BC Expert: Oil Prices and Russia
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Professor of Political Science
Professor Deese researches the international and comparative politics of climate change, and specifically the best and worst practices by countries (climate "winners" and "losers") to date in reducing their greenhouse gas emissions.
He also researches the leadership of international bargaining and negotiations; political economic reform in developing, resource based states and the Middle East region in particular; and the interaction of economics and security in US foreign policy. In January 2013, he was appointed to the United States Fulbright Program national roster of Fulbright Specialists. He is the author of several books and publications including, The Handbook of the International Political Economy of Trade; Globalization: Causes and Effects; The New Politics of American Foreign Policy and World Trade Politics: Power, Principles, and Leadership.
The sharp drop in the price of oil –at its lowest in five years - is not only draining the bank accounts of exporting countries, but also limiting the maneuvering room for their foreign policies.
“The major implications in the short term are the countries most reliant on oil revenues for their political foreign policy leverage - including the Russians - are going to be substantially limited by this,” says Boston College Political Science Professor David Deese, Ph.D. “Not this week or next week but over the coming months, along with the sanctions they are enduring, this is going to gradually reduce Putin’s strategic options and his ability to exert leverage in key places around the world.
“Putin is dedicating substantial resources in the Ukraine. He’s looking at the ruble already falling on international markets substantially in value, which reduces the purchasing power of Russians, and the economy is about to enter a recession. If oil prices remain in the $50-70 range through next year, this will begin to impose visible and politically significant costs upon an already weak economic and financial situation. Putin is not going to back down from his highest priority foreign policy commitments – the Ukraine especially – but he’s already cutting out major planned projects and he will be very hard pressed to be more prudent with any foreign policy initiatives requiring new revenues.”
Deese, an expert in leadership of international bargaining and negotiations, says the price drop could also affect Syria.
“The Syrian regime’s major backers are Iran and Russia - both countries very directly hurt economically and financially by this major drop in oil prices. The Iranian regime gets almost half of its revenues from the oil sales and with the price dropping and the sanctions, it could actually have the effect of helping the US and the Western countries push through a nuclear deal with Iran if it feels this additional pressure. It could also have the knock-on effect of reducing Russian and Iranian financial support, but it is too soon to know how that will play out.”
Oil prices have dropped roughly 40% since June, opening the door, Deese says, to growth in countries that need it most.
“Worldwide, the drop in oil prices is a serious relief for least developed and developing countries as well as the Western industrialized countries in terms of the reduced costs of their oil imports,” says Deese, who researches political economic reform in the Middle East region in particular. “So it’s going to be a boon for economic growth for most countries around the world at the same time it slows growth and spending in major oil exporting countries. The decision by OPEC not to change its quotas and overall production level is an indicator that first, they don’t have a lot of influence in the situation because of all the underlying factors of the market and second, if they cut their production level and its doesn’t affect price, then they lose market share to the non-OPEC producers. So for the moment, they’re sticking with that strategy.”
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