Why $40 oil is killing Iraq, Venezuela and others, but not Russia

August 28, 2015
Russian President Vladimir Putin meets with journalists after submerging into the waters of the Black Sea inside a research bathyscaphe as part of an expedition in Sevastopol, Crimea, August 18, 2015. REUTERS/Alexei Druzhinin/RIA Novosti/Kremlin

Russian President Vladimir Putin meets with journalists after submerging into the waters of the Black Sea inside a research bathyscaphe in Sevastopol, Crimea, August 18, 2015. REUTERS/Alexei Druzhinin/RIA Novosti/Kremlin

It’s not the economy, stupid. At least it isn’t where hearts are warmed by the fiercer flame of nationalism, rather than rising living standards.

Oil prices as low as $40 a barrel are separating the oil haves from the oil have-nots. The oil producers happily rode a wave of high oil prices for years, buying popularity with increased state spending while excusing themselves from the hard pounding of legitimate economic reform. The oil-buyers — like India and Egypt — now enjoy prices as low as a third of those they paid as recently as two years ago and can cut fuel subsidies, saving spending or redirecting it to broader social uses.

As a result, most of the oil-producers are now in a troubling position.  Venezuela’s President Nicolas Maduro faces parliamentary elections in December with falling popularity and a poll showing Venezuelans will vote for the opposition rather than his Socialist Party by a factor of two to one. Maduro lacks the charismatic populism of his predecessor, Hugo Chavez — a popularity based on the former president’s insistence that the high oil revenues were benefitting the poor (they did) and making the nation great, while sticking it to the Americans.

In Canada, now a major oil producer from Alberta’s tar sands, polls are jumping about nervously, as Conservative Prime Minister Stephen Harper seemed up in April, then down in July. Harper has been in power since 2006, so “regime fatigue” is judged to be a large factor in the public’s ambivalence toward him. The fall in the price of the commodity that accounts for a quarter of the country’s export revenue and nearly 10 percent of its GDP is not his fault — but it’s happened on his watch. This will only aggravate the fatigue. Elections are in October; a credible critique of Harper’s economic policy at a time of falling revenues could tip it for the opposition.

Nigerian President Muhammadu Buhari doesn’t have to face an election soon — he just won one. But like other leaders from oil-producing nations, he does have to cope with a price slump in the commodity, which comprises 80 percent of the government’s revenue. It has meant civil servants in most states are owed months of pay; capital projects have been frozen; and an already restive and divided country shows more signs of revolt.

The turmoil is felt by countries throughout the Middle East — by those desperately reliant on oil revenue (Iraq, Syria and Libya) and those with vast riches (Saudi Arabia).

And yet the Russian Federation, and Scotland buck this trend. Their leaders are the Teflon Kids of the oil slump: Hit by sliding prices but not public scorn.

The ruling party in the state’s’s regional parliament, the Scottish National Party, presented an economic program to the Scottish people before last year’s independence referendum (independence was voted down 55-45) promising higher social, infrastructural and education  spending.  And, perhaps most critically, better infrastructure based on an oil price above (as it had been) $100 a barrel. This should have doomed them in today’s court of public opinion, in a landscape dominated by cheap oil.

Yet the falling price hasn’t affected the result of either the Scottish or the UK parliamentary elections one whit. An independent Scotland would now be in an economic crisis. But the fall in the oil price has had less effect on the economy of the UK as a whole than the benefits from cheap oil — a fact that should make Scots relieved they live in the larger state. Yet since the election, and as the price has gone down further, the popularity of the SNP and its leader Nicola Sturgeon has gone up.

A similar phenomenon has occurred in Russia. Rising prices, falling employment, stagnant or reduced wages have had one political result above all others: an outpouring of support, amounting to veneration or even love, for President Vladimir Putin.

What unites Sturgeon and Putin? What makes them exempt from public scorn as oil prices slip and slide? They are ardent nationalists. Neither loses an opportunity to glorify their country.

Putin, in a visit to the Baltic fleet in the port of Baltiysk, depicted his country as again facing hostility from the West, again drawing on its own human reserves to repel the foreigners. (It is worth noting that Sturgeon’s predecessor in the SNP, Alex Salmond, is an admirer of “certain aspects” of the Russian president)

Sturgeon is less emphatic than Putin. But her party’s celebration last year, through a reenactment of the 1314 victory of a Scots army over an English one in the Battle of Bannockburn, shows that the SNP’s heart remains deeply anti-English. It keeps alive the popular myths and heroes of centuries’ old triumphs. During the referendum campaign, the then Labor leader Ed Miliband was forced to abandon speeches and walkabouts in Edinburgh, and the Scots Labor leader Jim Murphy was abused into silence in Glasgow. The SNP deplored those actions; but once released and encouraged, nationalism takes increasingly aggressive forms.

Putin and Sturgeon’s popularity is propelled by a force more powerful — at least to date — than the desire for better living standards. Especially in Russia, there is a pride in displaying courage and patriotism in the face of deprivation and aggression, seen as coming largely from the United States. In Scotland, the propaganda is more muted and the English enemy less clearly delineated, but nationalism needs a foe, and the English are it.

There is no question of which nationalism is more dangerous. An independent Scotland would reduce the UK’s authority, further weaken the EU and greatly damage the state itself. Russian nationalism on the other hand is a danger, perhaps a disaster, on a global scale, not least because its political success spawns imitators. For example, China, heading into harder times and taking the world with it, has a leader keen on promoting the “Chinese dream” — a stronger, more nationalistically inclined China.

Nationalism hasn’t gone out with the tide: it’s coming in waves.

16 comments

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The threat posed by nationalism does not end with China and Russia other nations are a threat to world peace such as America India and Iran. As to Scotland the true economic picture is that the rest of the UK (mainly the English) fund the Scottish economy through taxation I.E. a higher % of tax payers in the rest of the UK and the Barnett formula an outdated bit of legislation. I also disagree that the UK without Scotland would be weaker. Quite the opposite in fact, north sea oil is in decline and Scotland without the backing of the rest of the UK would not survive.

Posted by Moties001 | Report as abusive

Hitler was a nationalist, and before the war would paint the dominant powers of his day (France and the UK) as enemies of his people. Many people outside Germany “admired certain aspects” of him. It took a world war to show his true face, that of a man ready to sacrifice even his own people in order to hold on to power.

Posted by FUD312 | Report as abusive

Never forget that John Lloyd is an ardent Communist and a puppet in the hands of the international Fraternity, led by the banksters.
And the real Nazi country is his beloved Israel.
Nota bene: This ‘free’ media of the ‘most democratic country’ regulary stops my opinion post.

Posted by Ifandiev | Report as abusive

“An independent Scotland would reduce the UK’s authority, further weaken the EU and greatly damage the state itself.”

Stated as fact without a shred of evidence. But we do know that 45% of Scottish voters disagreed with you at the time of the independence referendum.

Entire articles have been written about this. Better articles. Why did you spoil yours for the sake of a snappy summing up?

Posted by Curlee | Report as abusive

Another problem for Putin is that we have entered a long period of low oil prices. Oil prices will not recover above $60 for ten or twenty years. In economic terms, Russia is f*((*d. Putin’s strategy of spending scarce funds on the military will not help long term. Military spending decreases living standards, not raise them.

Posted by ckd1358 | Report as abusive

Another problem for Putin is that we have entered a long period of low oil prices. Oil prices will not recover above $60 for ten or twenty years. In economic terms, Russia is f*((*d. Putin’s strategy of spending scarce funds on the military will not help long term. Military spending decreases living standards, not raise them.

Posted by ckd1358 | Report as abusive

You spelled Labour wrong.

Posted by geleisen | Report as abusive

The Russian economy has many other assets other than oil. Illyshin, Tupolev, Yakolev are major aircraft makers. Russia has large military industrial complex which is a huge exporter. The Space and tech industries are major assets as well. The crash in oil prices is going to hurt but not shatter the Russian economy.

Posted by atlantic965 | Report as abusive

Russia’s economy continues to shrink. Now smaller than Italy’s.

Russia’s primary exports now are orphans and herpes. What an empire.

Posted by Solidar | Report as abusive

Just because a leader is popular…. does not mean the country is in good shape. Kim Jong Un is popular in North Korea (at least on paper). The title of the article is misleading because make no mistake: $40 oil IS killing Russia. Just not the creepy chest-thumper who is driving russia at the moment. They got nothing else.

Posted by Solidar | Report as abusive

Solidar is here again spreading his mindless hatred of Russia. He needs to keep taking his meds and chill out….

BTW Crimea is Russian, now and forever!!! :-)

Posted by Big_Gazza | Report as abusive

A drive toward Fascism is evident in all countries as a dying middle class can be co-opted by economic oligarchies around nationalism. This is the time-tested and proven method for governing the corporate state.

Posted by ChrisHerz | Report as abusive

It won’t stay rosy for Putin much longer. Credit Suisse announced the average Russian has a net worth of $850US, the average Indian $1,000US. Putin and his pals have robbed Russia of billions. Putin is worth over $40b US alone! Let’s see how he holds up after a good long Russian winter.

Posted by MsUltraworld | Report as abusive

This is a silly article. Leaders of all countries are nationalistic, whether they are in trouble (Nigeria, Venezuela etc.) or not in trouble (Russia or Scotland). The thing which separates the countries is whether the population believe that the leaders are competent or incompetent. Also, Russian nationalism is not a danger to the world. It is the West’s stupid hostility to Russia that is the danger.

Posted by NJyote | Report as abusive

Apparently the United States is the only Country in the world with a President who is NOT a nationalist.

Posted by kjdjrr | Report as abusive

this article seems biased, light on evidence, and heavy on traditional perspective. While possibly relevant for the aging and elderly probably not applicable to the youth, where showing off stoic poverty and being a good comrade isn’t nearly as rad as an iPhone 6 and some fly kicks… just sayin

Posted by alibama | Report as abusive