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Wednesday, May 20, 2020

ANALYSIS/OPINION:

It is most ironic that in an age dominated by mainstream media claims of Russian meddling in American politics and a continued fascination with alleged collusion between the Trump campaign and Moscow that this same mainstream media so readily laps up Vladimir Putin’s propaganda and disinformation. Witness the coverage of the Russia-Saudi oil war.

According to those media sources, the evil leaders of Saudi Arabia, principal among them Crown Prince Mohammed bin Salman, began an effort in March to seize control of the global oil supply. A key objective in this nefarious plot? The destruction of the American shale industry.


Here’s what really happened. Before an OPEC meeting in March, the Saudis, seeing the writing on the wall as the coronavirus shut down the world economy, proposed a significant cut in production by all oil-producing nations, including Russia. The Russians, despite an agreement among OPEC nations to cut production by 1.5 million barrels per day, then refused to play ball. Not only did they refuse to cut production, they announced they would ramp it up with the explicit goal of taking market share away from U.S. shale.

In a meeting in March between Mr. Putin and the heads of Russian oil companies, the objective of Russia’s energy offensive was spelled out explicitly. At that meeting, Rosneft’s head, Igor Sechin, said that low energy prices “are great because they will damage U.S. shale.”

In short, Moscow, miscalculating badly, started a price war. The Saudis responded in kind, ramping up their own production and putting oil on the market, even as prices plummeted worldwide, at a price far below Russia’s production costs. They called Mr. Putin’s bluff, and Russia paid a massive cost.

Cue the shrieks of outrage from Moscow. Unable to respond in the marketplace, the Russians defaulted to what they do best: Propaganda. They had not made a horrible economic miscalculation and suffered the consequences. They were the victims of a nefarious Saudi plot, one whose real goal was world energy domination and the destruction of the American energy sector.

Shrieks of pain notwithstanding, here’s the good news. The Russians lost this war, and the implications across the planet and in the Middle East in particular are hugely positive for us and our allies.

Russia, like Iran, depends on its revenue from oil and gas sales for the lion’s share of its budget. The Iranians, buckling under the weight of sanctions and unable to export more than a trickle of oil, are already finding it impossible to continue to bankroll their foreign adventures and their Shia proxy forces. The wave of revolutionary expansionism is receding. 

The same impact will be seen on Russia’s adventurism in the Middle East. Starved of cash, Moscow will find it difficult to support its forces in Syria and elsewhere. It will desperately try to hang on to the facilities it has in Syria, but will increasingly find that they are an unaffordable drain on resources. 

The Russians will find that their efforts to field new weapons and keep pace with NATO and the United States will also prove unsustainable. The new arms race, already a challenge for a Russia with a fraction of the resources of the old Soviet Union, will be unwinnable.

Having rejected the earlier Saudi proposal to cut production, the Russians are now scurrying to attempt to staunch the bleeding. They have agreed to large cuts in production, but much of the damage to their economy has already been done. All across Russia oil wells are not simply being shut down. They are being sealed, perhaps forever.

And meanwhile, in a historic shift, an American company is sending a shipment of oil to Belarus this week, a direct challenge to Mr. Putin’s attempt to dominate the former Soviet satellite. “It certainly will infuriate Russia, especially that it is U.S. oil,” a Baltic official told the Washington Examiner. “The Kremlin tries hard to hide any signs of disagreement with Belarus. This is impossible to hide.” Secretary of State Mike Pompeo hailed the shipment as a bulwark of “Belarusian sovereignty and independence” stressing, perhaps just to twist the knife, that the sale could be the first of many between the two countries. 

What we have just witnessed was a very short, very violent economic war, one which the Russians instigated in one of the great strategic miscalculations in history. Our allies, the Saudis, mopped the floor with them. 

America’s energy industry remains strong. We are refilling our strategic petroleum reserves with cheap oil. We are energy independent, and we are now challenging Russian oil sales on its own doorstep.

Yes, there was an oil war, and here’s the good news: The Russians lost. 

• Sam Faddis, a former CIA operations officer with experience in the conduct of intelligence operations in the Middle East, South Asia and Europe, is a senior analyst at Ravenna Associates, a strategic communications company.


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