Russia

The Brent oil price has now fallen by 15 per cent in less than three months and is now below the psychologically important figure of $100 a barrel. Last week I wrote about the reaction in the industry. But the fall is beginning to have political consequences as well.

Brent Crude Oil Future three month chart

Across the world oil producing and exporting countries have come to rely on high, and ideally rising prices. Some countries save the revenue for a rainy day, but most, especially those with rising populations, tend to spend. Circumstances vary, as do the realistic options for adjustment, but the current concern is real and will shape political actions well beyond the oil sector itself. Read more

A pro-Kremlin rally in St Petersburg. OLGA MALTSEVA/AFP/Getty Images

The conventional wisdom is simple – business and politics are two separate worlds, which should not mix. Corporate leaders should not be involved in anything that smacks of political activity. Business exists to make money not policy.

That is the mantra – and it is wrong. In two weeks time the St Petersburg International Economic Forum is due to meet. Business leaders should be there and should have the nerve to tell Vladimir Putin what he doesn’t want to hear.

The St Petersburg forum is President Putin’s answer to Davos – a prestige event designed to show that Russia is a key part of the global economy. As the FT reported last Friday, the US government does not want business leaders to attend. Valerie Jarrett, Mr Obama’s adviser, has been calling CEOs telling them not to go, as part of the process of demonstrating that after what has happened in Ukraine, Russia is isolated and friendless. Many are taking her “advice”. In Europe the position is more ambivalent. European sanctions on Russia are soft and the rhetoric from Berlin and Brussels even softer. Many European leaders seem to regard Ukraine as Russia’s sphere of influence. There is little appetite for bringing the country into either the EU or Nato. In contrast to Russia, Ukraine cannot afford to employ the lobbying skills of Gerhard Schröder and his ilk. Read more

One of the greatest mistakes in the analysis of what is happening in Ukraine is the view of Russia as a one man dictatorship. That is clearly not the case. Moscow is a complex political society with numerous powerful figures. They, rather than Russia’s passive democracy, determine who is in charge. Vladimir Putin has been a strong leader but his power is not absolute. The eternal truth is that all leaders lose power in the end and very few go voluntarily.

After nearly 15 years in office as President or Prime Minister he has already exceeded the normal lifespan of leadership. Actuarially he is living on borrowed time and is dependent on continued success. In the current situation the line between success and failure is very narrow and energy issues are at the heart of the judgment. Read more

The first and easiest prediction arising from the continuing crisis in Ukraine and the deterioration of relations between Russia and the EU is that natural gas prices will rise. After all half the gas Europe imports from Russia comes through Ukraine. Very little of that supply can be replaced from other sources in the short term.

Russia has announced a sharp (44 per cent) increase in prices for the gas supplied to Ukraine – in part as a punishment for past unpaid bills. Surely Europe must be vulnerable to either a cut-off of supplies or a forced price rise? And yet in the real world actual gas prices have fallen over the past month and now stand at a three-year low. Is the market mad? Read more

The dispute over Ukraine has moved into a diplomatic phase and for the moment at least the prospect of a Russian advance into eastern Ukraine has receded. The consequences of what happened in the Crimea, however, continue to shape European policy making. The invasion provided a sharp reminder of Europe’s reliance on Russian gas – a degree of dependence which the EU will now reduce even if a settlement is agreed by the diplomats. It is quite possible that within two or three years European gas imports from Russia could be halved. Russia would be reduced to being one supplier among many in a world where gas-to-gas competition inexorably reduces prices. Read more