Streetwise Professor

January 12, 2009

A Revisionist Power

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 9:35 pm

In today’s WSJ, Gary Kasparov opines that Russia as an incentive to sow chaos in the Middle East in order to pump up oil prices.   He emphasizes that relying on Russia to take a constructive role in constraining Iran’s nuclear program is particularly foolish.  I advanced the same hypotheses about a year ago here:

Moreover, it should be noted that uncertainty and the potential for supply disruption can drive energy prices higher. This undermines Russia’s interest in promoting stability in major energy producing regions, such as the Gulf, Nigeria, or South America. Indeed, it may provide an incentive to sow instability in these regions. As a result, there is a reasonable basis for suspicion over the motives behind its policies regarding Iran, as well as other energy producing nations.

To say the least, Russia’s acute dependence on energy, and its desperate need for higher energy prices makes it very tempting for Putin to stir the pot in the Middle East, rather than try to help resolve problems there.

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  1. I agree it is in Putin’s best interest to facilitate ME supply shocks to pump up prices. Iran’s tenacles extend into Gaza and Lebanon. Iran hold’s 1/4 of the world’s natual gas reserves, if the current regime fell and the sanctions were lifted that wouldn’t be in Russia’s best interests either.

    Mary Anastasia O’Grady WSJ piece “Dictatorship for Dummies” could just as well have Putin substituted for Chavez:

    Yet the art of dictatorship has been greatly refined since Stalin killed millions of his own people. Modern tyrants understand that there are many ways to manipulate their subjects and most do not require the use of force.

    One measure that Mr. Chávez relies on heavily is control of the narrative. In government schools children are indoctrinated in Bolivarian thought. Meanwhile the state has stripped the media of its independence and now dominates all free television in the country. This allows the government to marinate the poor in Mr. Chávez’s antimarket dogma. His captive audiences are told repeatedly that hardship of every sort — including headline inflation of 31% last year — is the result of profit makers, middlemen and consumerism.

    The Orwellian screen is also used to stir up nationalist sentiment against foreign devils, like the U.S., Colombia and Israel. The audience has witnessed violence in Gaza through the lens of Hamas, and last week Mr. Chávez made a show of expelling the Israeli ambassador from Caracas.

    Comment by penny — January 14, 2009 @ 12:19 pm

  2. Ooops, here’s the WSJ link:

    Comment by penny — January 14, 2009 @ 12:20 pm

  3. Another request for the Professor – What do you think of the “too big to fail” concept. Given that the big investment banks failed due to mismanagement, isn’t it the correct thing to let them collapse thereby providing opportunity to smaller , more competent firms, presumably the ones less affected by the sub prime exposure? Even if this means displacement of the labor force temporarily – the growing small firms would eventually absorb them.

    Comment by Surya — January 14, 2009 @ 9:42 pm

  4. Surya–

    Thanks for the inquiry. Work demands and a funeral mean that I don’t have the time to respond at length immediately–I’ll try to get to it over the weekend.

    But, in brief, yes I am very skeptical about too big to fail, and primarily for the reasons you mention.

    Relatedly, your point about temporary displacement of the labor force has wider application. I am very skeptical about this stimulus mania, which jeopardizes long term growth to avoid temporary labor force dislocations. Hopefully I’ll have time soon for a longer piece on that topic too.


    The Professor

    The ProfessorComment by The Professor — January 15, 2009 @ 9:28 am

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