The price of a barrel of oil dropped under $50 dollars on Thursday. Good news for automobile drivers and stressed out airlines, perhaps, but very bad news for some countries for whom oil production is the economic mainstay. For example:
Russia.
The oil slump, however, exacerbates Russia's already severe economic problems. Since May Russian markets have lost 70 percent of their value. Russia's central bank, meanwhile, has been spent $57.5 billion in two months trying to prop up the country's ailing currency.
"If the current trend continues with the government supporting the rouble, oil prices falling and a slowing economy we are going to have a major crisis," said Chris Weafer, an analyst with the Moscow brokerage Uralsib.
Iran.
Iran is especially vulnerable because 80 percent of its revenue comes from oil. The IMF calculated recently that for Iran to balance its budget, the price of crude oil must not fall below $95 a barrel. With prices now below $50 the shortfall could be staggering.
The effect of declining oil prices will be felt both domestically and internationally. Ahmadinejad is expected to stand for a second presidential term next June but the lack of cash will restrict his plans to replace subsidies with direct cash payments - widely seen as a vote-buying tactic. US and UN sanctions imposed over the nuclear issue are already limiting Iran's ability to issue letters of credit and thus increasing its cost of trade.
Venezuela.
Hugo Chavez has reduced Venezuela's support to foreign allies and is poised to make deeper cuts at home and abroad as plunging oil revenues hit his self-styled socialist revolution.
The government has warned of austerity measures after years of breakneck spending on social programmes, nationalisations, arms and diplomacy, an exhilarating splurge when there seemed no end to petro-dollars.
South America's energy giant relies on oil for half of its exports and 95% of government revenue, leaving Chavez's ideological and political ambitions vulnerable to a crunch.
How the World Works does not feel particularly inclined to shed tears for Vladimir Putin, Mahmoud Ahmadinejad, or Hugo Chavez. But a cascade of imploding economies around the world is unlikely to have salutary effects on the overall health of the global economy.
(Thanks to The Oil Drum for the links.)
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