SIGN UP FOR THE BREITBART EMAIL NEWSLETTER

Russians Can Defeat Obama's Sanctions Through Sacrifice

Russians Can Defeat Obama's Sanctions Through Sacrifice

The Obama administration has led the European Union to jointly apply economic sanctions to starve Russia of the $59 billion in investment capital the nation needs to keep its oil and natural gas revenues high enough to fund over 50% of the Russian federal budget. But the Russian people could make the capital funding available by adopting stringent energy conservation and agreeing to sacrifice part of their 70% subsidy for domestic oil and natural gas consumption. Although these sacrifices would be painful, the Russian people are known for being very tenacious and patriotic when challenged by foreign powers.

Despite being the world’s largest oil producer at 10.1 million barrels per day (mbpd), Russia is only the second-largest oil exporter at 4.7 mbpd. The reason the nation of only 145 million people consumes 5.4 mbpd of oil and over half of Russia’s huge natural gas production is that the government provides a 70% subsidy for domestic consumption. With $122 billion in domestic crude oil and natural gas sales in 2013, the Russian subsidy amounted to about $285 billion for the Russian people.

Most Russian oil and natural gas companies are vertically integrated to control exploration, production, and retail distribution. But because of the enormous size of the domestic subsidies, Russian energy behemoths like Gazprom have been completely reliant in recent years on hard capital borrowing from Western banks to fund investments in new exploration projects and infrastructure improvements. 

Of Russia’s total exports of $527 billion last year, at least $355 billion, or 68%, was oil and natural gas. The other $171 billion was composed of other energy resources, such as coal, and non-energy exports, according to the Russia’s Federal Customs Service. The Russian federal government in 2013 was reliant on oil and natural gas export customs’ duties and taxes to fund over 50% of its budget.

Russia finalized a 30-year, $400 billion deal to supply China with natural gas from fields in Eastern Siberia. But to fulfill this contract and generate revenue by 2018, Russian capital spending on exploration and development must rise by 10.9%, from $53.9 billion last year to $59.8 billion this year, according to “Barclays Global 2014 E&P Spending Outlook.”

Europe and Turkey currently receive most of Russia’s exports of crude oil and virtually all their exports of natural gas. But North America refineries import some Russian crude oil, and Asia buys substantial volumes of crude oil and some liquefied natural gas (LNG) from Russia. As commodities, Russian oil and gas production will always find a buyer.

The mainstream media frets that Russia has a stranglehold on supplying natural gas to many European nations. But exports of oil and other petroleum products generate about four times the annual export revenue of natural gas. 

Russia reached 12% of global oil production last year to pass Saudi Arabia for the number-one spot. With the largest proven reserves of natural gas, Russia also accounted for about 20% of the world’s natural gas production. 

To continue to increase its production levels, Russia must make huge investments in exploring and recovering oil from virgin deposits from “green-fields” in the east Siberian region and the Arctic Shelf. If the Russian people are willing to make stringent sacrifices, Russia can internally generate the $59 billion in capital to fund its oil and gas that would foil Obama and his EU partners’ financial sanctions.

The author welcomes feedback and will respond to reader comments.
From July 15th to July 29th, Chriss Street is teaching
at Ho Chi Minh University in Vietnam.

 

P.S. DO YOU WANT MORE ARTICLES
LIKE THIS ONE DELIVERED RIGHT TO YOUR INBOX?
SIGN UP FOR THE DAILY BREITBART NEWSLETTER.


Comment count on this article reflects comments made on Breitbart.com and Facebook. Visit Breitbart's Facebook Page.

SIGN UP FOR THE OFFICIAL
BREITBART EMAIL NEWSLETTER

GET TODAY'S TOP NEWS DELIVERED RIGHT TO YOUR INBOX

I don't want to get today's top news.

x