We smile when someone who practiced hubris-on-acid gets theirs. Remember Hugo Chávez’ boasting ways ... offering charity to poor Americans or Vladimir Putin’s telling the world that America was over. Hey, there’s always the standby of Mahmoud Ahmadinejad denying the Holocaust and talking about the destruction of the United States and its ally Israel. The “dollar” was “worthless.” Oil was almost $150 a barrel back then; it’s now around $37. How times have changed.
The Russian stock market is in free fall, far worse than anything we’ve seen here – 75% down, and there are protests everywhere at higher import tariffs (a “nice one” in the picture above from the NY Times), burdensome taxes and unpaid wages. Putin’s once iron hand is losing its grip. Mohammad Khatami, former Iranian President and the current challenger to incumbent Ahmadinejad, is trashing the latter’s economic policies.
Venezuela saw student riots in the streets “facing tear-gas reprisals from security forces in protests in Caracas and provincial cities in recent weeks… [Chávez] threw the weight of institutions controlled by his supporters, including the National Assembly and the entire federal bureaucracy, behind [his ultimately successful effort to end term limits to his Presidency]. Petróleos de Venezuela, the powerful national oil company, and CANTV, the national telephone company, were among state entities that mobilized employees to campaign for the measure.” Feb. 16th New York Times. Chávez bought some more time, but reality is sinking in. Democracy has been replaced by populist authoritarianism, but the clock is ticking.
Unemployment in Venezuela, Russia and Iran is incredibly worse than what the West is experiencing. Seething unrest is spilling out into the streets; expect these repressive regimes to respond with less than kindness.
All those foreign currency reserves in this ugly triumvirate are melting, and clearly the revenues that were driven by high oil prices won’t be there any time soon. Strangely, countries like Saudi Arabia actually are better prepared for this steep decline in oil prices – they still have huge currency reserves and they didn’t embark on massive new “power-grabbing” regional agendas that sucked up billions and billions of dollars in anticipation of perpetually expensive oil; unlike Iran, Russia and Venezuela, the Middle Eastern oil nations have even invested in upgrading their existing petroleum industry to make it work better. In short, Russia, Iran and Venezuela are going broke, and foreign investors (hard enough to attract in a good economy) remember how badly their money was treated when these oil-bullies thought they had the upper hand.
The February 23 issue of Newsweek reports exactly how fast these nations are using up their reserves: “Russia has spent nearly a third of its $650 billion in foreign assets defending the ruble over the past couple of months. [Washington-based PFC Energy] estimates that by year's end, Venezuela will have run through 38 percent of the foreign assets it had at the end of 2008, and Iran will have spent some 25 percent. In short: under the current economic conditions, these petro-nations simply can't stay afloat much longer.”
We didn’t do too well when we told the world that they were “either with us or against us.” I think we may have learned that lesson. Apparently, Mssrs. Chávez, Putin and Ahmadinejad didn’t. Let’s see if they do now. Maybe, it’s already too late for them.
I’m Peter Dekom, and I approve this message.
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