NP - Krugman: Petrothoughts (Via Kevin Drom)

[David Morris]

Yes. My typo.

But more likely than WWIII is the second fall of this Neo-Wannabe-Empire:

http://www.motherjones.com/kevin-drum/2014/12/it-may-not-be-1989-russia-it-sure-looks-close-cousin

Why did the Soviet Union lose control of its satellite states behind the
Iron Curtain in 1989? Lots of reasons, but the proximate cause was a
disastrous war in Afghanistan; plummeting oil prices; and a resulting
economic crisis. Here is Yegor Gaidar:
<http://www.aei.org/feature/the-soviet-collapse/>

The timeline of the collapse of the Soviet Union can be traced to September
13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of
Saudi Arabia, declared that the monarchy had decided to alter its oil
policy radically. The Saudis stopped protecting oil prices, and Saudi
Arabia quickly regained itsshare in the world market. During the next six
months, oil production in Saudi Arabia increased fourfold, *while oil
prices collapsed by approximately the same amount in real terms.* As a
result, the Soviet Union lost approximately $20 billion per year, money
without which the country simply could not survive.

The Soviet leadership was confronted with a difficult decision on how to
adjust....Instead of implementing actual reforms, the Soviet Union started
to borrow money from abroad while its international credit rating was still
strong. *It borrowed heavily from 1985 to 1988, but in 1989 the Soviet
economy stalled completely. The money was suddenly gone.* The Soviet Union
tried to create a consortium of 300 banks to provide a large loan for the
Soviet Union in 1989, but was informed that only five of them would
participate and, as a result, the loan would be twenty times smaller than
needed.

The Soviet Union then received a final warning from the Deutsche Bank and
from its international partners that the funds would never come from
commercial sources. Instead, if the Soviet Union urgently needed the money,
it would have to start negotiations directly with Western governments about
so-called politically motivated credits. *In 1985 the idea that the Soviet
Union would begin bargaining for money in exchange for political
concessions would have sounded absolutely preposterous to the Soviet
leadership. In 1989 it became a reality, and Gorbachev understood the need
for at least $100 billion from the West to prop up the oil-dependent Soviet
economy.*

....Government-to-government loans were bound to come with a number of
rigid conditions. For instance, if the Soviet military crushed Solidarity
Party demonstrations in Warsaw, the Soviet Union would not have received
the desperately needed $100 billion from the West....The only option left
for the Soviet elites was to begin immediate negotiations about the
conditions of surrender. Gorbachev did not have to inform President George
H. W. Bush at the Malta Summit in 1989 that the threat of force to support
the communist regimes in Eastern Europe would not be employed. This was
already evident at the time. Six weeks after the talks, no communist regime
in Eastern Europe remained.

This sounds awfully familiar, doesn't it? War, sanctions, an oil crash, and
finally bankruptcy. And while history may not repeat itself, it sure does
rhyme sometimes: 25 years later Vladimir Putin has managed to back himself
into a situation surprisingly similar to the one that led to the end of the
Soviet Union and the final victory of the West—the very event that's
motivated almost everything he's done over the past few years. This is
either ironic or chilling, depending on your perspective.

On Tue, Dec 16, 2014 at 2:42 PM, Thomas Eckhardt <
thomas.eckhardt at uni-bonn.de> wrote:
>
>  David Morris wrote:
>
> > It is amazing how consistently you seem to endorse Russia's invasion of
> the Ukraine. Opposing that move is hardly the opposite of "reproachment."
>
> The word the author of the article you quoted from used was
> "rapprochement":
>
> "A Russian crash may or may not come, but it's hardly out of the realm of
> possibility. And if it happens, even a modest rapprochement between East
> and West could help avoid a disastrous outcome."
>
> What he is saying is that it might just make sense to de-escalate and have
> some talks before starting WW III. Sounds sensible to me.
>
> Resolution 758 however -- which is full of lies, unproven allegations
> (MH-17, anyone?) and deliberate distortions of the truth -- amounts to a
> declaration of war. Blaming Russia for everything and providing lethal
> weapons etc. to the Ukrainian government *is* the opposite of
> rapprochement. That was my point.
>
> I am not endorsing Russian support for the rebels  but I can understand
> the motives behind it. Russia reacts to what it perceives as an existential
> threat.
>
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