In an exclusive interview with CNN’s Candy Crowley last Sunday, President Obama addressed critics who believed he was too soft on Russia and that he was allowing Russian president Vladimir Putin to “roll America.” According to Obama:
There was a spate of stories about how he is the chess master and outmaneuvering the West and outmaneuvering Mr. Obama and this and that and the other. And right now, he's presiding over the collapse of his currency, a major financial crisis and a huge economic contraction. That doesn't sound like somebody who has rolled me or the United States of America.
The ruble has fallen sharply in the past few weeks and there are current stories coming out of Russia about potential bank runs. Last week the ruble became the world’s worst performing currency. This week, however, the Russian currency does appear to be stabilizing-- it's back up by 30%. So have sanctions and falling oil prices sunk Russia?
Not really says Marin Katusa, author of “The Colder War,” and chief energy investment strategist at Casey Research. Katusa believes that falling oil prices will eventually give Russia the upper hand and deeply injure the U.S. energy industry. The falling ruble makes Russian oil less expensive and more desirable to other countries—Russia also produces oil quite cheaply while the American shale industry has a larger cost of operation. Russia is more than able to weather the current storm, Katusa says. “They have a $200 billion a year trade surplus. They have over $400 billion in reserve currency. They’ve increased their gold reserve. They have much lower debt to their GDP than America. So yes there’s pain in the economy… [but] it's far from terminal.”
On Tuesday the Ukrainian Parliament voted to drop its “non-aligned” status and begin work towards a NATO membership. Russian Foreign Minister Sergei Lavrov said this “unproductive” move would only increase tension between Russia and Ukraine. Katusa believes that this is the beginning of another cold war. “The Ukraine parliament only did this after Obama guaranteed hundreds of billions of dollars in military support to fight the Russians,” he says. “And what is critical here is we all know that the logarithmic rule in war when you commit hundreds of millions - it means billions of dollars and through these actions Obama has declared the colder war on Russia.”
Katusa believes that this move will result in more atrocities on both sides of the border, but mostly in Ukraine. According to Katusa, sanctions have only made it so that Russia must work more closely with emerging markets like China. “We’ve seen billions of dollars of increase in the currency swaps between China and Russia and it’s going to continue,” he says. Currently about 9% of China’s oil exports come from Russia but Katusa predicts that number will grow significantly in the decades to come.
