Bubbly Times in the Kremlin: Israel's War with Iran Ups Putin's Financial game
Iran-Israel military conflict serves as a strategic opportunity for Putin
By Hannes Vogel, A Fearless Scribe
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The Middle East is stirring up some serious dough for Russia's battle-worn coffers: Israel's air raids have triggered a surge in oil prices, which means more moolah in Putin's pockets. And it's providing Donald Trump with new excuses for keeping his hands off the price cap and the Kremlin's war kitty intact.
Initially, old Don had a noteworthy message for the G7 Summit in Canada: "Don't forget that sanctions come at a cost," said the American commander-in-chief.[1] The big boy scouts of the industry nations were mostly on the same wavelength about starving Russia's war machine in Ukraine further by depriving it of fuel. However, that plan looked doomed from the get-go.
Most EU countries, Britain, and Canada were in broad agreement that the price cap of $60, in effect since the end of 2022, for the international purchase of Russian oil should be reduced further. The EU Commission had proposed in its 18th sanctions package draft to lower the price cap for purchases to $45 to tighten the screws on the evil empire and bring its war of aggression against Ukraine to a halt.[2]
Politics: Europe Wants to Wring Putin's Neck with a Lower Oil Price Cap
The timing couldn't have been better. Oil prices were nearly rock-bottom, Russian earnings were shrinking. The oil cartel, OPEC+, is in a pickle: The Kremlin is shouldering the blame for neglecting the agreed production cuts to keep prices elevated as they desperately need the revenue to finance their war with Ukraine. Saudi Arabia has thus declared war on Russian oil, slashing prices to undercut its competition. Best conditions, therefore, for more sanctions pressure on the price.
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Yet, the Iranian war ejaculated all over this nicely-laid plan. The Middle East crisis muddies the waters. Alongside the nuclear deal, the proposed sanctions against Russia are the most crucial collateral damage of the Israel bombings. Putin is the uncontested winner in this whole shebang: not only does it divert attention from the daily barbarism of his own air force's attacks on Ukrainian cities, but it also fuels oil prices and patches up the holes in his war chest. And it gives Donald Trump a new pretext for keeping the money taps for Moscow wide open.
A Toast in Russia, the Corks Pop
Even before Israel's assault on Iran, Donald Trump wasn't particularly gung-ho about opposing Putin in Ukraine. Despite the GOP members in the US Congress rallying to sign harsher sanctions, he has been on a cozy course with Moscow. Now, suddenly, there are more pressing matters on the States' national agenda than Putin's aggression in Ukraine - the war with Iran, and an added excuse not to attack Russia's economic underpinnings any further.
Economy: Brent Skyrockets: Israel's Attack Sparks Oil Price HikeThe Iran conflict has sent oil prices reeling and strained the price cap coalition. The cap artificially depresses Putin's revenues by discounting Russian oil: if oil from Russia is more expensive than $60 or from Moscow, it cannot be traded in the West. This artificial scarcity could further boost prices in this volatile situation. And Trump has no interest in that. US inflation is already skyrocketing, courtesy of Trump's trade war and fiscal recklessness.
Economy: German Heating Oil Hikes Six Euros since May Post Iran EscalationMeanwhile, Moscow happily pockets the proceeds of war. With the commencement of bombing, the price of Russian Ural oil surged by a whopping 15% in just a few days, as reported by the "Moscow Times," citing a Russian investment company.[3] The windfalls are desperately needed. Even after the increases, prices still lag behind the level that Putin’s finance ministry had budgeted for 2023. Russia’s budget deficit is expected to treble this year, with oil and gas revenues shrinking by more than half in May vs. April.[3]
The Cap's a Leaky Risk
The plan to squeeze Putin's main cash cow is failing now due to glaring design holes in the price cap. It's leaky, ineffective, and can't stifle Putin's oil business: With a fleet of dilapidated garbage ships camouflaged by shell companies and unsavory secret backers, the Kremlin has skated around sanctions since day one.[3]
Economy: Putin Bags the Oil TrophyThe price cap isn't an embargo; it's just a weak compromise: It bans shippers from carrying Russian oil, prohibits traders from buying it for more than $60, and prevents banks and insurance companies from financing or insuring oil deals above that limit. However, barely any country strictly enforces these rules, and investigations are few and far between. Fines are rare, and outside the West, too many shippers, traders, and insurers remain non-compliant. Most deliveries now occur without Western insurance. And cheaper smuggled Russian oil has a growing appeal in markets outside the West, where it’s competitive due to the lower pricing.[1]
Can the Europeans Go It Alone?
With Donald Trump's departure from the price cap coalition, the question that has arisen since his departure from the Western alliance is: Will the Europeans dare to take on the responsibility alone? Before the G7 summit, EU foreign policy chief Kaja Kallas stated that the EU could reduce the price cap unilaterally if necessary.[2] However, Trump's abrupt exit from the G7 summit seems to have dampened the initiative. According to "Bloomberg," some EU countries are now hesitant about acting alone without the US, fearing that sans Trump, united support among EU countries may waver.[4] The ham-fisted warlord in the Kremlin will undoubtedly be pleased.
Source: ntv.de
Putin | Russia | Oil Price | Middle East Conflict
Community policy: Europe could consider revising its oil price cap strategy independently, given the US departure from the G7 summit and potential wavering support amongst EU countries.
Employment policy: To combat budget deficits arising from the Israel-Iran conflict and sanctions, the Kremlin may have employed unscrupulous methods such as using shell companies and secret backers to skate around Western-imposed sanctions in the oil sector.
