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  • Russian Crisis Acquires New Dimension

    Russian motorists rally (Photo by Valery Sharifulin/Newscom)

    The crisis in Russia is revealing new features proving it is quite unlike the global downturn. Last week saw numerous actions protesting a hike in import duties on foreign cars that were staged in an array of Russian provinces. The government had passed a decision to the effect to protect domestic carmakers. This dealt a massive blow to many provinces. The truth is that auto making is localized in Russia’s European area, and shipping cars to Siberia and the Far East racks up their sales price, especially at the backdrop of cheaper and higher-quality Japanese cars. The most massive protests took place in Vladivostok where Japanese cars are prevalent.

    The protests were quite vocal: their participants blocked traffic on the city’s main thoroughfares and attempted to capture the airport. They did not confine themselves to economic demands but called for the government to step down. Similar protests were staged in other cities, Moscow inclusive.

    Prime Minister Vladimir Putin has taken unprecedented steps to assuage those protesting duty hikes on foreign cars. He offered to pay Russian Railways out of the federal budget to cover the costs of shipping the cars to the Far East. This measure would hit the taxpayer’s pocket hard but is no guarantee consumers would choose cheaper Russian Ladas over Japanese Toyotas. Protests are unlikely to end any time soon.

    Small wonder, the government instructed law enforcers to crack down on protesters. The riot police unit Zubr (Russian for Bison) based in the Moscow Province was rushed to Vladivostok. This Interior Ministry’s elite unit is reported to have been established on the chance of a color revolution in Russia. It looks like Putin is seriously concerned over the rising tide of protest and seeks to nip it in the bud to prevent it engulfing the entire country.

    The decision to cut oil production to arrest the further drop in crude prices is one in an array of the government’s moves to combat the crisis. Deputy Prime Minister Igor Sechin unveiled it at OPEC’s Algeria Summit. Moscow is stepping up its coordination with this oil cartel. While OPEC has agreed to a 2-million-bpd cut as of January 1, Russia is going to cut its crude output by 0.5 million bpd. Thus far, Moscow is unprepared to commit itself to joining forces with OPEC, choosing to play independently instead.

    Russian oil majors are disaffected with the government’s oil production tax policy. Thus far, the Russian Cabinet has been unwilling to offer clear-cut guarantees that it would approve tax breaks for oilmen any time soon. But the oil companies are demanding immediate cuts on oil export duty and in natural resources tax for the next two years. It looks like the Cabinet members do not believe the oil–price fall will be protracted, and expect a favorable oil world market situation to promptly make its comeback.

    Irrespective of the government’s efforts, a dramatic plunge in industrial output is ongoing in Russia. Last November saw the 8.7% drop in production, while December is to witness a 19% slide. The scope of the present economic downturn tops that of the 1998-1999. The production of coke, cellulose, mineral fertilizers, ferrous metals and output in some areas of mechanical engineering and machine-tool manufacturing has suffered the most serious losses of nearly 30 percent. The government’s measures to support these industries have been unsuccessful, so far.

    Posted in Ongoing Priorities [slideshow_deploy]

    2 Responses to Russian Crisis Acquires New Dimension

    1. Thomas Gray South Ca says:

      Oil Independence,

      Everyone knows [ I hope, ] the using of oil is a dead end street, in the event of a supply interruption causing wild price rises we need to be able to function as a country if oil suddenly becomes unaffordable, NG prices are no more secure but I know little about NG supply security.

      The many million's of barrels of oil we and other country's use every day guarantees the price will soon begin it's infinite climb so we must plan to install another energy source for transportation to continue at soon to be much lower personal travel levels when the price returns to 147 +, again.

      If and or [ hopefully, ] as our economies recover the oil price increases will return.

      Our transportation fuel sources must begin reforming now not when the whole economy has collapsed becouse of unaffordable transportation fuels. Detroit auto makers will insure future job security if they stop building vehicles that use OIL as a energy source to power new vehicles. Anything the envirogreensocialist activist's choose, but not oil.

      We now know what the price of oil can do in a matter of three or four months.

      Ten years into the future prices will be higher, by this time everyone will know how fast the supply declines are going to be, by twenty years there will be supply restraints further increasing prices due to declining oil flow levels from known oil producing fields from all over the earth

      unless something appears that we don't for see.

      Perhaps Detroit could put my electric car on the market since thy are not doing much at the moment. electricity can be produced from multiple energy sources.

      We must plan to install another energy source for transportation now. Pick the fuel you like just not OIL.

      Drilling for more oil and NG will give us more time but the answer remains the same.

    2. Warwick Wakefield, S says:

      The problem is green extremism. There is plenty of oil in the ground but green extremists, through clever political operations, have put up a huge structure of regulations that prevent its being extracted. Petrol driven autos are hugely superior to clunky electric machines and they don't employ huge batteries that are a disposal nightmare.

      Anyway, do you think that the green activists would be contented if the gas driven autos were simply replaced by electric counterparts? Not a chance. They would then attack the "electricity guzzling uatos" with the same ferocity. The greens won't be happy until the great bulk of the worl's people have lost their mobility. If you can't get there by bus or train you have to stay at home. Pile the kids into the family sedan and take a break at the coast? Go exploring in the mountains? Forget it. You will have to load the family, and all the family's bikes and clothes and paraphenalia onto a train, arousing the hatred of the other passengers.

      In the future, if the greens get their way, you will take a train or bus to work and a train or bus to one place at the weekend and you'll be happy with it.

      Mobility is freedom and the greens want to take that freedom away from the great majority of the population.

      Present-day autos are already clean, cleaner and more efficient than hybrids. The answer is more drilling and a continuation of the improvement that is steadily happening.

      Don't ever trust the greens; they are modern day religious fanatics.

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