National Post (National Edition)
To Putin and the Saudis, Canada is easy prey.
Other than coronavirus, it is Russian President Vladimir Putin who has wreaked the most damage on Canada’s economy lately.
At an OPEC meeting in Vienna in March, Russia refused a request by Saudi Arabia to cut back on oil volumes, in order to prop up oil prices. Snubbed, the Saudis flooded the market and an oil war began, a game of chicken that may last many months and is decimating the American and Canadian oil industries by driving prices below the cost of production.
The Saudis have more staying power than the Russians, in the form of lower production costs and cash on hand. But Putin’s boldness is a key move in his geopolitical chess game. He is willing to shoot himself in the foot (Russia is the world’s third-largest oil producer after the U.S. and Saudi Arabia, followed by Alberta) for two reasons: to continue his long-term strategy to drive high-cost producers in shale and the oilsands out of the market and, more immediately, to squeeze the United States into scrapping massive sanctions against its oil, gas and pipeline companies, in retaliation for its 2014 invasion of Ukraine.
In other words, the oil war’s escalation is Putin’s oil-for-sanctions gambit and oil producers are targets, but also collateral damage.
Why now? My guess is that a few weeks ago, it became obvious that the fiercely anti-Russia Joe Biden may win the U.S. presidency in the fall, so Putin had to make his move while his admirer, President Donald Trump, was still in office (and weakened).
“Putin is lodging the oil war as he wants sanctions moderation,” wrote British markets observer Timothy Ash, who’s with Bluebay Asset Management in London.
The strategy worked and Putin got Trump’s attention and a two-hour phone call this week. The sanctions have impaired the Russian economy and disrupted the operations of Russian oil giants Rosneft and Gazprom since 2014.
Trump is meeting with oil executives this week, but removing sanctions will be difficult because they work and are backed by Congress and both parties. For instance, U.S. sanctions placed on Rosneft last month for its dealings with Petróleos de Venezuela may have helped end Russia’s support for Venezuela’s communist dictator and enraged the most important influencer in Russia, Rosneft CEO Igor Sechin.
The Saudis also won’t back off. They are at odds with Russia over its forays into Syria and its alliance with Iran. And if Trump tries to reduce the sanctions, he will face pushback from Republicans like Texas Sen. Ted Cruz.
Oil wars are nothing new and Canada has been a victim of them for years. The Russians, and Saudis, have shut-in shale and oilsands production in North America and Europe by supporting climate-change fanaticism, anti-fracking and other environmental groups. And Canada’s paid a price, thanks to Prime Minister Justin Trudeau who has been gamed by Putin and others into sabotaging Alberta.
Fortunately, Alberta Premier Jason Kenney this week struck back by announcing the province’s investment in the desperately needed Keystone XL pipeline to the U.S. that has finally gotten the green light to go ahead.
Finishing this pipeline is critical, in order to reduce the inter-continental discount that further afflicts Canadian oil producers. But, more importantly, the pipeline guarantees Alberta’s economic viability, if it ever decides to separate from the rest of Canada.
Now it’s up to Ottawa to defend Canada’s most important industry. Federal funds must help oil companies, the Trans Mountain Pipeline expansion must be rammed through under emergency national interest legislation, oil imports to Quebec and the Maritimes from Saudi Arabia and Venezuela must be banned and the Liberal’s suicidal climate-change agenda must stop cold.
To marauders like Putin and the Saudis, Canada is easy prey. Without Alberta’s prosperous oil industry, the country’s living standards will fall apart, and so will the nation.