 1970’s when it became clear that growth had stalled. By this time, the Soviets had already abandoned their ambitions for the Moon and the entire Soviet system was in decline. That’s why the oil shocks and increased real price of oil from the mid 70’s and to mid 80’s were a blessing to the leadership at the time. An elevated price for the Soviet’s chief export meant they had more capacity to pay for the food they desperately needed to import. Soon after the oil price crashed in the mid 80’s, so did the entire Soviet system.

Even though it is 2015, the Russian economy is fundamentally unchanged since Soviet times. Russian consumers import a lot of basics like food and sustain it by exporting oil primarily. The frailties that doomed the old Soviet economy were never fixed. However until 1 year ago, Putin had never been faced with anything but a positive trajectory for oil. For many reasons, oil is expected to stay closer to $50 than $100, and so with it comes the threat of instability Russia has not had to deal with since the turn of the millennium.

The chess board is set

So can Russia raise the oil price? Certainly, they can try by disrupting the oil producing regions. The Russian military can be a bull in a china shop if it needs to be, Chechnya taught us that. And certainly they have good will from Iraq and Iran, which would benefit from higher oil. In markets driven by expectations, that might be all it takes to scare the oil price up. But it gets complicated because raising the oil price by fighting ISIS in Syria may actually strengthen ISIS in Iraq. We have to remember ISIS itself benefits from higher oil prices too.

The US does not seem to harbor the public support needed for Obama or Congress to engage Russia militarily in Syria (though Turkey and NATO might nevertheless draw the US in). And it is not clear that Russia wouldn’t welcome US military intervention either, seeing as it would probably scare the oil markets and help achieve Russia’s economic goals. However, there are other ways the US can fight without being in Syria. For example, Congress could pass legislation supporting oil producers, with the ultimate goal being to make it economical for US to pump as much possible. There are a number of ways to do this including industry-specific loans or incentives, or subsidizing the myriad of technologies that are increasing fracking output. These legislative and executive measures might work to lower the oil price and negate some of Russia’s gains. A lower oil price would also hurt the long term viability of ISIS in the Fertile Crescent.

As for now, the greatest certainty is this: the Syrian people will suffer because it benefits powerful nations and industrial groups to make them suffer. Teams form around shared interests, and often time the shared interests of war are far removed from the ideological reasons they broadcast. As I hope this post illustrates, it might be to the advantage of some teams to increase the suffering in Syria.