Why Russia is in the Middle East

The Russians are there in the Middle East; understandably to escalate existing tension, so that oil price can be brought up. Russia is the biggest loser from the ongoing crude price slide. Export turnover has come down; government’s budget is also in trouble.

IMF’s economy forecast indicates that Russia will continue as the poor performer among the emerging market giants if crude prices continue to travel southwards.

Russian intervention by supporting Syrian President Assad has so far given momentum to the international crude price. Moscow’s strategic ally and a crude export aspirant- Iran has also launched its Syrian mission. Everybody needs crude prices to get back to some decent levels so that their budgets will remain stable.

Brent variety crude has crossed $54 mark on Friday, 9th of October. According to Bloomberg, oil prices are on course for one of the biggest weekly gains in six years due to the rising geopolitical tensions.

Similarly, there are reports of falling Shale output from the US –though weak. Altogether, crude is getting a push despite strong medium term negative factors like weak demand and constant high supply by the market leader Saudi Arabia.

Weakening demand from global recession pressure and increased supply due to the entry of Iran indicate that only geopolitical disturbances can bring up oil price. But at the same time, how far such actions can bring oil back to even $60 mark is a question to be raised because of the quickly slowing global economy.

Only long term output cut by the shale industry can bring up prices. So far there is no trend in significant production cut by the industry. In the immediate future, crude may make a comeback; bit by bit- only because of the Middle East interventions by the two major oil exporting countries’ – Russia and Iran.