IN DECEMBER 1979 Soviet troops invaded Afghanistan. The oil price at the time was at its peak of $101 a barrel. The high price combined with fast-growing production of oil in Western Siberia provided the Soviet Union with unprecedented revenues. Instead of saving this money for a rainy day, the Soviet government financed foreign adventures and imports of food. Seven years later the Brent crude oil price fell to around $30 a barrel and Mikhail Gorbachev launched the policy of Perestroika (restructuring) and convergence with the West. The high oil price coincided with Soviet aggression, but as the price fell the Soviet Union became more democratic and friendly to the West.
That the oil price correlated with Soviet politics is not surprising – in the uncompetitive command economy oil and gas revenues accounted for 67% of all exports. But the correlation remained just as strong after the end of the Soviet Union and transition to a market economy, and oil and gas remained the main source of Russian export revenues. When Vladimir Putin came to power the price of oil was $25 a barrel. Mr Putin allied...Continue reading
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