Gotti: Russia’s evil genius triumphs in oil market

From Gotti today:

Last night’s arrangements between Saudi Arabia and Russia will go down as a historic turning point in global affairs.

It’s an enormous relief to Australia’s struggling LNG producers and underlines the view of CSL chief executive Paul Perreault that share markets may be too pessimistic about the world outlook.

In itself, the Russian-Saudi deal does not change the depressed oil market significantly. All the two major producers have agreed to do is freeze output. And the deal does not include Iran, which is certainly going to increase output.

What is unusual about the deal is that Saudi Arabia and Russia are on opposite sides of the military conflict in Syria and the deal becomes a potential game changer when put into the context of the ambitious agenda of Russian President Vladimir Putin.

The two have not agreed to freeze output, they have agreed to freeze output if other OPEC producers do so and Iran won’t do so the deal is meaningless beyond a little diplomatic blame shifting.

Gotti sees a grand plan laid out before him:

Russia is aiming at a market sharing agreement that has clear similarities to the agreement of the 1920s, but with one important difference — the US is left out.

I emphasise that the new cartel is not yet formed but the master strategist Putin is, step by step, putting all the links in place, including supply arrangements with China and Asian countries.

Russian gas is under assault in Europe from both Qatar and the US and the Syrian conflict is a useful foil against all three. It’s oil revenues are collapsing as well. It’s getting weaker not stronger with every passing day which is why its rattling the sabre madly for domestic consumption.

Putin is not some evil genius from a James Bond movie, he’s the despotic leader of a failing state under immense fiscal strain.

Comments

  1. Putin is not some evil genius from a James Bond movie, he’s the despotic leader of a failing state under immense fiscal strain.

    Russian GDP has to fall by 85% and unemployment has to tripple before it gets to the levels before Putin.
    He is not even close under so much fiscal stress as western leaders who have to see just 1-2% fall of GDP and rise of unemployment before it becomes much worse than before them.
    not to mention that he cannot lose elections even if majority of people are against him.

      • Looks like your readers have voted with a stream of derision – your assertions and political stance regarding Russia are gormless at best.

        All I can say is that I hope this was just some lame attempt at “click bait” – because if you’re serious on your reading of what is happening with Russia and the west regarding Syria etc then you have absolutely no idea what so ever on global politics, international relations and geo-strategic interests .

        Really disappointing post to have read.

      • Still looking for the derision below…my point was not that I know what’s going on in Russia only that I know enough to see that Gotti has no idea and his reader should be aware of it.

      • Russia is not a ‘failing state’ yet, but it is being besieged by the West. Economics is not everything, and for Russia, the distance of NATO troops away from Moscow is far more important than this year’s GDP figures.

    • “not to mention that he cannot lose elections even if majority of people are against him.”

      Yet the Western owned polling organisations say that the vast majority are with him. 80% plus in fact.

    • That biggest war mongering nation will most likely be the only nation that could and would come to our defense, at the end of the day you shouldn’t ever forget that, do you think Russia or China would aid us or invade us then take everything for themselves. I get pissed off with the US, I can’t stand tpp and would boycott their products to make a point but at the end of the day I know who my friends and enemies are. I can’t ever recall the US trying to invade another country and own it but I do see Russia, China and other countries doing that. Stalin killed 10s of millions of people, Mao Zi Dong killed 30 to 40 million of his own people. Germany during the war killed 50 million, and f#=k knows how many have been murdered in africa over the last few decades. The US is still way behind.

      • “I can’t ever recall the US trying to invade another country and own it but I do see Russia, China and other countries doing that.”

        Where to even begin, i have no idea!

      • Russia has two military bases outside of Russia (and one of them in a former Soviet country, which houses its space launching facility).

        The USA has more than this in Australia alone.

        “I can’t ever recall the US trying to invade another country and own it”

        Where do you think Haliburton’s and The Carlyle Group’s dividend growth for the past 10 years have come from?

      • Today's Empire Tomorrow's Ashes

        William Blum’s eponymous works, perhaps as well as Chomsky, might help redress a fundamental misinterpretation of a perceived lack of US incursions into other countries.

      • We only need their help because weve jumped into wars they started by ‘invading nations’ to say they dont is outrageous. USA is the bad guy

      • “Where to even begin, i have no idea!”

        Gotta admit the same thought jumped into my mind. And that’s not including financial wars like the Asian currency crisis.

  2. What is sad is that Russia runs current account surpluses and has a reasonable manufacturing base that can help drive rebalancing of their economy towards domestic consumption and industrial exports.

    We are relying on selling each other existing housing.

  3. ResearchtimeMEMBER

    Poor Russsia, the rouble is down by half, inflation is >11% and higher than 17% in some places, its facing sanctions, and its deficit is 4-4.5% of GDP (which is lower than some Western countries still). And yet everyone claims that they are working to some grand plan, and their military might (their defence budget is actually lower than the UK’s) will crush us all.

    Its all BS. They are on struggle street the same as us – just further down the path. And Putin is just trying desperately to hold the whole place together…

    Oil is their only export really, I betcha that the CEO of Grazprom is on his knees every night wishing someone will go bust soon, ranging from Venezuela to those evil oil shale guys in Texas and North Dakota… No grand plan just a bunch of desperate people.

  4. Russia is under immense economic strain. But unlike (‘western’) other societies Russia and Russians will largely tough it out – yes I certainly think protest and discontent will mount and that this poses a risk for Putin, but not a major risk and the bigger risk will be after the 2018 presidential election) – the budget outlays are essentially all RUB denominated, the revenues are largely USD (oil based) denominated.

    The deal between the Sauds and the Russians (and it isnt much of a deal, just that they wont keep increasing production in a world currently awash with oil – and they both need to be able to live with it and hope that the Iranians, Iraqis etc wont keep flooding the supply side) offers the reduced risk that there will be further revenue earnings downside for the Russians. For them that is largely squared away the political and economic outlook. They have reserves to play some sort of fiscal stimulus at home in the leadup to the Presidential election, and they will run a line in an almost autarky like policy positioning which will resonate just fine in Russia. More than half the economy is owned by the State, plenty of people look back fondly on the communist era and dont have a problem with interventionist government (or want the privatised part back because they feel as though they were ripped off last time). There are loads of pensioners living off utter peanuts whom VVP can keep onside by upping their pensions (in RUB) which will cost him (and the Russian budget) relatively little.

    The task before anyone trying to run Russia is how to create a globally competitive economy – but there isnt much urgency about it because the marginal benefit of doing so in a deflationary world is pretty diminished.

    The Russian financial system has essentially been de dollarized (there is not much USD denominated debt inside the system, and that that is there is quite easily serviced, and more than offset a number of times by the assets available to Russian corporates outside of Russia to deploy). If the rest of the EM world is looking at a situation where a rising USD is going to ratchet up monetary settings then in Russia they will largely be seeing only upside.

    The other side of the deal is the Sauds. They have about 3-4 months before they need to start bailing out their banks, and this phenomena is likely to be widespread across the ME, against the backdrop of their USD peg effectively shorting their banking system. The deal with the Russians (such as it is) at least offers the prospect of some sort ability to keep their foot on the throat of US shale oil/fracking producers sufficient to be able to lead the production side towards a world of reduced transport oil dependence (albeit they will probably have to come to some arrangement on how they divvy up the spoils of that), and possibly some clarity on who is doing what and why in Syria.

      • plenty there to agree and disagree with….

        the key is this…

        ‘So it isn’t prosperity that binds the country together, but a shared idealized vision of and loyalty toward Mother Russia. And in this sense, there is a deep chasm between both Europe and the United States (which use prosperity as a justification for loyalty) and Russia (for whom loyalty derives from the power of the state and the inherent definition of being Russian). This support for the Russian nation remains powerful, despite the existence of diverse ethnic groups throughout the country.’

        as I said above the Russians will largely just tough it out – the prospect of economic adversity doesnt terrorise them quite the way it would do elsewhere (unless it reaches the point where it undermines the state). They will assume they have a duty to tough it out for Russia. I lived there for nearly a decade and in that time asked nearly every person I ever came across the following questions (with most common answers)

        What does Russia have to fear most (chaos)
        What sort of leadership should Russia have (strong leadership)
        Should Russia become more democratic (yes, but it should not allow democracy to weaken Russia)
        Should Russia become a more market driven economy (so the rich can buy it and pillage it like Ukraine?)

        While I suspect that VVP will go too far in his strategic adventurism, I dont think he has done so in Ukraine (which serves as a lasting reminder to many Russians of the pitfalls of ‘markets’ and ‘democracy’), and I am not convinced he is doing so yet in Syria. Ultimately I think that even if the Americans and EU were to be able to get rid of VVP and bring about something remotely ‘democratic’ anything remotely resembling a vote would see something like VVP get elected and even if it was initially a US/EU plaything it would increasingly adopt VVP like behaviours to retain credibility with people inside Russia.

      • ResearchtimeMEMBER

        Not sure – I think Putin is on a short leash. He was put there by unseen forces (whom put in and removed Premiers during the USSR days) he will be removed when the time comes. Rumour is (aka Stratfor) they have already selected a successor.

        Look at how careful Putin has played Ukraine. Russia cannot afford a war with Europe, they are desperate not to provoke EU response (Juncker on the other hand is desperate to justify an EU army and airforce – but no navy!!!!) And a proposal has been sitting in front of the EU parliament for an EU army and airforce outside NATO for more than five years… (long before Juncker rose to power – there are ambitious EU players too) – https://www.youtube.com/watch?v=hI5_pMvLZd8. The EU has 180% more (over 5,000 modern MBT’s ) than Russia, and over 600% more front line fighter aircraft than Russia currently (in reality like for like the ratio is probably closer to 20 to 1).

        As the EU becomes more National Socialist, Russia has to play for time… and hope the EU cracks internally. Putin is cautious. And rightfully so. The Euro may fall – but the EU is the second biggest player globally. And many of its members are economically desperate and will follow any EU guidance – for their economic future depends upon it.

        But again this is the here and now. If I am right about oil – Russia will recover almost instantly, a mere five years at the most IMHO.

      • Today's Empire Tomorrow's Ashes

        I do enjoy it when MBers throw in some Mauldin or Grant Williams or Stratfor. People with real insights.

      • @Gunnamatta

        Yours are the only informed comments about Russia in this complete thread.

        Could I ask how you see Russia developing?

      • Agree, most of the commenters here seem only capable of making one way binary relationships, i.e. Putin good, west bad….. Isiah Berlin’s ‘hedgehogs’ who can only gauge one top down view vs foxes who take a broader more nuanced take. It’s not unlike those who flood The Guardian, Der Spiegel etc. comments to muddy the waters…. who stereotype all westerners as dupe and/or morons…

        That’s in addition to something I heard other day, ‘I watch RT because Channel 10 is rubbish’….. a highly educated former GM and consultant….. clear thinking 🙁

        For those who don’t actually know Russia, how does one explain the Russian elite dependent upon Putin/Russia living, studying, shopping, investing etc.. in the west with no apparent desire to live in Russia?

        Or, as one has experienced, obsessive dribbly mouthed criticism of USA by a Russian couple, who then desisted, why? They just won the green card lottery 🙂

  5. …despotic leader of a failing state….? hmmm
    Russia is the only credible actor in the Syrian conflict with reasonable, understandable, achievable and credible aims.
    Russia understands that the conflict in Syria is strengthening ISIS, that without some single player having a monopoly over the use of violence, life is nasty brutish and short for the population of Syria; and it is sadly clear that Assad is by far the most credible force to provide that stability. The failures of the other Arab spring uprisings demonstrate that, as do the millions of Syrian refugees that have exited post the failure of Assad’s regime to provide order (all caused by western support for his enemies).
    Russia understands that any regime imposed by the west in the event of Assad’s fall will not be sympathetic to Russia’s Mediterranean fleet based in Syria and therefor Putin rightly sees the geopolitical risk for Russia in the west’s half arsed plans.
    Russia further sees the west as weak and fragmented, the last 20 years has seen Russia’s previous empire fall to EU, Euro and NATO – but now Cameron is consumed by potential Brexit, Merkel is consumed with domestic issues, Hollande is an utter arse and Obama is nowhere to be seen…..
    Putin’s policy of expansion and military action is utter gold for his domestic audience and his approval ratings are through the roof…..
    Its only a matter of time before the west turns to support Assad, so if Putin is the despotic leader of a failed state – erm – what does that make our leaders?……
    Frankly out of Cameron, Turnbull, Obama, Merkel, Hollande and Putin I will take Putin every time.

    • All Arab springs, like all colour revolutions are the creation of the CIA. From the orange to the Rose to the Green in Iran – all of them.

      The ONLY exceptions have been those were regime change was not intended and no revolution was NOT meant to happen – such as in Bahrain, Saudi Arabia, Egypt – where the protesters were put down with repugnant violence and death supported by the US.

      Syria is no different.

      After the initial protests Assad agreed to massive reforms which were implemented and the people were happy with that – the west was not – and in went the western paid, backed, trained, armed jihadist mercenaries who started slaughtering Syrians – all of these atrocities were QUICKLY blamed on Assad and despite every single time evidence from the ground pointing to Sunni mercenaries and Jihadists the western media never followed up and the memory hole was filled with propaganda.

      The same thing just happened with the air strikes on the Hospitals in Syria – why the HELL would Russia bomb hospitals ? Well no one ever said they did – not the US, not the UN, not NATO – just the Turkish and the media – no one else.

      BUt guess who DID run bombing runs into Syria at EXACTLY that time which NO ONE KNEW ABOUT and is the reason people concluded it was Russia.

      Yup – the worlds number one sponsor of terrorism, the number one supply route of jihadi mercenaries into Syria, the people primarily responsible for the war in Syria – the Saudi Arabians.

      http://www.euronews.com/newswires/3151877-saudi-arabia-took-part-in-weekend-air-strikes-against-islamic-state-pentagon/

      Well COLOUR ME SURPRISED !!!

      And no one cares – because we blamed the Russians for something they didn’t do and that’s all that matters.

    • WRAL
      A long time ago (70s) in a less Politically Correct era, the mainsteam European commentators were mostly of the view that ANY dictatorship was better than the alternative (chaos) in Middle Eastern countries. Any Arab Spring would always be doomed due to the concurrent increase in power of the Mullahs.
      In general, you only have to listen to the sound of explosions with all sides shouting “Allahu Akbar” (and nothing else) to see the seismic chasm that separates Sunni and Shiite mindsets and their limitations. Syria and Iraq, artificial creations, in fact represent the area where the tectonic plates of Shi’ism and Sunnism meet.
      The West is now fighting for “regime change” with no understanding that Arab dictatorships are, by nature, necessary and, by nature – brutal. It’s no surprise that the Syrian opposition is at best fractious, at worst at war with each other, and that’s just over internal Sunni differences of opinion.
      In supporting Assad, Putin is achieving several objectives, not the least maintaining the naval base at Tartus. Once the North Western border of Syria with Turkey is secured by a mix of the Syrian army and the Kurds, there is no way the Sunnis in Syria can be logistically supported and the conflict in Syria will fizzle out, no doubt with a series of massacres. Iraq isn’t Putin’s problem.
      The only joker in the pack is Erdogan, extremist Sunni enough to attempt an armed incursion into Syria. If he’s unhinged enough to do so, anything can happen.

      • Oh, and as for the Saudis, they don’t have a border with Syria, any overt move into Iraq will bring Iran down on them. Even the Saudis know they wouldn’t last 10 minutes against a real army…

      • “The only joker in the pack is Erdogan, extremist Sunni enough to attempt an armed incursion into Syria. If he’s unhinged enough to do so, anything can happen.”

        True. The response will also depend on what he does. If he limits it to creating a “buffer zone” in the North and commits no more than this – i think Russia won’t respond at all militarily – the pressure will come diplomatically and militarily via proxy. I think he’d need to push fairly hard to get a large Russian response, which is not in his countries interest. As you mention though, he seems unhinged. In a true war with Russia, it is one with no winners, even though Russia will win it (if this makes sense).

        If i remember my history correctly they have fought 12 wars in the last 300 years – with Russia up 8 to 4. Putin and the other politicians who steer policy in Russia don’t want open war, but will wage it if the Turks do something silly:

        1. Direct contact with Russian forces leading to Russian military deaths.

        2. Closing off access to the Med Sea.

  6. ” Putin is not some evil genius from a James Bond movie, he’s the despotic leader of a failing state under immense fiscal strain.”

    Such tripe!! Based on what? Your reading of the Western Press regarding the matter? This comment is risible!!!

    You are a huge hypocrite HnH. You bash the mainstream economic media for its inherent capture and bias, and then make broad sweeping and generalised statements such as this one, without laying down even a single shred of your reasoning as to how you came to this conclusion? One can only assume you are eating the bowls of sh*t from the same MSM you ask us to ignore on such matters.

    Stick to economic analysis. It’s what we pay for, it’s what you are good at – you at least back up your assertions with some actual facts, and then reasoning as to your conclusions. If you want to start posting about political matters – please do the same, so that those of us with some clue can proceed to tear it down to shreds!

    • Would you care to give us an indication on your qualifications (in a broad sense) and experience that suggests we whould prefer your view to someone else’s?

    • “Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
      In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”
      – Michael Crichton (1942-2008)

  7. Wow – really showing your colours here.

    Its at least admirable that you can admit that Syria is the result of the US and its despotic allies attempting regime change, Putin has done absolutely nothing wrong outside of aiding an ally who was struggling with foreign mercenaries, paid for by the west, funded by the west, trained and armed by the west and her allies who were / are slaughtering native Syrians in the guise of being freedom fighters – all the while those Syrian deaths are being blamed on Assad – its actually quite sickening to listen to people comment on these issues when they literally have no idea what so ever.

    And yes the US is sending gas to Europe – because the US has destroyed and bombed every other competing avenue – from Libya to Iraq. Small price to pay really – decimating entire nations, slaughtering literally millions for your own financial gain.

    Russia is not struggling any more than anyone else – they are the ones in poll position. The US is struggling with its absurd fracking and shale, the middle east has been quarantined by the Crescent Bridge (hence why the US / NATO are killing so many Arabs / Persians), while Australia and Africa are out cold.

    Russia has the worlds largest reserves by a massive degree and has overland pipelines supplying Asia and the New Asian Century of economic and political power and world dominion as stated by Dick Cheney and Donald Rumsfeld almost a decade and a half ago – that’s how long this has been playing out for those who aren’t aware.

    The gaping gullet for western propaganda needs to be slammed shut and realised for what it is – wholesale global warfare by the west – thats us – for a seat at the table in the coming century. We are the ones doing the bombing, the killing, the maiming and slaughtering – its US, the western alliance.

    Putin is doing absolutely the right thing.

    And as far as historical position goes for Russians he brought the nation back from despair after a procession of supine, protoplasmic, prostrate western lacky’s allowed their nations commons to be carved up and distributed amongst whoring western corporations.

    Yes we hate because he stands up to the west – Russians bloody love him and so they should.

    And before anyone mentions Crimea – they were 95% Russian, it was always part of Russia, they voted to secede with a vote of 98%.

    As for the flight shot down over Ukraine the evidence which has come out from that is that the Russians DID NOT EVEN HAVE the missile system used to shoot it down. They were in the Ukrainian military ex-Soviet, the actual explosive pattern is clearly identified as being of a type the Russians have never even possessed. The only evidence to ever come out was a voice recording released 5 minutes after the plane came down by Ukraine put together in Adobe which still had the bloody META data attached to it showing the edits and a photo of a BUK system. That’s it.

    • “Putin has done absolutely nothing wrong outside of aiding an ally who was struggling with foreign mercenaries”

      At the legal invitation of an ally and targeting terrorists (the Western press calls them rebels) as per the UN resolution on the matter. All the groups being targeted are listed on the UN mandate – This means it is Russia’s right, and i’d argue obligation to obliterate them. What Russia is doing in Syria is totally legal, and more than this it is totally MORAL!! They do not want to see it go the way of Libya. The USA and its putrid allies on the other hand, in KSA, Turkey and Qatar have been conducting nefarious activities for some time.

      It is not a coincidence KSA and Turkey want to escalate this conflict right now with ground invasions and cross border shelling – their Islamic fundamentalist proxies are losing, BADLY! There is an almost total blackout in the Western MSM regarding this escalation and just how precarious the situation could become. The situation on the ground has deteriorated rapidly for the Wahhabi’s in the last 4 weeks. The Kurds own the dam crossing West to the Euphrates, Aleppo is all but liberated (under seige according to the Western MSM). All the supply routes to these terrorists are rapidly closing. That means no weapons, money or even food. Of course in HnH case he probably thinks ISIL and the ” Syrian opposition” have somehow managed to wage war successfully against one of the better Mid East armies (SAA) for five years inside a land locked country without US allies (KSA, Turkey, Qatar) funneling in men, weapons, supplies and money, showing a total lack of even a rudimentary understanding of how one wages a war.

      This is why the media has suddenly been flooded with stories of Russian planes destroying schools and hospitals, and targeting civilians in the last week, but not so much in the months prior – US allies need cover to enter the war in such a way as to obfuscate the real reason they are there, i.e. to back Islamic fundamentalists, and save their little Syria project. More media garbage, like using photos of bombed civilians from other Mid East conflicts before the first Russian bomb even fell in Syria, and the US media passing off Russian MoD bombing footage as coalition strikes. Totally laughable if the situation wasn’t so serious.

  8. Yeah I have to agree with others this is a bit desperate w/out historical context.

    Putin is not a saint, but show me any national leader that is…

    Skippy…. hes doing a better job than the Chicago boys did.

    • Despite the Western efforts to discourage investors from participating in the St. Petersburg Economic Forum, the affair is in full swing. Jim Rogers, legendary investor and chairman of Beeland Interests, is in attendance, and he told Radio Sputnik that the Russian economy may be the most promising market for fellow investors.

      Skippy…. do you need Ice for that Burn…. 3d1k

  9. Meanwhile the peace loving Sunnis are exercising……with up to 350,000 soldiers:-

    “Saudi Arabia has commenced a massive military drill in which 20 nations are participating. The move comes amid ongoing deadly conflicts in the Middle East.

    More than 2,500 warplanes, 20,000 tanks and 450 helicopters will be part of the exercise. Riyadh has billed the manoeuvre as “the largest and most important” drill ever staged in the region.

    Up to 350,000 troops from various Gulf nations, and other allies such as Pakistan, Jordan, Chad and Sudan will take part in the drill, the Saudi Press Agency said. The exercises would involve ground, naval and air forces personnel.

    http://www.ibtimes.co.uk/saudi-arabia-embarks-massive-military-drill-2500-warplanes-20000-tanks-1543841

    • Interesting timing with the oil production agreement between Russia and the Saudis, particularly given it’s contingent on Iran (who will soon be free of sanctions and able to start pumping oil). I wonder if this is a gentle message to Iran along the lines of: “Remember those S-300 mobile anti-aircraft launchers we were going to sell you and train you up on? On an unrelated note, we’ve made an agreement with the Saudis to cap oil supply because low prices are killing our domestic economy. You know, as in your main rival and major regional air power? Don’t worry. Please, feel free to start pumping that oil, we don’t mind.”

      If I were in the Iranian or Syrian government, I’d be a little concerned right now. It almost looks like Russia is prioritising their domestic economy over keeping their military foothold and arms export market in the middle-east.

      And I wonder if Saudi Arabia has miscalculated here. It’s possible the US will think their only choice now is to double down on Iran. Should be interesting to see the contortions the US MSM make to rehabilitate Iran’s image in the US; especially as they’ve spent the better part of a decade portraying them as ‘those evil guys trying to build nukes’.

      And that just further pits the US against Israel. So many shifting alliances and interests. It’s hard to keep up.