Americans are actually smiling as they fill up at gas pumps these days, with some people enjoying prices below $2 a gallon. But the recent 40 percent collapse in oil prices down to the $60-a-barrel range is leading to a lot of hand-wringing among oil-producing nations that are also America’s adversaries. The distress is afflicting a group of thugs who well deserve it.
It’s been amusing to see anti-U.S. demagogues rail at low oil prices. Venezuelan president Nicolás Maduro, the Mini-Me of the late dictator Hugo Chávez, took to state-run TV last week to blame U.S. fracking technology for the collapse in prices. “We’ve got to get oil back to the price where it needs to be,” he whined. “The oil they’re taking from [shale deposits] and the gas. They’ve flooded the international market to batter Iran and to hurt us, Venezuela.”
Iran is blaming both the U.S. and its neighbors in the Mideast. Iranian government spokesman Mohammad Bagher Nobakht told Muslim clerics in October that “some so-called Islamic countries in the region are serving the interests of America and [other] arrogant powers in trying to squeeze the Islamic Republic.” He later told reporters that the West has “forced our oil production from 4 million barrels per day to 1 million barrels per day.”
Then there is Russia. Vladimir Putin is in denial over the falling price of oil. “I am sure the market will come into balance again in the first quarter or toward the middle of next year,” he said recently. He appears not to have a Plan B if oil prices continue to decline. The three-year Russian budget he just signed into law is based on an oil price of $100 a barrel. Dissenting voices are squelched. When Alexei Ulyukayev, Russia’s economic minister, predicted that Russian real wages would decline by 3.8 percent in 2015, he was quickly contradicted by Putin economic aide Andrei Belousov, who dismissed the pessimistic forecasts as “a bunch of numbers” and “a technical mistake.”
But numbers do have consequences, and if oil prices continue to fall, Putin will have to ponder his response. Mikhail Gorbachev and Boris Yeltsin wielded enormous power in the Kremlin, but both were humbled and limited by economic downturns that caused popular unrest. Despite his strong will, Putin may have to reconsider his foreign adventurism and his refusal to go along with reform-minded advisers who are urging him to deregulate the Russian economy and limit corruption.
Venezuela is in much more dire straits that could definitely limit its capacity to make trouble internationally. Oil makes up 97 percent of its foreign earnings, and its massive spending on social programs is based on an oil price that’s double what it is today. Standard & Poor’s pegs the risk of a Venezuelan bond default at 50 percent within the next two years. Those approving of Maduro’s performance in office now represent only a fourth of Venezuelan voters.
The Maduro government’s struggles may well have a silver lining for U.S. interests: Venezuela will be less able to use cheap oil to prop up Cuba and other regimes in Latin America.
No one is suggesting any of the Triple Threat regimes — Venezuela, Iran, and Russia — are about to be overthrown and replaced with friendlier regimes. But the opportunity is there for the United States to exert more pressure against them.
Ed Royce, the chairman of the House Foreign Affairs Committee, thinks that we should factor Iran’s current economic woes into our policy on Iran’s nuclear capability. “The Iranian economy is weaker now than ever, and we have an opportunity to get them to consider a compromise on the nuclear program to stave off an economic collapse,” he told me. Right now, Iran is barred by sanctions from selling its oil to the European Union.
Other analysts agree. “For the first time since the United States and other world powers confronted Iran over its nuclear program in 2006, today’s oil-market conditions allow [the negotiators] to work toward the best possible deal without risking oil-price volatility and damaging consequences for the global economy,” Sam Ori, the executive vice president of Securing America’s Future Energy, said in a recent press release. Iran’s economy already is suffering from international sanctions that include a European Union ban on buying Iranian oil. Only the regime knows just how much pressure its economy can take before public unrest breaks out. But Ori warned that now is the time to take advantage of the current low oil prices: “While current conditions will likely hold through 2015, this suggests that there is a temporary window in which to work to strike a deal.”
Of course, all of these foreign-policy opportunities would require the occupant of the White House to play a skilled diplomatic hand. Given President Obama’s track record in foreign policy, that’s a big if. After all, as National Review editor Rich Lowry reminded us last week, as recently as 2012, Obama was proclaiming that “we can’t just drill our way to lower gas prices.” The White House failed to predict (let alone to bring about) the sudden downward spiral of oil prices, but it would be sheer folly if it now failed to use the power that dropping prices gives us to responsibly squeeze our adversaries. But as his record as shown, Barack Obama appears so far to be far tougher on his domestic opponents — the Republicans — than he does on our overseas foes.
— John Fund is national-affairs correspondent for National Review Online.