Picture 2

Picture 2

Oct 17, 2015

Is Syria Putin's Real Goal?

Vladimir Putin believes (probably correctly) that a fall from power will mean his death. Putin came to power after the 1998 oil price crash forced a Russian bond default, drove inflation to 80% and pushed Boris Yeltsin out of office. The price of oil has crashed again. Putin needs a higher price of oil or a significant military victory to stay in power.

Putin's military support of Bashir al Assad is designed to raise the price of oil by fomenting chaos in the Middle East. The price of oil has increased from about $45 a barrel to almost $50 a barrel for Brent crude since Putin's intervention started, nice but insufficient.

Putin has other reasons for optimism on oil prices. The Iran Nuclear deal guarantees a Middle East war in the next 6 months. It both permits unlimited Iranian oil sales and gives Iran access to $150 billion in formerly frozen assets. Iran's oil revenue last year was about $55 billion. This is big money for the Mad Mullahs to spend on weapons and training militias and terrorists.

I don't think the Israelis, Saudis and Egyptians are going to wait peacefully while the Iranians to make enough nuclear weapons to wipe them out. I expect them to attack Iran's two big economic vulnerabilities. Over 90% of Iran's oil exports flow through the Kharg Island oil terminal, 16 miles offshore. All of Iran's gasoline, kerosene and diesel fuel is imported. They have no refineries. If Iran's enemies bomb Kharg Island and mine their harbors from the air, it puts Iran out of business economically. Iran would probably try to close the Strait of Hormuz to retaliate. Most of the Persian Gulf oil exports move through the Strait of Hormuz. Even if the Iranians are unsuccessful, the threat of attack may be enough. If the strait is a war zone, oil tanker ships moving through it will have no insurance. A significant amount of oil will not reach the international market.

I come to believe that Putin's Middle East moves may be a feint. If he’s going the military route, his target is most likely one of the three former Soviet Republics that are now NATO members. It's Putin's choice of Baltic States: Estonia, Latvia or Lithuania. I think Lithuania is a logical choice because taking it would give Russia land access to the Russian enclave of Kalingrad, formerly East Prussia. Putin has recently firmed up a deal with Belarus for a big Russian air base within striking distance of the Baltic States. This will be the first Russian military base in Belarus since it became an independent country.  The agreement didn’t get much coverage in the press.  I think even a massive Russian buildup on Lithuania’s border would not get much press either.

Barry the Brilliant has made polite gestures towards defending the Baltic countries, but nothing that would actually be effective. Our Smartest President Ever refuses to have more than a few hundred American soldiers in any of these countries, and they are just passing through. Obama also refuses to establish NATO air bases in any former Eastern Block counties because there's a treaty with Russia that promises we won't do that. Russia already broke that treaty, but we're still living up to it. If any NATO country falls to Russia, the failure of NATO to defend an ally effectively would destroy the alliance. Putin is desperate enough to try it. Given the Middle East chaos distracting world leaders, the general weakness of NATO and the specific weakness of the defenses in the Baltic countries, Putin has a decent chance of getting away with it.

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