SAIS Next Europe

Energy



October 22, 2008 4:01 PM

In Italy, a Lesson in Laundry Economics

"Wash and Dry-- 6000 Lire." It was the last thing I expected to see painted on the wall of the local laundromat in Bologna, Italy, where I made the most banal of weekly pilgrimages in college life. I was hoping for clean underwear; I got a lesson in economics.

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November 7, 2008 4:27 PM

Russia's Fate and Falling Oil Prices

How will the current plummet of oil prices affect Russia? Guesses abound, mostly in the negative, but they remain nothing more than just guesses.

History can be interesting without being terribly useful. In 1986 oil prices crashed. The resultant slowdown in the Soviet economy, heavily dependent on sales of oil and gas, was one of the causes of the Soviet breakup at the end of 1991. But is this lesson really relevant?

For starters, the Russian Federation is not the Soviet Union, even if it has inherited its legacy of pervasive corruption. The most notable feature is the absence of ethnic republics of any considerable size (and history of some self-rule). The economic slowdown was one of the causes of the Soviet collapse, but the mobilization of ethnic, nationalist claims was probably even more important. In today's Russian Federation ethnic tensions and desires for increased autonomy, or even sovereignty, do exist. (Look at nearly sixteen years' of events in the North Caucasus.) The Putin years have not laid this issue to rest, but the tensions have decreased since the formal end of the second Chechen War.

This brings us back to the original question: whither Russia if oil prices continue dropping? The government's 2009 budget will likely see its first deficit in nearly a decade. This will not be a problem for short-term operations, though: over $700 billion of reserves insures the government against this. The problem for Russia is a long-term one: several years of these prices, impossible though that might seem, would lead to catastrophic consequences for a state seeking to improve its living standards to and triple its GDP by 2020. By that date, the object of so much planning for Russia's long-term development, Russians' annual salary should increase by a factor greater than three and its pension problem should be solved. $60 per barrel of oil, if indeed we get there, will make these hopes and intentions a pipe dream.

The United States has strategic interests in these affairs. Our leaders would certainly hope to see a humbled Russian political and business elite. But only to some degree. We are not witnessing the imminent collapse of a fragile regime. Nor should we hope for one. The Russian leadership has not exercised great delicacy over the past six months. Its deterioration and consequent instability would be even worse for American interests. Bring the Russian back to the table, yes, but don't bring them back begging. Witness the results of the 1990s.

Chad Miner is a graduate student in the IR/Global Theory and History program at the Johns Hopkins University Paul H. Nitze School of Advanced International Studies (SAIS) in Washington, D.C.




July 27, 2009 11:25 AM

Nabucco Pipeline Gets the Green Light

It was a cold winter, especially in several European countries. When Russia stopped pumping natural gas through Ukraine in January because of price disputes, several EU members found that their reliance on Eastern European partners made them surprisingly vulnerable. The lack of natural gas in the middle of the winter summoned the political will to find a solution and reduce the EU's dependence on Russian gas.

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