Low oil prices: recession in Russia, revolt in Venezuela?

Guardian: “The sudden slump in oil prices, which have fallen 15% in the past three months, has sent tremors through the capitals of the world’s great oil powers, many of whom could face testing budget crunches if the tendency persists.”
“….Prices are now well below the level on which many oil exporters have based their budgets.
….Brent has averaged $103 since 2010 – trading mostly between $100 and $120 – so a continued period of $80 oil, or less, would have an impact across the world, and from multiple angles.
….plummeting oil prices will strike a significant blow to Russia’s economy and could send it into a recession, analysts said.
Growing economic troubles could test the Russian business elite’s support for Putin and potentially weaken his popularity, which began skyrocketing after his annexation of Ukraine’s Crimea peninsula and reached an all-time high of 87% in August.
Russia obtains more than half its budget revenue from oil and gas, and its economy is highly sensitive to oil price changes.
The 2014 federal budget was calculated with $93-a-barrel oil prices in mind, while 2015 counted on about $95 a barrel.
….plunging oil prices were responsible at least partly for unseating his two predecessors in the Kremlin, Mikhail Gorbachev and Boris Yeltsin.
….Iranian officials have pointed the finger at Saudi Arabia, saying it has deliberately kept prices low by manipulating Opec sales.
Iran’s oil minister, Bijan Zanganeh, has explicitly blamed Riyadh for the situation. “Some of the biggest producers at Opec should reduce their sales,” he said, in what was widely viewed as a criticism of Saudi Arabia.
….Saudi officials have been signalling that they are prepared to see prices sink to as low as $80 per barrel at least for a year or two – well below the IMF estimate of the country needing a price of $91 to balance its budget.
Analysts suggest one motive of Opec’s largest producer may be to make US shale oil unprofitable
and force a US production cut at a time when the world market seems to be facing years of oversupply.
Even at $100 a barrel, Venezuela was eating into its currency reserves. Experts believe that $80 oil will deepen a fiscal crisis that is already threatening social unrest.
Venezuela relies on oil revenues to pay for imports, everything from car parts to basic foodstuffs, and this supply might be compromised if cash runs dry. Anti-government protests across the country left more than 40 people dead in February.
….The losers are oil producers, which will see growth fall and budget deficits swell. Iran, subject to a crippling western embargo, needs an oil price of more than $140 a barrel to make its budget break even. Anything below $120 a barrel spells trouble for Venezuela and Nigeria. About $105 a barrel is Russia’s cutoff point. At today’s price even Saudi Arabia, the world’s biggest producer, is starting to feel the pinch as it has used a high oil price to fund generous public spending. It needs $93 a barrel to balance the books.
The problems are magnified for many of these countries because high oil prices have stunted the development of other sectors of the economy. In Russia, oil and gas accounts for 70% of exports. The country’s struggling manufacturing sector relies heavily on orders from energy companies.
Falling oil prices are the result of a glut of supply and an easing of demand from a slowing global economy. Saudi Arabia could try to arrest the decline by cutting production, although a similar ploy was notably unsuccessful in the mid-1980s. Despite having youth unemployment of above 30%, Riyadh would probably live with $80 barrel oil prices if it thought it would discourage Vladimir Putin from turning off the taps to the west.
This is where the economics of oil mesh with geopolitics. One theory is that lower oil prices will force Russia to adopt a softer line over Ukraine, and Iran to come to terms over its nuclear programme. But a sharp dose of economic pain in countries that are highly volatile could have the opposite effect.”