Russia Crushes OPEC

[corourke]

A few weeks ago, I read this article. Basically, it talks about the power that Russia holds over OPEC because of Russia's more diversified economy. It is unusual to hear something positive about Russia's economy! Essentially, Russia would win a price war with OPEC because its economy has more going for it than oil.

So here's a POD: In 1998, relations between Russia and OPEC sour, and Russia responds to this by cutting its oil prices. OPEC reacts in kind, but won't be able to sustain the price cuts for very long.

What happens now? What does the world economy look like after a few years of extremely cheap oil? How does this affect the US? With cheaper oil, is China's growth even faster?

 

[HueyLong]

Off Topic: Playing a politsim, that little tidbit is used all the time by Russian players......

On Topic: Russia wouldn't keep the cheap oil for all that long, nor do they really have much power to do so. Unlike most OPEC countries, they don't have a large degree of state control in their oil industry.

They've got to make a profit too, but the end result would be Russia with a larger market share of oil, slightly cheaper prices than OTL, and the dutch disease wrecking what little Russia has going for it.

 

[Viriato]

What would be the point in keeping oil prices artificially low? Russia's recent economic growth has been driven mostly by the boom in oil and commodity prices. In 1998 Russia was in the throes of an economic crisis, lowering the revenue by dumping its most precious foreign exchange earning export would have been suicide. At that time oil was fairly cheap and there was a bit more capacity on the market, the rise of China and India could have made demand increase just as much if not more, bringing up the prices due to speculation.

 

[Wendell]

Could this have moved Russia and China closer together?

 

[corourke]

I chose 1998 because it was a somewhat of a crisis time for OPEC nations because the cost of oil was already lowered by Russia's expanding productivity in that sector.

 

[Ivan Druzhkov]

Slight problem with your AH: in 1998, Yeltsin’s government defaulted on the ruble, sending a large hunk of the economy into free-fall. A number of banks simply disappeared, and a lot of people lost everything they had. Given that the economy was tanking, I can’t think why the oil barons would elect (ha!) to keep oil prices low, given how the export of natural resources are one of the few things that keeps the Russian economy going. Of course, seeing how these people managed to protect their respective fortunes from the collapse, and how it was their thievery and mismanagement that got the collapse going in the first place, I suppose they could very well choose to saw off the branch they’re sitting on.