If Marcus Tullius Cicero had been around in 2019, he’d have said that the sinews of war are infinite crude oil.
So both Iran and Venezuela are major oil producers, and Venezuela has recoverable reserves about twice the size of Saudi Arabia’s. What has Saudi Arabia, de facto leader of OPEC been doing the whole of this year? Cutting oil outputs. And many OPEC countries (of which the US is not a part) have followed suit. So prices have been going up, and Iran and Venezuela can’t export.
But the US can. US crude production and stockpiles have been surging, denting the price increase and increasing market share.
Russia is, of course, not pleased with this situation. In 2016, Russia signed a supply pact with OPEC, which means that it has been cutting supplies this year. Now, however, the head of Russia’s sovereign wealth fund has said that the cuts are “may not be required after June”, an issue that will likely be raised at the next OPEC summit. Saudi Arabia, which has previously said that output cuts will last till the end of the year, has also stated that markets will likely “move towards a balance” in May.
What would an increase in Russian oil output entail? A sharp fall in oil prices come June is likely. However, Russia also holds considerable stakes in Venezuela’s oil fields, and Venezuela has often used oil to pay directly or indirectly for Russian equipment. Russia has also moved troops to Venezuela to prop up the Maduro regime, which I noted was an obvious statement to the US. It would seem that, despite the damage that lower prices would cause to Venezuela’s already-declining output, the Kremlin sees this as the right geoeconomic move to make.
Geoeconomics is in the news for other reasons as well. Vladimir Putin has announced an ambitious plan to expand Russia’s Arctic presence – this is hugely significant given that it has around 30,000 kilometres of coastline directly bordering the Arctic. And despite conciliatory statements from the Nordic countries, it would appear that Russia fully intends to use the Arctic for “national security” purposes, likely diplo-speak for militarisation. The plan includes a series of new ports and associated infrastructure as well as an expanded fleet of nuclear-powered icebreakers. While the economic value of Arctic trade pales in comparison to those of other established sea lanes, its geographical position, close to Canadian and US territories, makes it hugely significant and Russia is likely to remain a major, if not the major power in the area.
What would power projection into the Arctic entail? The retreat of the ice sheets and the establishment of ports for supply and repair mean that Russian ships can now operate in the region with more and more mobility. Perhaps the looming retirement of Russia’s single remaining aircraft carrier may be tied to a broader reorientation of the Russian navy from long-distance power projection with large fleets to smaller, more efficient squadrons armed with long-range missiles and capable of rapid deployment in coastal waters. (This is not to say that Russian power projection is on the retreat, rather that they might use land-based missiles or air squadrons to do so instead).
It is a small consolation, but as the Himalayas melt in the decades to come, at least we shall have a grand time watching the Arctic heat up.