Popping the Champagne in the Kremlin: Israel's War with Iran Buoys Putin's Economy
Iran's military conflict with Israel proves advantageous for Russian President Vladimir Putin
In the world of politics, it's often said that there are no permanent friends or enemies, only permanent interests. And right now, Russia's persistent friend is looking a whole lot like Israel's war with Iran.
The ongoing Middle East conflict is becoming a lifeline for Russia's ailing war economy. Israel's airstrikes are driving up oil prices, and you guessed it, that means more revenues for Putin. And it provides Donald Trump with fresh excuses to keep the price cap and the Kremlin's war chest intact.
Trump's Lament and Russia's Break
Ahead of the G7 summit in Canada, Donald Trump had a pointed message: "Remember, sanctions cost us a lot of money," he said. The leaders of the major industrial nations were already considering further measures to starve Russia's war machine in Ukraine of fuel. But Trump's plea was enough to quell any plans of further sanctions.
The EU countries, Britain, and Canada had proposed to lower the price cap for the international sale of Russian oil to 45 dollars, a move aimed at tightening the screws on the Kremlin and stopping their war of aggression against Ukraine. But the Iran conflict has upset the apple cart.
Distraction and Disruption
But now, Benjamin Netanyahu's attack on Iran has thrown a spanner in the works. Alongside the nuclear deal, the planned sanctions against Russia are the most significant diplomatic casualties of the bombing attacks. Vladimir Putin is the biggest beneficiary of the attack on Tehran: not only does it distract from the daily terror attacks of his own air force on Ukrainian cities, but it also pushes up oil prices and fills the holes in his war chest. And it gives Trump another reason to keep the money tap open for Moscow.
Even before Iran, Trump was never particularly enthusiastic about standing up to Putin. Although even Republicans in the US Congress are now preparing harsher sanctions, he has adopted a soft approach towards Moscow. Now, Washington has more pressing matters on its agenda than Putin's aggression in Ukraine with the war against Iran. And that's not all - it's a new justification for not further attacking his economic foundation.
Brent Soars and Putin Smiles
The Iran conflict is sending oil prices skyrocketing, straining the price cap coalition. With the cap, Russian oil is artificially discounted to weaken Putin's war chest: if it's more than $60 and from Moscow, it can't be traded in the West. This artificial scarcity could further boost prices in the volatile situation. And Trump seems unfazed by the soaring prices, which are only exacerbating US inflation and fueling it further.
Meanwhile, Moscow is reaping the benefits of war. With the start of bombing, the price of Russian Ural oil jumped 15% in just a few days, according to the "Moscow Times", citing a Russian investment firm. The Kremlin needs these unexpected gains. Even with the increased prices, they're still below the level Putin's finance ministry budgeted for this year. Moscow's budget deficit will more than triple this year, with oil and gas revenues plummeting by more than half in May compared to the previous month.
A Leaky Price Cap
The plan to dry up Putin's main money source is still not working, thanks to glaring design flaws in the price cap. It's leaky, ineffective, and doesn't put a lid on Putin's oil business. With a fleet of ancient junkers, whose owners are obscured by shell companies and questionable backers, the Kremlin has been evading sanctions since day one.
The price cap is not a real embargo, just a weak compromise: it's supposed to be global by banning shippers from transporting Russian oil, prohibiting traders from buying it for more than $60, and preventing banks and insurers from financing or insuring deals above that limit. But hardly any country strictly enforces these rules, and there are barely any investigations or fines. And outside the West, compliance is scarce. Most deliveries are now handled without Western insurance. And the cheaper Russian smuggled oil gets, the less reason India and China have to buy expensively in the West, making them effectively Putin's only customers.
Europe Alone?
Trump's departure from the price cap coalition raises a question that has been asked since his withdrawal from the Western alliance: Will Europe dare to go it alone? Before the G7 summit, EU foreign policy chief Kaja Kallas stressed that the EU could lower the price cap unilaterally if necessary. "If we and the rest of the G7 support a lower price and the Americans don't, that's still something we should aim for," she said. But the warlord in the Kremlin will be pleased – the war in Ukraine might not be over just yet, but this conflict could certainly make his wallet a lot fatter.
Source: ntv.de
Vladimir Putin, Russia, Oil Price, Middle East Conflict
The Middle East conflict, particularly Israel's ongoing war with Iran, has become a crucial component in Russia's employment policy, as it drives up oil prices and consequently increases Russia's revenue through its oil exports.
In the realm of war-and-conflicts and politics, the ongoing Iran conflict has disrupted the proposed European Union sanctions against Russia, providing a distraction and creating disruption in the international community policy towards Putin's war in Ukraine.
