The Russian Oil Olympics

For more see Russia’s Cynical Business Model: Anti-Capitalism for Profit

Russia has seized the opportunity to monopolize the oil and gas market of Europe. By seizing control of the Georgian pipeline, Russia Inc. eliminates it's competition. Then once Iran and Israel go to war as expected, and the Persian Gulf is blocked, Russia can functionally control Europe.

Written by Dagny D'Anconia

Monday 11, 2008

Russian tanks are rolling again, but why now?

For one thing, the high oil prices that have propped up the Russian economy are now faltering. The bubble has burst. The Russian stock market (RTS) dropped 25% so far this year. This stock crash is in spite of vast Russian oil profits. With most of the Russian oil money looted from Russia, and now Russian oil prices falling, the economy is suffering. As Jack Wheeler said "Russia has no future beyond ephemerally high oil prices. Once they crash, so does Russia." Real estate has been more expensive in Moscow than in anyplace in the world. That bubble too may now change.

The orchestration of high oil prices has fallen apart since America (meaning the Republicans) finally got serious about oil supplies. With the future showing cheaper oil, what supported the gluttonous Russian mafia has disappeared. Putin et al know this, and need a distraction to keep the people feeling powerful and Russian. And of course, what is a more nationalistic time to show Russia's power but at the start of the Olympics? The whole operation is awash in testosterone.

Furthermore, Georgia has been seeking to join NATO. In the big scheme of things, Russia wants to counter the placement of the missiles in Eastern Europe. Russia will now have a bargaining chip in Georgia as well as a menacing military to back it up.

Furthermore, Georgia is home to a vital oil pipeline:

"The area is of strategic importance, largely because of the BTC oil pipeline, which runs through central Georgia just south of the breakaway region. The pipeline - which features in the 1999 James Bond film The World is Not Enough - pumps around one per cent of global crude supplies from the Caspian to the Turkish port of Ceyhan for export to Western Europe but is already closed because of an attack in Turkey last week by the Kurdish separatist organization PKK. (

Furthermore, isn't it interesting that the same pipeline was just shut down last week in Turkey by the PKK. This is the same Leftist PKK that Jack was talking about in The Kurdish Map. The PKK shut it down, but that was not enough to revive the price of oil. Something had to be done with longer term ramifications to affect the price, and Russia did it.

But has it worked? The Russian stock market dropped 6% in one day. Oil is still dropping.

Isn't it strange that a major oil producer (Russia) is at war, and a major pipeline is in the war zone, and the price of oil drops? The PKK shuts a pipeline and nothing happens. This at the same time as tensions in the Middle East and Iran are coming to a head? The price of oil should be going up but it isn't. Something changed.

What changed was the Olympics. Beijing and its nearby cities with their vast appetite for oil and energy were shut down for the Olympics to cut pollution. The oil drop started at the same time as these measures were instituted. Bush timed it perfectly to get the greatest effect and pop the oil bubble. Bush's move to make oil drilling available and drop oil prices was coordinated with the skill of an oil man.

What will Russia do? It will raise the ante. It has done deviltry for oil profit before, and there is no reason to doubt it will do it again under these its dire economic circumstances. The easiest place to do that is in the Persian Gulf, and the time to do it with the greatest effect is after the end of the Olympics, right when China Inc. with its voracious appetite for oil comes back on line. I missed the signal back on the 5th, and since then the signals have been flipping around, and causing me to anxiously and unprofitably wait. Oil prices have been driving the bus. How low will oil go?

On one hand, the oil prices have been dropping thanks to machinations from Bush and the Chinese. On the other hand, the Russians are hell-bent to raise them. It is hard to tell just how far the Russians will go to destroy the oil supply before the Olympics are over. Will they control Georgia, and thus control the BP pipeline - or even destroy it?. There are reports of over 51 bombs launched at the pipeline.

Without that oil pipeline, Europe will be very dependent on the Russians for oil and gas because all the other ones are through Russia. If then the Persian Gulf is effectively shut down by the Iranians, which appears quite likely in a nuclear showdown with Israel, the Russians would be able to raise oil prices for Europe to levels that boggle the mind. Russia's sale of anti-aircraft weapons to Iran should be understood in this context.

If Bush et al intercede on the side of Georgia, it could bring American and Russian troops in direct conflict. Furthermore, no one wants to start WW3 during the feel good Olympics.

With the Russians, one has to think several moves ahead. The DDI is up, but given the strategic oil situation that could change based on what Russia and NATO et al do.