Toast Popping in the Kremlin: Israel's Fight with Iran is a Lifeline for Putin's Troubled War Economy
Iran-Israel Conflict: Russian President's Relief Amidst Escalating Mideast Tensions
By Joe Schmoe
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The Middle Eastern struggle has become a lifeline for Russia's ailing war economy. Israel's airstrikes are pushing up oil prices, and Putin's fortunes are following suit. The escalating conflict has given Donald Trump new reasons to leave the price cap and the Kremlin's war chest intact.
Before his early departure, Donald Trump had some words for the G7 summit in Canada: "Remember, sanctions cost us a lot of money," said the US president. The major industrial nations' plans to further isolate Russia's war machine in Ukraine were doomed to fail as a result.
In essence, the primary EU countries, Britain, Canada, and the rest were on the same page regarding decreasing the price cap, which has been in effect since the end of 2022, to $45 for international Russian oil sales to squeeze the Kremlin even further and end its war on Ukraine.
Politics 18th Sanctions Package: EU States Want to Hurt Putin with Lower Oil Price
The timing seemed perfect. Black gold was cheaper than it had been in a long time, Russia's revenues were dwindling, and OPEC+ was at odds - the Kremlin was not adhering to production cuts meant to maintain high prices because it urgently needed revenue for its war against Ukraine. Saudi Arabia had therefore entered into an oil price war against Moscow, attempting to outmaneuver the Russian competition. However, the middle eastern conflict has thrown a wrench in the works.
Alongside the nuclear deal, the looming sanctions against Russia are the most significant diplomatic casualties of the bombing attacks on Iran. Putin is the primary beneficiary of Israel's attack on Tehran: it diverted attention from the daily acts of terror perpetrated by the Kremlin's air force on Ukrainian cities and drove up oil prices, bolstering the Kremlin's war chest. Furthermore, it offered Trump another excuse to maintain the Rouble's economic lifeline wide open.
Champagne Corks Flying in the Kremlin
Even before Israel's offensive, Trump demonstrated little inclination to confront Putin on the Ukrainian front. Although members of the US Congress, even Republicans, are now preparing harsher sanctions, his stance toward Moscow has been cozy. Now, with the Iran conflict, the United States suddenly has more pressing matters on its agenda than the Kremlin's aggressions in Ukraine. It also provides a fresh justification for Trump not to intensify his economic assault on Russia's foundations.
Oil Prices Soaring Enormously: Israel's Attack and Its Impact on Oil Price
The Iran conflict has sent oil prices soaring, creating divisions within the price cap coalition. Given the cap, Western trading partnersPay extra to sell cheaper Russian oil, weakening Putin's war chest. If Russian oil surpasses $60 per barrel, with Putin's backing, it may no longer be permissible for trade in the West. This artificial scarcity could lead to further price rises in the already volatile market. And Trump has no interest in that, as American inflation is already skyrocketing due to his trade wars, debt, and other economic policies.
Meanwhile, Moscow is reaping the rewards of war. Following the commencement of bombing, the price of Russian Ural oil increased by 15% within just a few days, according to a Russian investment company, as reported by the "Moscow Times." The unexpected profits are a lifeline for the Kremlin, which is grappling with a budget deficit that is projected to triple this year. In May, oil and gas revenues fell more than half compared to the preceding month.
The Cap is Too Loose
That the plan to dry up Putin's primary money source is failing now is also due to design flaws in the cap. It's leaky, ineffective, and fails to put a real cap on Putin's oil business: Despite Western sanctions, the Kremlin has been circumventing restrictions with an armada of old scrap tankers, owned by secret companies and questionable financiers, since day one.
War Chest is Adequately Filled: Putin Has Won the Oil War
The price cap is not a genuine embargo - merely a weak compromise: It prohibits shippers, traders, and insurers from participating in oil deals exceeding $60, including transportation and trading. Shippers, traders, and insurers, even in Europe, are loosely enforcing these guidelines, and there are few investigations or penalties. Moreover, outside the West, there is barely any participation. Most deliveries are now handled without Western insurance, and the cheaper smuggled Russian oil is, the less reason India and China have to buy expensive oil in the West. They are practically Putin's sole customers now.
Will the Europeans Act Alone?
With Trump's departure from the price cap coalition, the question arises: Can the Europeans stand alone? Prior to the G7 summit, EU foreign policy chief Kaja Kallas stated that the EU could lower the price cap unilaterally if necessary. "If we and the rest of the G7 support a lower price, and the Americans don't, that's something we should aim for," said EU sanctions chief David O'Sullivan. However, it seems Trump's departure from the G7 summit has dashed the initiative. According to "Bloomberg," some EU countries are now reluctant to act solo without the US, for fear that unity among EU countries may unravel without Trump. Putin will no doubt be pleased with this development.
Vladimir PutinRussiaOil PriceMiddle East Conflict
Additional Insights
The recent rise in oil prices due to the Middle East conflict has bolstered Russia's energy-dependent economy. Higher oil prices contribute to increased government revenue, but Russia still faces significant economic challenges, including sanctions and fears of a global economic slowdown. Russia has also been exploiting geopolitical opportunities to bolster its energy interests in the region.
In this context, Israel's escalating conflict with Iran serves as both a distraction from the daily acts of terror perpetrated by the Kremlin on Ukrainian cities and a means of driving up oil prices, thereby boosting Putin's war chest. Furthermore, Donald Trump's departure from the Western alliance has raised apprehensions among EU countries about their ability to act independently without the US's support, potentially weakening the Western sanctions regime against Russia and allowing Putin to reap further benefits.
- Despite concerns over Russia's war economy, the escalating Middle East conflict has been a lifeline for the Kremlin, driving up oil prices and boosting Putin's war chest.
- In the story of Israel's fight with Iran, the energy sector, particularly oil-and-gas, has emerged as a significant player, impacting both Putin's war economy and international politics.
- The ongoing conflict in the Middle East has disrupted the price cap coalition's plan to squeeze the Kremlin further, given the increased oil prices, which make American inflation even more skyrocketing under Trump's economic policies.
- The diversion of attention caused by Israel's offensive on Tehran has offered Trump a new excuse not to intensify economic sanctions against Russia, maintaining the Rouble's economic lifeline. This situation has boosted Moscow's finances, with Russia's oil revenues soaring due to the Middle East conflict.
