Putin decided to declare economic war and collapse of the oil market

..because my country is falling apart
with leaders who don’t care a bit.
V. Vysotsky

Our greatest enemies are not the United States and China. It is the government, which is like a weather vane – turns in the wind and does only what it is ordered from above, "low-down rats" - departmental officials and lobbyists, who "gnaw out bits" of the budget for their owners and help to plunder it. And finally, Mr. President. His incompetence and desire to stay on the throne at any cost led to the fact that now even the most silly granny from Kukueva village does not believe him.

No one - except "the sycophants by the throne" like Tereshkova and Klishas, and lobbyists who "eat for three throats" - wants to see him as the head of state. And they will be very happy if he gets out of the seat on any terms.

But Mr. President has got the National Guard and army in his pocket, so behind their reliable backs, he shamelessly accepts his share of Russia's wealth and continues to actively help the rats in looting.

It would be possible to forgive a lot of these pathetic likenesses of people who have long lost honor and conscience, if they did not ruin the lives of us - those whom they call "the people", "the inhabitants"- by their decisions.

There is a very simple way to nip discontent and "social explosions" in the bud. People should be occupied so that they don't care what happens "at the top". The best reason is to fight. War – and the economy is immediately in crisis, consumers are not thinking about their feelings for Mr. President, but only about how to survive and live up to good times.

That's why Mr. Putin went along with Mr. Sechin - he suddenly brought down the oil market and started a price war that nobody needed and the least profitable to Russia.

But let's take it one by one, so that we are not accused of unfounded facts and falsification.

Russia's involvement in OPEC+ has always been profitable. Basically, OPEC+ is a cartel of oil producers that maintains high oil prices. And in recent years, Russia's budget is at least 50% of revenues from oil and gas. In 2018, Russia's budget received an additional gain of 5 trillion from joining OPEC+ as stated by Mr. Novak*. 2019 was clearly no worse. Withdrawal from OPEC+ – a guaranteed price war, which no sane participant of the market needs.

On December 6, 2019, at the final meeting of the OPEC+ countries, it was decided to reduce daily oil production by 500 thousand barrels in the 1st quarter of 2020. Countries shared quotas. Russia agreed with the decision to further reduce production by 70 thousand barrels per day. Yes, it is an unprofitable decision for the country, but not for free - the agreement did not concern the volume of production from the so-called "gas-condensate" fields (liquid hydrocarbons are condensed from natural gases), which partially covers the losses in production. As a result, according to Mr. Novak, the actual reduction in production should be only 300 thousand barrels per day.

Thus, Russia's total loss in production should have been 3% instead of 6%. In addition, for some reason, the voluntary decision of Saudi Arabia to reduce its own production by another 400 thousand barrels per day, if other countries comply with the agreed quotas was hushed up. It is not surprising that in December 2019, Russia fully accepted the decision of its OPEC+ partners**.

But everything changed at the end of February 2020. Because of the situation with coronavirus, they began to predict the stagnation of the world economy and OPEC+ made a statement about the need for additional production cuts of 1 million barrels per day for members of the organization and by 500 thousand barrels per day for other countries, so as not to bring down the market. The decision could be adjusted at the next OPEC+ meeting in June 2020.

Yes, now the loss from production has increased from 3% to 13%. Yes, it is not pleasing. But as you can see, there was no matter of any infringement of Russia, because all countries had to reduce their production. The decline in production to 10.4 million barrels per day was to be compensated by maintaining and subsequently increasing the cost of oil prices. But Mr. Sechin is absolutely not satisfied with this. After all, his personal success depends on the spending on the oil industry, not on the revenue from it to the budget.
It's ironic, isn't it?

In Russia, up till now, an official takes a position not by the results of his work , but by how convenient he is for those who pump the country's resources into their pockets. And if we reduce production – we can forget about the development of fields, the allocation of funds for infrastructure development – a huge cash flow, in which Mr. Sechin's partners in budget sharing had to put their "grubby hands". If Mr. Sechin does not protect their interests and does not lobby for the interests of his department, then why is he needed?

So, absolutely not sudden in February, Mr. Sechin writes a letter to the president, where he humbly implores him and says that the participation in OPEC+ is not profitable for us:

The essence of the letter: the OPEC deal with Russia to reduce oil production "is a strategic threat to Russia", " the participants in the OPEC+ agreement actually created a preferential advantage for the United States".

If you remove all the official bureaucracy, Mr. Sechin says that the decision was made exclusively to the detriment of Russia. Supposedly, only our country is suffering, and the "cursed enemies - the Americans" are not members of OPEC and are not going to reduce their shale oil production. Supposedly, while we keep prices in the market - "the enemy swings" and makes more and more money. We follow the lead of our partners and do not grow up, but they grab everything like they aren’t playing. Oh, byada! Oh, save us from devastation, president!

Well, if we drop the market, they will not survive- they will go broke, oh "they'll be belly-up". And then we will take them with our bare hands, capture their markets, and live better than ever.

Here is what "the serf" approximately wrote H.I.M. Own Chancery, still VVP for now - he is also the Chief Executive Officer of PJSC Rosneft Oil Company, Chairman of the Board of Directors of Rosneft, I. I. Sechin.

The letter seems to be confidential, but for some reason it got into all the foreign media in a couple of days. Ah Yes, the Office of the President- no information is kept there.

And the Tsar, that is, Mr Putin, made a positive decision on the letter from his "serf", Mr Sechin. Russia withdrew from the OPEC+ deal, while saying that the former partners were to blame. Supposedly, if you do not love and respect mother Russia, we will not be friends with you either. And may the best man win.

It is not surprising that after Russia's refusal to confirm the decline in production and after the response of Saudi Arabia to increase production to 12 million barrels of oil per day, on the night of March 8 to 9, the world oil market collapsed and the "oil war" began.

Currently, prices for 70% of all world oil grades, including the Russian Urals, Siberian Light and REBCO brands, are determined by the prices of the Brent blend. It is considered a benchmark because it is produced by several large independent refiners in the offshore fields between the coasts of Norway and Great Britain, and the constant demand for the brand is significantly higher than for all the others produced in Europe. On March 9, the price of Brent oil fell by more than a third to $33.65. Amidst the falling oil prices, the ruble also fell to the ratio of 75 rubles to the dollar and 85.9 rubles to the euro.

And our political power pretends that it transfers all the resentment to everyone and says: Saudi Arabia started the war and made the market to collapse – as you see, it is to blame for the fact that, like Russia, it is not going to reduce its appetites. But it can't, it's not Russia!

Now let's look at the position of the pieces on the chessboard.

USA

"From the point of view of Russia's interests, the deal with OPEC is simply meaningless. By giving up our own markets, we are removing cheap Arab and Russian oil from them to make room for expensive American shale oil. And ensure the efficiency of its production"- Mikhail Leontiev, Rosneft's press secretary, said; after the decision necessary for Rosneft was made.

Mr. Leontiev is coming out with trash and he knows this well. First, because of the coronavirus, the development of the world economy will be suspended and a reduction in production will not lead to a deficit. Secondly, the brands of oil produced in the United States and Russia differ greatly in composition and are purchased by different types of businesses. Therefore, Russia has its own customers, and the United States has its own. Since when will businesses, especially big businesses, overpay and buy the wrong things?

Third, the US is not able to meet its own needs at the level of 20 million barrels per day and is forced to export up to 40% from South America. If the US starts producing more, it will first be able to close its domestic needs. In 2020, it was expected that the total crude oil production of American oil companies will grow to 12.5-12.7 million barrels per day. And to say that the US is just about to "flood the whole world with its oil" - is only a fiction.

Undoubtedly, the American business expects a loss of profit, additional production of cash losses will not compensate it. Yes, the cost of extracting shale hydrocarbons and over-crediting oil companies will cause certain economic problems. And maybe the weakest players will not even survive and leave the market. But everything is not as fatal as the professor of sour shchi, Mr. Sechin, claimed.

Most of the American oil producers have protected their investments- they hedged (insured) risks in case of a fall in the price of oil in January 2020, immediately after the assassination of the Iranian General Soleimani. More than 60% of the production will be realized through futures contracts. In other words, the prices and volumes of transactions between the majority of oil sellers and buyers are fixed and are not subject to change this year. Therefore, the US shale industry will withstand at least a year of low oil prices. And such monsters as Chevron, Gulf Oil, Mobil Oil, Texaco, ExxonMobil will not notice the pressure from the market at all. On the contrary, this will only encourage them to optimize their costs as much as possible and to compensate for the lost profits for the next year or two, when the economy recovers and demand increases many times.

At the same time, Mr Putin has become a "good fairy" for the US economy. Now the country will have the same cheap gasoline as during the Reagan administration. 2020 will be the year of US GDP growth of at least 10%. So Trump has a chance to take advantage of the situation and return to the success of Reaganomics.

Saudi Arabia and its OPEC Arab associates

The country's budget is calculated based on the cost of oil at about $80 per barrel, and the price of less than 40 per barrel "breaks the bottom". A loss of more than $100 billion – 20% of the budget is critical. The country has enough reserves to close the deficit for 3-4 years. Therefore, in a situation where the market is falling, the Saudis will do everything to maximize production and sales.

Meanwhile, we can forget about the informal agreements between Russia and SA on market division and prepare for a new round of competition and falling prices, because Russia has lost good relations with a serious player in the oil market and an influential country in the Middle East.

As for other Arab countries, the situation there is even more unpleasant – economic crises are coming. And Iran, Kuwait, Libya, the UAE, etc. will not forget that this is a shortfall - it is a "gift" to Russia. Lavrov will have to try very hard to maintain good diplomatic contacts with our former partners.

Russia

Let's compare the pros and cons of falling oil prices. If the OPEC+ agreement was adopted and production is reduced to 10.4 billion barrels per day, but with the price of 60 dollars per barrel in 2020, Russia would receive 624 billion dollars. Now at best, even reaching 12 billion barrels per day (and more will not work - the industry is not ready) at 35 dollars per barrel, the result will be a maximum of 420 billion dollars.

Losses of Russian oil companies and the budget are about 200 billion dollars. For comparison, Russia's foreign exchange reserves amount to $549 billion. More than a third of the foreign exchange reserves has to go to cover losses due to the incompetent decision of Sechin-Putin. But most likely, no one will touch the strategic reserve.

The budget crisis will be stopped at the expense of us, the ordinary citizens. Get ready - we are waiting for the devaluation of the ruble, a sharp increase in inflation, a fall in Russian shares in the stock market. Let me remind you that import substitution is a fiction, and all raw materials and goods purchased abroad will grow by at least 15%, now the dollar will rise to 110-120 rubles.

Are you ready to go on vacation to Turkey for the price of trips to Thailand, and to Thailand for the price of trips to Mexico? Or maybe you should hold on to the money, because the next economic downturn, bankruptcy of small and medium-sized businesses, mass layoffs are ahead. A reduction in social spending and a reduction in support for the vulnerable segments of the population awaits us. Prepare for an increase in death, crime, and suicide. This will be a crisis worse than the crisis of 2014.

So, what we see as a result: the US economy will strengthen and benefit from the oil war, and Russia and Saudi Arabia will not only become competitors - they will lose part of their gold and foreign exchange reserves, and the people of Russia will enter another economic crisis.

It is obvious that Russia does not need the fall in oil prices . This is that same situation when "an unjust peace is better than a just war". It is better to compromise and lose 13% of the margin than to be left alone and lose almost 50%! And at the same time to increase competition in the market and break the existing partnership relations with a number of countries in the Middle East. Even an idiot can understand that it was necessary to think not 7, but 10 times before taking such a step.

A policy that directly undermines the economy and the future of Russia is very much in evidence.

Our "dear" president deprived the country of 200 billion dollars with the stroke of a pen. More than 140 million Russians will soon suffer because of two sellouts who want to stay in their seats at any cost.

Both of these people: Sechin and Putin attend church as diligent parishioners and receive full support from the ROC, although they should have been anathematized for violating all the commandments and the Judas betrayal of people who trusted them.

Both of these absolutely non-theatrical villains drink and sleep well, without fear of retribution. They are used to the fact that we, the people, are not capable of anything – we will drink a "glass of tea" in the kitchen and go home. The simple question is: are we ready to continue watching these ghouls slowly but surely turn our lives into hell? Or is it time to take the pitchfork and send them to live permanently in the underworld, where they belong?!

https://www.rbc.ru/business/08/02/2019/5c5db5de9a79472d6f891b37
https://www.rbc.ru/economics/06/12/2019/5dea72809a794719e72c425c
https://www.rbc.ru/economics/02/01/2020/5e0e2d869a7947365851bd0d
https://novayagazeta.ru/articles/2020/03/09/84231-geroy-dna
https://www.rbc.ru/rbcfreenews/5c24cf2e9a79479649f2baa6
https://www.opec.org/opec_web/en/press_room/5865.htm
https://www.rbc.ru/business/08/02/2019/5c5db5de9a79472d6f891b37
https://tass.ru/ekonomika/7926203
https://novayagazeta.ru/articles/2020/03/07/84219-igra-na-ponizhenie
https://tass.ru/ekonomika/7863677
https://novayagazeta.ru/articles/2020/03/09/84230-igor-sechin-v-roli-ronalda-reygana
https://novayagazeta.ru/articles/2020/03/09/84231-geroy-dna
https://newsland.com/community/4765/content/vchera-rossiia-obiavila-ssha-i-saudovskoi-aravii-neftianuiu-voinu/7050437
https://www.reuters.com/article/us-oil-opec-russia-rosneft-exclusive/exclusive-russias-sechin-raises-pressure-on-putin-to-end-opec-deal-idUSKCN1PX1R7?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29

@animor aka golos.io/@runews