Vladimir Putin may be corrupt, authoritarian – and even belligerent. But he’s not an idiot.
On the contrary, he’s fully aware of his actions.
And although he may seem unpredictable, that’s not the case when we consider his motives from an economic context…
Indeed, while the latest crisis in Ukraine may appear to have political underpinnings, the real reason for Putin’s military push into Ukraine is pure economics.
Military Might is Last on Putin’s Mind
It’s no secret that Russia can take over Ukraine at any time.
Heck, the Black Sea Fleet harbored in Crimea and the thousands of troops at the border between Russia and Ukraine could take over most of Europe if it wanted to.
On the other hand, while the Ukrainians can certainly put up a good verbal battle, they don’t have enough spare parts for more than one submarine – and hardly enough for a few military aircraft.
They’re not itching for war, and they’re not economically or militarily prepared for it. Even if they were, it’s the Russians who armed them, and it’s the Russians who are fully aware of their capabilities.
So, as I mentioned before, while the rest of the world considers Putin’s invasion into Ukraine a show of military might, his real motives are based on saving Russia’s economy.
Nothing Like Volatility to Keep Energy Prices High
The Russian economy is very reliant on energy. Fully 70% of the country’s exports are energy related, and more than 50% of its budgetary revenue comes from the oil and gas sector.
When Putin entered Russian politics in the early ’90s, Russia was selling about US$45 billion in energy. That number has skyrocketed to more than US$220 billion today. It’s now the third-largest producer of oil after the Saudis and the United States.
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At the same time, however, oil and energy prices aren’t shooting higher. In fact, competition may actually force prices lower. And while Russian oil is plentiful, it’s depleting.
Now, Russia does own the world’s largest natural gas reserves, and it controls the pricing in Europe and the former Soviet Republics. But in the coming years, Russia’s monopoly over natural gas will face major assaults from supplies in the Mediterranean, as we’ve covered in past issues.
Plus, the massive finds in the Leviathan and Tamar gas fields off the coast of Israel, the potential for a major find in the Aphrodite gas fields near Cyprus, and the increasing focus on LNG are all pressure points for the Russian regime.
Ultimately, Russia simply needs to stir the pot, because volatility will keep energy prices higher. That way, it can maintain an economic balance at home.
Bottom line: Yes, Russia’s incursion into the Ukraine is a show of force to its own former vassals that it still holds the cards militarily. It’s also a show to the rest of the world that while it may not be a superpower on par with the United States anymore, it’s still second or third when it comes to world affairs. But most importantly, it is Russia’s way of introducing uncertainty to the energy and commodities markets for its own internal stability.
And “the chase” continues,