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Russia Sees No Oil Price Recovery In The Coming 7 Years

Tyler Durden's picture




 

Oil has given up all the overnight gains as we head towards the open and algos wake up to the reality that Russia's deputy FinMin believes...

 

Submitted by Andy Tully via OilPrice.com,

“Lower for longer” is becoming the catch phrase of the global oil industry, as an increasing number of energy executives and government officials alike see no opportunity for prices to rebound to their levels of mid-2014.

The latest such forecast came from Maxim Oreshkin, Russia’s deputy finance minister, who says he expects oil to sell for no more than $40 to $60 per barrel for the next seven years, and that Moscow is adjusting its budget planning accordingly, given that half the country’s annual budget relies on revenues from oil and gas sales.

“In our estimates, one should hardly expect any serious growth of the oil price above $50,” Oreshkin told a breakfast forum hosted by Russian newspaper Vedomosti on Friday. “The oil industry is changing structurally and it may happen that … the global economy will not need that much oil."

“Therefore we see a range from $40 to $60 somewhere for the next seven years,” Oreshkin said. “And these are the prices we should base our macroeconomic policy on.” They also must take into account the pressure on Russia’s economy brought by Western sanctions imposed because of Moscow’s annexation of Ukraine’s Crimean peninsula and its role in the country’s internal conflict.

The Finance Ministry’s first step, he said, will be to address an expected deficit of 3 percent for the country’s 2016 fiscal year because his ministry forecasts that the average global price of oil will remain where it has been for the past few months, between $40 and $50 per barrel. In fact, the world’s two international benchmarks, Brent crude and West Texas Intermediate, recently dipped below $40.

Specifically, Oreshkin said his country’s deficit forecast for fiscal 2016 is $21.7 billion if the price of oil remains around $40 per barrel for the next year. Revenues are expected to be $204 billion in 2016, compared with $238 billion in projected spending, he said.

The low cost of fossil fuels, including gas and coal, may be a boon to consumers and businesses who still rely on such energy, but they’re devastating not only to oil companies but also to countries, including Russia, who rely on oil to balance their budgets.

And the blame for this appears to rest solidly with OPEC, which is commonly called a cartel, according to the International Energy Agency (IEA). Cartels exist in large part to regulate prices, but for the past year the group decided not to reduce its collective production ceiling below 30 million barrels per day despite an oil glut. The aim was to keep prices low long enough to drive producers relying on expensive extraction methods out of business.

OPEC has twice reaffirmed that policy, most recently at its Dec. 4 ministerial meeting in Vienna. And in its monthly Oil Market Report issued the very day Oreshkin spoke, the IEA, which advises its 29 member states on energy policy, implied that “cartel” doesn’t apply to OPEC now because the group’s members have been exceeding the ceiling for months.

"The exporter group has effectively been pumping at will since Saudi Arabia convinced fellow members a year ago to refrain from supply cuts and defend market share against a relentless rise in non-OPEC supply,” the IEA report said. Its decision to maintain and even exceed its own production ceiling “appears to signal a renewed determination to maximize low-cost OPEC supply and drive out high-cost non-OPEC production – regardless of price.”

Some OPEC members such as Venezuela that are not as wealthy as OPEC’s Gulf States have expressed their concerns about the strategy. And even the group’s Secretary General Abdallah Salem el-Badri has expressed hope that oil producers outside his group will work with him to establish more realistic combined production levels.

“We are looking for negotiations with non-OPEC [producers] and trying to reach a collective effort,” he said last week. He reported some “positive” overtures from such countries, but no concrete proposals. “Everybody is trying to digest how they can do it,” he said.

Until such an agreement can be reached, it appears that Russia will spend the next several years trying to dig itself out of a deep financial hole.

 

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Tue, 12/15/2015 - 09:23 | 6925198 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

must be expecting a dramatic decrease in the size of one of the world's biggest consumers of oil, the US military industrial complex.

Tue, 12/15/2015 - 09:34 | 6925228 Money Counterfeiter
Money Counterfeiter's picture

 No just watched Bernake destroy credit.

Tue, 12/15/2015 - 10:43 | 6925513 Bumpo
Bumpo's picture

Funny how so many of these oil price articles worry out loud for Russia's economy - As if they cared. It's the Opec member states that seem to be shitting their pants Lol

Tue, 12/15/2015 - 11:07 | 6925629 MountainMan02
MountainMan02's picture

Shit I care. I want to go back to work. Oil/gas was the last honest job paying a middle class wage in this godforsaken economy. 

 

Tue, 12/15/2015 - 09:38 | 6925237 JohninMK
JohninMK's picture

At least the Russian Government seems to have taken this fundamental economic change on board and are planning it in, not putting their heads in the sand.

Given that gas is tumbling as well, I wonder what this will do for the economics of the Russia/China pipelines?

Tue, 12/15/2015 - 09:58 | 6925311 BlindMonkey
BlindMonkey's picture

I believe they will still go forward.  They know there will be another cycle of tight supply at some point.  What is only 7 years to the Chinese?  

Tue, 12/15/2015 - 09:50 | 6925240 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

Either that or solar just got a whole lot more efficient. Actually, it wouldn't even need to; it would just have to be backed by the right people and marketed by the greens. Will COP22 be the solar summit?

Or thorium??

Tue, 12/15/2015 - 10:46 | 6925538 Kirk2NCC1701
Kirk2NCC1701's picture

The statement is also predicated on the (big) assumption that Saudi oil supplies will remain constant.

I.e., that they will not experience an unscheduled "engineering failure", the kind that the USN experienced with its new ship.  ;-)

Tue, 12/15/2015 - 11:32 | 6925804 Angel_Eyes
Angel_Eyes's picture

Check this legitimate ways to mak? money from home, working on your own time and being your own boss... Join the many successful people who have already used the system. Only reliable internet connection needed, no prior experience neccessary, that's why where are here. Start here... www.wallstreet34.com

Tue, 12/15/2015 - 09:23 | 6925199 FreeShitter
FreeShitter's picture

Cop-21

Tue, 12/15/2015 - 09:24 | 6925205 blabam
blabam's picture

Say what you wanna say about the US. But they innovated the shit out of everybody. 

Tue, 12/15/2015 - 09:35 | 6925225 Troy Ounce
Troy Ounce's picture

 

 

Can't deny they're world's leader in bull shitting everybody.

Oh, forgot the ATM

Tue, 12/15/2015 - 09:41 | 6925244 samjam7
samjam7's picture

You mean they innovated, sudden unexpected tremours and burning groundwater? Yeah hell always good for some Hollywood action!

Tue, 12/15/2015 - 10:00 | 6925318 BlindMonkey
BlindMonkey's picture

You expect that to continue forward with all of the vibrant immigrants that are being imported? 

Tue, 12/15/2015 - 10:40 | 6925496 Lorca's Novena
Lorca's Novena's picture

On US soil, but remember all of those pesky German scientists circa 1930's - 40's ? Yupper

Tue, 12/15/2015 - 09:31 | 6925222 Mick Shrimpton
Mick Shrimpton's picture

We'll need plenty of oil when the war starts.

Tue, 12/15/2015 - 09:36 | 6925233 Sandmann
Sandmann's picture

Nigeria will blow up. Indonesia will blow up. Looks like the US will be in Permanent Warfare

Tue, 12/15/2015 - 10:32 | 6925452 kralizec
kralizec's picture

Pre-WWII: US cuts off oil and other raw materials to Japan for invading Manchuria.

Pre-WWIII: OPEC floods market with oil, collapsing domestic production in America and Russia, choas in Africa and Indonesia...

Gosh, what comes next?

Tue, 12/15/2015 - 11:08 | 6925640 Zero-Hegemon
Zero-Hegemon's picture

Bartertown

Tue, 12/15/2015 - 11:23 | 6925733 kralizec
kralizec's picture

Hey, look what I just found at the bottom of the lake!

Tue, 12/15/2015 - 13:13 | 6926310 malek
malek's picture

"will be" ?

Tue, 12/15/2015 - 09:39 | 6925238 christiangustafson
christiangustafson's picture

This is all Steve Ludlum's fault.

Tue, 12/15/2015 - 19:35 | 6927996 Radical Marijuana
Radical Marijuana's picture
Oil Price Crash: Who Cooda Node?

http://www.doomsteaddiner.net/blog/wp-content/uploads/2012/08/Triangleof...

When the Oil Price Crash arrived in November of 2014 (and progresses onward here as we speak), the MSM tells us that “Nobody Saw it Coming”

Steve Ludlum's "Triangle of Doom"  chart predicted the timing of the collapse of oil prices to the month, a couple of years before that happened. However, as most of us do, he continues to want to indulge in various irrational hopes regarding the foreseeable finite future, when there actually are NONE.

I find that Ludlum has penetrated more deeply than most into recognizing the degree to which civilization operates through fundamentally fraudulent financial accounting systems. However, he still wants to maintain irrational hopes regarding that.

In my view, the basic situation is that civilization being controlled by the methods of organized crime, much too successfully, for far too long, has resulted in that civilization manifesting runaway criminal insanities. The entrenched established systems make "money" out of nothing as debts, in order to pay for strip-mining the planet's natural resources, with the burning of petroleum being the single most important form of doing that ...

That kind of political economy is based upon the history of POLITICAL FUNDING ENFORCING FRAUDS. Since everything operates through those systems of excessively successful organized crime capturing control over governments, which in turn results in almost everyone becoming socially successful in proportion to the degree to which they are the best available professional hypocrites, able to enjoy their careers within a political economy based upon ENFORCING FRAUDS, pretty well everyone takes for granted how those fundamentally fraudulent financial accounting systems require attitudes of evil deliberate ignorance towards the principle of the conservation of energy, along with misunderstanding the concept of entropy in the most absurdly backward ways.

The political economy that turns natural resources into garbage and pollution as fast as possible, while that is presented through fundamentally fraudulent financial accounting systems are being "productive" and "good things" to be doing, is what Steve Ludlum much better perceives than most other people. However, his article linked in the comment above by christiangustafson does NOT engage in any deeper analysis of how and why money is necessarily measurement backed by murder, and therefore, the only genuine resolutions to the underlying problems are going to necessarily become, in one way or another, sooner or later, changes in the human death control systems.

By and large, the vast majority of people do NOT understand human beings and civilizations as manifestations of general energy systems, because doing so requires using unitary mechanisms, rather than the dualities of false fundamental dichotomies and the related impossible ideals.

My most recent repetition regarding the meaning of that was presented in a comment under this article:

http://www.zerohedge.com/news/2015-12-11/living-lie

Living A Lie

The vast majority of people do NOT have the slightest clue about how clueless they are regarding the degree to which they are "Living A Lie," due to their whole lives, and indeed the lives of generation after generation, INSIDE SYSTEMS BASED UPON VICIOUS SPIRALS OF POLITICAL FUNDING ENFORCING FRAUDS.

Since almost everyone wants to continue thinking about everything using old-fashioned dualities, based upon false fundamental dichotomies, and the related impossible ideals, it is politically impossible to change the degree to which there are growing Grand Canyon Chasms getting wider and WIDER between the apparent progress in areas like information theory and thermodynamics, which totally FAIL to be applied to better understand sociopolitical systems, because of the conclusions becoming that governments are necessarily the biggest forms of organized crime, controlled by the best organized gangs of criminals, which applies to ALL COUNTRIES, more or less, while those which were the most successful from doing that have become paradoxically the worst, which are now, namely all NATO countries, and especially the USA.

Therefore, at the present time, Russia is relatively more realistic than the USA. But still, Russia is also still dominated by its own locally available best professional hypocrites. (Although the professional hypocrites that dominate the USA and all other NATO countries are relatively worse, in the degree to which they lie to everyone, including themselves, because they enjoy the history that enabled them to more get away with doing that.)

Neolithic Civilization has always been based upon being able to back up lies with violence, which has grown at about an exponential rate due to prodigious progress in physical science. However, so far, that has come to dead-end in political science, since social pyramid systems based on increasingly integrated and sophisticated systems of legalized lies backed by legalized violence are not able and willing to admit and address those radical truths about themselves.

OVERALL, the case of petroleum resources is the single most important example of how civilization operates through fundamentally fraudulent financial accounting systems, so that we more and more are living INSIDE of Wonderland Matrix Bizarro Worlds, where everything is publicly presented in the most absurdly backward ways possible, due to the history of successful warfare developing to become the history of successful economics.

COLLECTIVELY, "we" have been making "money" out of nothing as debts in order to "pay" for burning petroleum resources as fast as possible ... Of course, the most wealthy and powerful amongst "us" have been doing that the most. The ways that "we" have been doing that were always actually being done in a manner that was consistent with information theory and thermodynamics, however, those human systems were driven by the history of successful warfare, becoming successful finance, to become publicly presented in the most absurdly backward ways possible.

The article linked above by Steve Ludlum presents some of the idealized possibilities for resolving our real problems in the euphemistical ways, where he is actually proposing changing the combined death and debt control systems, BUT, without going through enough paradigm shifts in his presentations in order to more thoroughly systematize those ideas.

Every country has its own history. The particular history of Russia is that they had the shit kicked out of them by the international banksters during the 20th Century. (Perhaps that was partially due to the previous history when the Russians helped the American Revolution to succeed, which was one of the biggest historical reversals for the international banksters, until they recaptured control over the American monetary systems after 1913.)

That horrible history taught the Russians a thing or two, in order to adopt enough of the banksters tricks for the Russians to somewhat be more able to resist the banksters, and therefore, Russians are now being demonized by the bankster controlled NATO countries, while being put under duress to get back to fully complying with the international banksters' global agenda, rather than somewhat still following more of the short-term Russian national interests.

Also, due to the extremely tough Russian history, Russia as a whole has suffered extreme demographic dislocations and distortions, which make their predicament quite basically different than most other places in the world, at the present time. Overall, all of that history gives Russians a different perspective upon the world, and their place in it. Although Russia is still basically another social pyramid system, still operating inside the Neolithic style of civilization, there are several historical reasons for how and why Russia is not as totally under the thumb of the international banksters, to the degree that other NATO countries tend to be, and especially so regarding the USA.

All combined, that results in Russia appearing to be slightly more realistic in their assessments of the short to medium term future for their economy. However, since they are still basically a form of Neolithic Civilization, Russia is still operating in ways which are criminally insane, because of the degree that they too are trapped within the intense paradoxes, or sets of consistent contradictions, regarding how they necessarily operate through the principles and methods of organized crime, in ways which have become runaway criminal insanities, when viewed from the perspective of the most likely longer term consequences from doing that, but which, nevertheless, are still driven to develop due to each short to medium term increment of the history of social successfulness being based on the abilities to back up lies with violence.

The most important things are the operations of the human death control systems, with the human murder systems as the most extreme forms of those. Since those have developed to become most socially successful through the maximum possible deceits and treacheries, that was how and why we ended up with a political economy based on ENFORCED FRAUDS STRIP-MINING THE PLANET'S NATURAL RESOURCES, THE FIRST AND FOREMOST OF THOSE HAVING BECOME BURNING PETROLEUM.

Steve Ludlum's article linked above provides a list of slightly more realistic, but still way too euphemistically expressed, changes to the economic and ecological systems, which would amount to changes in the combined debt/debt control systems. Ludlum's analysis tends to be more perceptive, and penetrates deeper than most into the actual things that human civilization has been doing, while "Living A Lie," and lying to itself as much as it could while doing that.

However, at the present time, it is politically impossible for any country to become much more realistic and honest about itself, (since almost nobody is able and willing to change the ways that they think and communicate sufficiently to be able to do that) although it may well continue to be the case that some countries are much more relatively dishonest than others. At the present time, I regard Russia as being much more relatively honest and realistic than NATO countries, while the USA is especially the country that has become the most dishonest country, which is increasingly dominated by psychotic psychopaths, mostly operating through their Deep State Shadow Government, controlling the public government of the USA, in ways which increasingly risk starting a war with Russia.

Meanwhile, it appears that Russians are relatively more realistic in facing their problems, that are due to the international banksters attempting to consolidate their total global hegemony through ENFORCING FRAUDS ... However, OVERALL, that means that the world's natural resources continue being turned into garbage and pollution as fast as still possible, since the world's economic activities are controlled through fundamentally fraudulent financial accounting systems, that present everything being done in the most absurdly backward ways to what is really happening..

Tue, 12/15/2015 - 09:40 | 6925241 samjam7
samjam7's picture

'Some OPEC members such as Venezuela that are not as wealthy...' well, well now why is that? Certainly not for lack of proven oil reserves. 

It's prudent of Russia to plan their budget accordingly while the house of Saud still controls that patch of desert next to the gulf, but let's hope it won't be 7 years and things will change down there. Really it is about who holds the longer breath!

 

Tue, 12/15/2015 - 09:55 | 6925257 Son of Captain Nemo
Son of Captain Nemo's picture

Loosely translated...

We can hold our breaths longer than you Riyadh...  After all?...

WE'RE YOUR NEW NEIGHBOR IN ALEPPO MOFO!!!

We'll see who can play this one the longest!

P.S.

Sorry about that deal you made with the U.S. is forcing you to hold all of your "shit" in USD!

Real pity on this end!!!

Tue, 12/15/2015 - 10:16 | 6925395 Took Red Pill
Took Red Pill's picture

Yeah, the Saudis are trying to pull a Walmart. Keep prices low to drive out competitors, then once their out of business, jack up the prices.

Tue, 12/15/2015 - 10:41 | 6925502 Son of Captain Nemo
Son of Captain Nemo's picture

But they don't have the reserves anymore which is why the destabilization campaign is in high gear to take it from Iraq and Syria.

And Russia doesn't have that problem with one of the strongest currencies out there (because they don't have the debt), plenty of untapped reserves and best of all "time"!

Tue, 12/15/2015 - 11:06 | 6925628 Government need...
Government needs you to pay taxes's picture

In a game of who can take more financial pain, my money is on the Russians.  They've got cold weather . . . and vodka.

Tue, 12/15/2015 - 09:45 | 6925261 PutinLover
PutinLover's picture

Russia is so fucked.

Who's got Vlad's suicide watch tonight?

Tue, 12/15/2015 - 09:49 | 6925273 Son of Captain Nemo
Son of Captain Nemo's picture

Jew Bagel talking smack again!...

If I were you I would spare no expense and get that car and suit you always wanted to be buried in when that last option you love to boast about finally comes true.

Hezballoah is the least of your worries now booby!

Tue, 12/15/2015 - 09:57 | 6925303 silverer
silverer's picture

I don't see why you think that.  Everybody in the oil business has to go through it.

Tue, 12/15/2015 - 10:43 | 6925520 Kirk2NCC1701
Kirk2NCC1701's picture

Hey, PutinLover, send me your name, street address and your landline phone number, and I'll send you a genuine Russian 1 Toz. silver coin.

Tue, 12/15/2015 - 11:10 | 6925657 Baby Bladeface
Baby Bladeface's picture

This commenter PutinLover a retard and a retard was seen before on this site.

Here and a dead giveaway:

"Who's got Vlad's suicide watch tonight?"

This phrase fingerprints the retard specifically, always used and along with phrases advertising his tendencies to homosexuality and the leaky ass.

Retarded troll initially on here and used handle "Amerikan Patriot". Was kicked off and more than once after shitting on comments threads.

Other times handles observed using was 5e0V2a3, asophocles, iofera, stopeuro, TheFourthStoog-ing (not with former commenter lacking retardity TheFourthStooge-ing and do not confuse).

Can expect this PutinLover guy on comments to shit and tell his weird passive same sex fantasies.

Tue, 12/15/2015 - 11:42 | 6925873 Collectivism Killz
Collectivism Killz's picture

Sorry dude, we can't cover down on Putin. We are too busy taking care of all the oilmen blowing their heads off in Alberta and Texas, the strippers in North Dakota who are dealing with no tips, and the Ukrainians having all their wealth stolen by Yatsunyuk and his merry band of pirates.

Tue, 12/15/2015 - 19:49 | 6928094 bid the soldier...
bid the soldiers shoot's picture

Don't worry about Vlad's suicide watch, Amerikan Patriot.  Vlad isn't going anywhere until the American National Debt brings all of the Temple of Dagon down on your pimpled, bulbous nose.   

Tue, 12/15/2015 - 09:47 | 6925265 Kina
Kina's picture

Maybe time to shut down Saudi Arabia, well overdue.

Tue, 12/15/2015 - 09:48 | 6925272 fockewulf190
fockewulf190's picture

Putin has got to end the war in Syria much faster than how it´s going now.  If this drags on and on, that deep financial hole will end up being a canyon.

Tue, 12/15/2015 - 10:08 | 6925350 Global Hunter
Global Hunter's picture

Syria with Iran and Russia help is slowly gaining control over the West and South of the country, I agree they'd like it go very fast but the war is slowly going their way.  Furthermore the Russians don't fight "shock and awe" wars, look at Ukraine, they were content to retreat tactically and then enclose the enemy, they are content with the Minsk2 stalemate. 

Russians in my opinion needed to turn the tide of the war in Syria and support the Assad forces from being toppled, they have acheived this objective.  The Russians don't need to control the entire Middle East for their model to be successful, it is the US/NATO that are in a race against time to control the world's resources before their currency no longer buys even piles of dung.

Tue, 12/15/2015 - 10:09 | 6925354 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

Just bomb Turkey, maybe get some pipelines by accident. That might loosen global reserves.

Tue, 12/15/2015 - 10:33 | 6925462 jme540
jme540's picture

I agree, this is not time for bravery, this is time for tactical nukes. And only fools bring conventional weapons into nuclear war.

Obama's pupeteers obviously don't understand gentle hints, but seeing nukes to be used (conveniently on ISIS) is something they would probably get.

 

Tue, 12/15/2015 - 10:35 | 6925468 cornflakesdisease
cornflakesdisease's picture

My thoughts too.

Tue, 12/15/2015 - 11:54 | 6925962 Omen IV
Omen IV's picture

try looking at GDP / Debt ratio for Russia - and the absolute number is a rounding error by US standards

 

not only will Russia / Putin survive but it is Saudi Arabia that  is on the clock - no one compares

if the Sunni extremists ever turn directions they can take SA for all Sunni in the world  and throw out the Prince(s) of Darkness

Tue, 12/15/2015 - 09:59 | 6925289 roadhazard
roadhazard's picture

So much for Pootins military upgrade. And every day more Rubles are sucked into Syria. It's tough when you are a one trick pony.

Tue, 12/15/2015 - 09:57 | 6925304 richsob
richsob's picture

So Russia's going to be broke.  The U.S. is already broke.  China is getting there.  Sounds like everybody should shut the F up and start getting along.  Wars are expensive.

Tue, 12/15/2015 - 10:05 | 6925339 silverer
silverer's picture

You are correct.  War is a poor use of capital, and hires the least amount of people.

Tue, 12/15/2015 - 10:14 | 6925372 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

But the defense industry is the only one still producing anything in the US. End war and Yellen is out of work... hey wait a minute!

2 birds, 1 stone

Tue, 12/15/2015 - 10:08 | 6925352 IridiumRebel
IridiumRebel's picture

But according to the Neo-Cock PNAC fux, 'THERE CAN BE ONLY ONE".

Uni-polar world or nuclear flash you fuckers!

Tue, 12/15/2015 - 10:07 | 6925348 commie
commie's picture

If Pootin is forced to withdraw from  Syria it will be another humiliating episode. The lost jet the first. 

Tue, 12/15/2015 - 10:40 | 6925492 Kirk2NCC1701
Kirk2NCC1701's picture

You know what 'embarassing'?  Your shitty grammar.

E.g. "The lost jet the first." (And I didn't even bother to junk you)

Tue, 12/15/2015 - 10:55 | 6925554 . . . _ _ _ . . .
. . . _ _ _ . . .'s picture

Not everybody on the internet is an anglophone. Americans might not understand this but English is a second or third language for some.

And some people drink in the morning, too.

Just sayin'...

 

ps_ "You know what 'embarassing'?" is not exactly good syntax, and embarrassing has a double 'r'.

Tue, 12/15/2015 - 11:14 | 6925686 commie
commie's picture

You know what 'embarassing'?  Your shitty grammar.

 

You left out a word wise ass beside the misspelling. . And you used a fragment for a sentence as I did. But I didn't expect to be graded on grammar here. 

Tue, 12/15/2015 - 10:09 | 6925356 cn13
cn13's picture

Russia needs $55/barrel crude oil to pay for their domestic programs.  Saudi Arabia needs $105/barrel crude oil to balance their budget.

Saudi Arabia is literally going bankrupt attempting to bankrupt their competition primarily U.S. shale producers.

Who wins in the end I don't know but my money would be on Russia.

Why?  Because Russia has true leadership not a bunch of sell out traitors like we have here in the U.S.

Tue, 12/15/2015 - 10:40 | 6925493 cornflakesdisease
cornflakesdisease's picture

Saudi has quite a bit of dollar reserves to burn through; about $750 billion.  It's quite a game of chicken.

Tue, 12/15/2015 - 10:10 | 6925363 Tigermoth
Tigermoth's picture

Since when is a 3% deficit, $21.7 billion, a problem? The Russians acknowledge it and are going to work within their budget this year and are anticipating the same for the next 7. The USA has 17 trillion more or less and could care less about working within a budget. Who is more clever? 

"The Finance Ministry’s first step, he said, will be to address an expected deficit of 3 percent for the country’s 2016 fiscal year because his ministry forecasts that the average global price of oil will remain where it has been for the past few months, between $40 and $50 per barrel."

Tue, 12/15/2015 - 10:12 | 6925364 Kina
Kina's picture

The war in Syria is going perfectly for Putin - it stops Israel/Saudi/Turkey etc from attaining their various goals.  They don't need to win, they just need to make a mess of the 'oppositions' plans.

And with Iran, Iraq and China siding with Russia......

Tue, 12/15/2015 - 10:22 | 6925413 Kaeako
Kaeako's picture

America and its allies were perfectly happy with letting things proceed on their own weight and that hasn't changed. The plans of Britain, France and Turkey in the north of the country are still proceeding - and quite well one might add, given the ISIS losses over the last one to two months in the area of interest. As far as the Americans, Saudis and their puppets are concerned, removal of Assad is a done deal one way or another. If it takes years more, so be it. If Russia isn't willing to compromise it can keep on bombing and wasting millions. Of course Russia is very pragmatic and Assad isn't a redline - if there is a compromise that protects at least some Russian interests, poof, Assad is gone. Assad is not an ideological question to Russia in the same way it is to Iran.

Tue, 12/15/2015 - 12:00 | 6925993 richsob
richsob's picture

I have my issues with Russian politicians but the Russian people are good folks.  I hate to see the Russian people being chained to shitty countries like Iran, Iraq and, to a lesser extent, China.  Those are pretty crappy "friends" to have.

Tue, 12/15/2015 - 12:35 | 6926165 get-green-befor...
get-green-before-too-late's picture

What about US friends?

Saudi Arabia, leader of the UN Human Rights Council (lol)

Turkey

Israel

etc

 

Tue, 12/15/2015 - 12:46 | 6926210 richsob
richsob's picture

How about we agree any country in the Middle East is apt to be a shitty friend.  I don't like any of them.  :)

Tue, 12/15/2015 - 10:11 | 6925374 PutinLover
PutinLover's picture

Vlad's down at the Western Union and he says you guys haven't been holding up your end of the bargain.

Also, no rubles! He wants strictly dollars.

Tue, 12/15/2015 - 10:14 | 6925382 Kina
Kina's picture

Now it will be difficult, but irony if Iran/Russia were able to do a CIA effort aka Libya Egypt Ukraine  in Saudi Arabia.

Tue, 12/15/2015 - 10:16 | 6925394 Tigermoth
Tigermoth's picture

Speaking of Syria, I wonder if there is a corellation between these 2 items from RT

"The US is to send some 10,000 troops to Iraq to provide support for a 90,000-strong force from the Gulf states, a leading Iraqi opposition MP has warned. The politician said the plan was announced to the Iraqi government during a visit by US Senator John McCain.

During a meeting in Baghdad on November 27, McCain told Prime Minister Haider Abadi and a number of senior Iraqi cabinet and military officials that the decision was ‘non-negotiable’, claimed Hanan Fatlawi, the head of the opposition Irada Movement.

“A hundred thousand foreign troops, including 90,000 from Saudi Arabia, the UAE, Qatar and Jordan, and 10,000 troops from America will be deployed in western regions of Iraq,” "

and this today

"A Riyadh-based “Islamic military alliance” has been formed to fight terrorism, Saudi Arabian state TV has announced. The coalition consists of 34 countries, including the Gulf States, a number of African countries, Turkey, Egypt, Malaysia and Pakistan.

Countries involved in the coalition aside from Saudi Arabia, include Jordan, the UAE, Pakistan, Bahrain, Bangladesh, Benin, Turkey, Chad, Togo, Tunisia, Djibouti, Senegal, Sudan, Sierra Leone, Somalia, Gabon, Guinea, the partially-recognized state of Palestine, the Islamic Federal Republic of the Comoros, Qatar, Cote d’Ivoire, Kuwait, Lebanon, Libya, Maldives, Mali, Malaysia, Egypt, Morocco, Mauritania, Niger, Nigeria, Yemen.

“The countries here mentioned have decided on the formation of a military alliance led by Saudi Arabia to fight terrorism, with a joint operations centre based in Riyadh to coordinate and support military operations,” state news agency SPA quoted an official statement as saying."

 

Tue, 12/15/2015 - 10:37 | 6925475 Kirk2NCC1701
Kirk2NCC1701's picture

Yes, but it does not have the approval of Syria or Iraq.  Russia claims it will therefore fail.

The Islamic counterterrorist coalition launched by Saudi Arabia will not be effective, or even feasible, without Iraq and Iran, the head of the Federation Council’s International Relations Committee maintains.

Not only Sunni but some Shia nations have been invited into this coalition, such as Yemen, Lebanon and Bahrein. But it still lacks Iraq and Iran and without them we anyway cannot say that this coalition is feasible and effective,” Konstantin Kosachev wrote in his Facebook account on Tuesday.  Kosachev added that Iraq and Iran were actively cooperating with Russia in the counterterrorist sphere.

Our joint actions were definitely more effective than those of yet another coalition – led by the United States,” he wrote.

Another anti-terror alliance working in the Middle East is the US-led coalition of about 65 countries in which most of the strikes are carried out by the US Air Force without any permission from the Syrian government.

Russia has also launched an anti-terror coalition in the Middle East together with Syria, Iraq and Iran. The headquarters of this bloc, known as RSII are located in Baghdad and cooperation mostly amounts to exchange of intelligence data.

On Tuesday Saudi Arabian government news agency SPA announced the formation of the ‘Islamic military alliance’ with a mission to fight terrorism. The coalition consists of 34 countries, including the Gulf States, a number of African countries, including Egypt, as well as Turkey, Malaysia and Pakistan. Its headquarters will be in Saudi Arabia capital, Riyadh.

source: https://www.rt.com/politics/325985-senior-russian-lawmaker-blasts-saudi/

Tue, 12/15/2015 - 10:17 | 6925398 dogismycopilot
dogismycopilot's picture

Iraq is pretty much fucked if oil stays below $40 for more than the next 6 months. The country is already practically bankrupt as it is.

The GCC countries will be rolling out a VAT tax within the next 18 months: http://www.khaleejtimes.com/business/economy/vat-may-increase-business-c...

Saudi has some hefty invoices with Boeing and Raytheon as well as firing up their new King Abdullah Economic City.

Low oil price = lot of bad shit happening in the Middle East = more refugees in EU.

Russia should be able to Muddle through this well enough. War will increase demand for Rubles internally. What they don't have they can buy in China cheap enough.

Turkey is going to be strung out as demand for their products and services goes down in Iraq, Iran, and Russia.

US has access to the magic copy machine that shits bonds and money and they will do the best.

Tue, 12/15/2015 - 10:21 | 6925409 donupstream
donupstream's picture

So we should believe the Russian guy right? Just like we should believe that Saudi has an unlimited supply of oil. Here is how I see it, we are still using around 92 million barrels of oil o day and winter hasn't even started yet. Low gas prices will encourage consumption and kill the electric car market. The oil industry probably need around $80 to continue to keep production at these levels so there will be a massive supply response to the games going on by the FOMC who yes, set the price of oil. Oil consumption is like the debt clock in that it just keep running and the 60 year old fields that supply almost half of the worlds oil are set for a decline that will be something to behold. They thought the great fields of Texas would never roll over so the prize goes to one who can think beyond tomorrow.

Tue, 12/15/2015 - 11:34 | 6925816 libertysghost
libertysghost's picture

So go "long oil!"  Like 60 years long?  They are only talking about 7 years.

Tue, 12/15/2015 - 10:32 | 6925440 CTG_Sweden
CTG_Sweden's picture

 

 

 

 

 

 

Westerns sanctions are not necesserily bad for Russia in the medium term, provided that the Russian response is to replace Western imports with domestically produced goods.

One of the problems with Russian economy in the 1990s was that they replaced domestically produced goods with imported goods. Free trade did not benefit Russia at that point since they were not competitive in any industry except commodities and AK47:s. People didn´t even buy Russian vodka abroad. Russia still has the same problem to some extent.

If the Russian government is smart, they provide some kind of equivalents to private equity companies with capital and let some clever people create companies that imitate Western companies that export goods to Russia. In the past, the only thing that would have happened if they had tried something like that would probably have been that the money would have wound at some offshore bank account and would not have been used for productive investments. But perhaps it would work today. If the top management gets no reward if the money winds up at an offshore bank account but get rich if they create a successful company on behalf of the tax payers they could might make this kind of strategy work. Later on, the ownership of the companies could be distributed as vouchers to the tax payers or transfered to a pension fund.

If you got a market with 150 million consumers for yourself, I think that should be considered as a substantial competitive advantage. Especially if you are not competitive abroad and in addition to that is not allowed to compete on the same terms as Western competitors abroad.

 

 

Tue, 12/15/2015 - 10:53 | 6925580 Tigermoth
Tigermoth's picture

The Russian think tanks have been saying the same thing for a while now. The problem is with the Central Bank having been setup to benefit the Western banking system, they only loan locally at really high interest rates compared to Western Banks. The result is two fold. The Russian businesses owe Western banks huge debt (because the borrowing rates were so much better), which is what the plan was now they are debit slaves to the West, and it also stops or slows the growth of the grassroots SME businesses.

The current government is starting to maneuver around this to stimulate the growth of the internal economy in certain sectors that have been hit by the sanctions through subsidies and special funding schemes . I'm not sure why the financial system isn't being changed maybe the timing isn't right to bail out of the world banking system yet.

Tue, 12/15/2015 - 11:56 | 6925939 CTG_Sweden
CTG_Sweden's picture

 

 

 

 

Please note that I´m not talking about small and medium-size businesses (well, perhaps in some cases medium-size businesses). What I´m talking about is replacing imports from foreign big business. And that probably takes creating domestic big business equivalents as fast as you can. And then you can´t wait for small companies to grow by themselves. At least, you got to copy the private equity model which means that you buy a substantial stake in a small business, gives stock options to the founder and makes him grow the company with some additional assistance.

 

Furthermore, I think there is rather little difference between lending money to a small- or medium size business owner, or invest in his company in order to make it grow, or hire a few people who understand a certain industry, let them create a company and provide them with stock options. The Russians should use American private equity companies as a model to a substantial extent.

 

I also suspect that the Russians should try to borrow money from China and use (wood) land as collateral.

 

Russia should probably also have imposed capital controls long ago. To some economies, capital controls can do harm. But not to an economy which is about exporting commodities and arms, at least not to a substantial extent. It seems as if profits from commodities even during the Putin era has not been used for productive investments in Russia. Instead, the money has wound up at foreign offshore bank accounts. People that had made huge profits from privatized Russian government property should have been forced to lend this money on reasonable terms to productive investments.

 

Russia should probably also try to raise wages aggressively and use Henry Ford circa 1914 as a role model. If people buy domestically produced goods which is produced efficiently, raising wages is no problem for the economy. However, if they buy imported goods, you can´t raise wages unless the oil price rises significantly. A good starting point for transforming an economy is to ask the question "where can we begin to raise wages and what needs to been done to make that possible?".

 

 

Tue, 12/15/2015 - 13:06 | 6926283 MEFOBILLS
MEFOBILLS's picture

Pretty good comment.. I like to see this at ZH.

 

With regards to borrowing money on international or overseas markets - there is no need for that, especially in Russia case.  The only reason for borrowing on capital markets is if you need to buy something from overseas, and it is only denonominated in dollars, etc.

Any sovereign country can create its own credit by borrowing from itself.  This borrowing has to be directed, like Kaizer's germany did with its industrial capitalism. (Japan post WW2 is another example of directed industrial credit.)

Think of it like a body, where you want to direct credit to make said body healthy.

China imports foreign technology by issuing Yuan loans.  For example, they may attract solar cell experts who just graduated from MIT.   Of course wall street helps in the China/Wall Street Gambit, by exporting American jobs in order to earn wage arbitrage.

These Western imported people, or even companies,  are set up with their own labs or businesses in China using internally sourced Yuans.  Russia could do the same, e.g. follow the Chinese model.

Once the targeted industry is set up, then the loans may be pruned, or erased.  This allows a debt free company to do battle in marketplaces at low cost.  A country like Russia could end up with a Western advanced technology company brought into being fairly easily.

China has political control over their state banks.  Russia, to be a sovereign actor also needs equivalent type control.  Russia's banks need to be state owned.  Or even better a fully sovereign money system.  www.sovereignmoney.eu

Russia with its land and resources could overtake China. In terms of natural resources China does not compare. 

If I were a Russian Tsar, I would import labor from Germany, and Nordic countries to then replenish Russo type genetic stock, to thus buld a new bulwark of Western Civilzation.  Transplanting workers and industries to Russia is just a matter of incentives.

Many educated attractive westerners would make the jump if offered a deal.

Tue, 12/15/2015 - 10:33 | 6925453 Kina
Kina's picture

Frankly, Saudi Arabia needs to be neutralised.

And Iran needs to be given nuclear weapons (China, Russia...) then announce it.

That will chang Israel strategy to know they can be nuked.

 

And if Syria were to come up with nukes?  How keen would Israel/USA/Saudi be for their ISIS terrorist mates to get their hands on them if they beat Assad?  All of a sudden the push to use ISIS to conquor Assad would end.

Tue, 12/15/2015 - 10:37 | 6925479 rsnoble
rsnoble's picture

The Fed's won't like this 7 year non-recovery talk.  I'm sure WW3 could get it racheted up---but like it would matter lol.

Tue, 12/15/2015 - 11:07 | 6925634 Government need...
Government needs you to pay taxes's picture

Just need a hotter shooting war in the sandbox . . . that's better than a booming economy for the price of oil.

Tue, 12/15/2015 - 11:11 | 6925667 David Wooten
David Wooten's picture

"...the blame for this appears to rest solidly with OPEC, which is commonly called a cartel, according to the International Energy Agency (IEA)."

 

“The oil industry is changing structurally and it may happen that … the global economy will not need that much oil." - Maxim Oreshkin Russian Deputy FM

It appears that the Russian FM has a better grasp of the situation and its causes and is, therefore, taking a different more reasoned approach to his country's economic problems.

 

Tue, 12/15/2015 - 11:14 | 6925681 Zero-Hegemon
Zero-Hegemon's picture

We'll know when the real shit show starts when Russia starts bombing Saudi Arabia. And it would do the world a lot of good, IMO. I think that's when the US will start shooting back, and not by proxy.

But cut their Saudi fucking shit stain heads off by bombing their oil infrastructure into the stone age like they are doing to the ISIS pavement pipeline into Turkey.

Tue, 12/15/2015 - 11:16 | 6925689 falak pema
falak pema's picture

In seven years the Petromonarchies will be back to camel caravaning and the silk and spice routes will replace the oil routes. Yipee !

Jihad will be a lonely camel lost in translation.

Hopefully we will move into Elon Musk territory singing Renewables to the moon !

The Fed, or its replacement, now has to develop a seven year itch to get the Casino down to the very ditch.

Zero Hedge the naked shorts all the way to the shredder,  and let the bitch of a market die with its banksta witches; tits up like poached eggs and all warts exposed, hanging out burning like purple toast in the sun!

Mad dogs sent to the pen. I'll sign that scenario like I were Michael Angelo painting the divine ceiling. 

Putin named Pope of this new Renaissance. Lets hope the NWO Habsburgs will not call his puts or we will be back to the pemanent wars...you can never tell with those psychopaths.

Tipping times indeed.

Tue, 12/15/2015 - 11:50 | 6925935 HenryHall
HenryHall's picture

Suppose Russia simply stops shipping pipeline gas to Europe for reasons of sanctions and force majeure. And stops shipment of all forms of energy (including nuclear fuel) to Ukraine for similar reasons.

Result - Europe freezes, Turkey is fcuked and the "free" market price of LNG and oil is driven way up - including LNG and oil sold by Russia to the world.

Also, the inevitable decline and revolution of Ukraine is hastened. Then Ukraine returns to a Russia-friendly government, European sanctions expire and the pipelined gas becomes available again at free market prices. Everyone is happy and appreciative of what they once took for granted. As to the Baltics - well who cares one iota what happens to the Baltics - whatever they get they have richly deserved.

Tue, 12/15/2015 - 12:04 | 6926017 mototard
mototard's picture

I agree that oil will remain "low for long" unless there is a:

1.  A real shooting war in the Ukraine versus the current slow war

2.  A real shooting war involving Iran and (Iraq, Syria, USA, Russia, Saudi etc)

3.  A real shooting war involving Israel and (insert any middle eastern country or entity here)

4.  An outbreak of widespread civil strife in the Euro Zone

5.  The collapse of the Euro and Schengen agreements

 

OK, now that I think about it, oil prices could spike suddenly and go past USD 100 in a heartbeat.

So it goes....

 

Tue, 12/15/2015 - 12:27 | 6926118 Tigermoth
Tigermoth's picture

We probably shouldn't worry about the Saudi Navy too much:

http://southfront.org/2-other-saudi-warships-were-destroyed-by-yemeni-fo...

2 OTHER SAUDI WARSHIPS WERE DESTROYED BY YEMEN’S FORCES

Two Saudi warships were destroyed by Yemen’s army and popular forces in the waters near Bab al-Mandab Strait on Monday, bringing the number of the Saudi vessels sent down in the waters offshore Yemen to 10.

Tue, 12/15/2015 - 13:18 | 6926327 HenryHall
HenryHall's picture

However, Saudi Arabia recently captured a strategic island which was used for transshipment of materiel, food and medical supplies to the Houtis. That development is distinctly non-trivial.

http://www.almasdarnews.com/article/saudi-coalition-capture-strategic-ye...

Tue, 12/15/2015 - 20:10 | 6928167 bid the soldier...
bid the soldiers shoot's picture

ho ho

The low cost of fossil fuels, including gas and coal, may be a boon to consumers and businesses who still rely on such energy, but they’re devastating not only to oil companies but also to countries, including Russia, who rely on oil to balance their budgets.

How devastating are the lost cost of fossil fuels to countries like the US, who haven't balanced their budgets since Ronald Reagan was inaugurated in 1981, 34 years ago?


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