If oil prices were to drop the important geopolitical impact would be on Russia

If shale oil, shale gas and synthetic biofuels were to rapidly scale and significantly lower the price of oil this would have interesting geopolitical impacts on Russia. The Iran, Saudi Arabia impacts would also be interesting but a weaker Russian economy would matter more for geopolitics. 20-25% of Russia’s GDP is tied to the oil and gas sector.

The importance of oil exports and hydrocarbon exports in general to the Russian economy arises along several channels. Income from crude has accounted for a significant share of Russian export revenues increasing from 25 per cent in 2000 to more than 35 per cent in 2008. Total hydrocarbon exports (inclusive natural gas and petrochemicals) accounted for 65 per cent of total export revenues in 2008. Fjærtoft (2008) found evidence that the price of crude is a key driving force behind Russia’s trade flow driven exchange rate. This finding is supported in the present paper. Hydrocarbon exports generated 50 per cent of federal budget revenues in 2008 (EEG 2009) and the governments scope of manoeuvre is directly linked to the price of crude. On a larger scale the oil and gas sector is estimated to account for 20–25 per cent of GDP (Anker and Sonnerby 2008). The oil and gas sector also accounts for an important share of investment demand (World Bank 2008).

IEA oil projection to 2035 was for $125/barrel in real terms

Global oil demand grows by 7 mb/d to 2020 and exceeds 99 mb/d in 2035, by which time oil prices reach $125/barrel in real terms (over $215/barrel in nominal terms). A surge in unconventional and deepwater oil boosts non-OPEC supply over the current decade, but the world relies increasingly on OPEC after 2020. Iraq accounts for 45% of the growth in global oil production to 2035 and becomes the second-largest global oil exporter, overtaking Russia.

Oil demand was projected to increase by 14 percent between now and 2035.

Weaker economy and weak demographics could result in a loss of chunks of Siberia to China

Russia’s greatest geopolitical fear is fed by a very plausible scenario — China, populous and resource-hungry, taking over large chunks of Siberia, part of Russia’s failing and emptying East. Hundreds of thousands of Chinese have already crossed the border at the Amur River and set up trading settlements, intermarrying with Russians and Siberia’s native nomadic minorities. Russia has a nuclear arsenal with which to fend off formal threats to its sovereignty, but the demographic imbalance is to Russia’s disadvantage and could accelerate the economic shift in China’s favor. Russia’s far eastern outpost of Vladivostok is ever more distant from Moscow. Will it become a Russian enclave in a re-Sinofied “Outer Manchuria,” like Kaliningrad, 5,000 miles away on the Baltic Sea, a Soviet fragment stranded inside the European Union?

Prior to 1858, Primorye was part of the Qing Empire and known as Outer Manchuria

Primorye is a federal subject of Russia (a krai). Primorsky means “maritime” in Russian, hence the region is sometimes referred to as Maritime Province or Maritime Territory. Its administrative center is in the city of Vladivostok. The region’s population is 1,956,497.

In 1858, Nikolay Muravyov-Amursky signed the Aigun Treaty with China, followed by the Beijing Treaty two years later. As a result of the two treaties the Sino-Russian border shifted south to the Amur and Ussuri Rivers; granting Russia full control of Primorye.

Primorskaya Oblast was established as the easternmost division of the Russian Empire in 1856. It included the territory of modern Primorsky Krai as well as the territories of modern Khabarovsk Krai and Magadan Oblast, stretching from Vladivostok to the Chukchi Peninsula in the far north.

The text of the treaty where Russia got control of Primorye. These were part of the same set of treaties where China was forced to lease out Hong Kong to the UK. China had Hong Kong returned in 1997.

Outer Manchuria is regarded by some Manchu, and for that matter Han Chinese, as territory that was unfairly taken away. However, outstanding boundary issues between China and Russia have been officially settled. Article 6 of the 2001 Sino-Russian Treaty of Friendship provides that the contracting parties, the People’s Republic of China and the Russian Federation, have no territorial claims.

As the Republic of China now based in Taiwan has never recognized the People’s Republic of China or its border treaties with other countries, some Chinese maps published in Taiwan still consider the entire Heixiazi Island and the Sixty-Four Villages East of the Heilongjiang River to be Chinese territories, although these maps do show Outer Manchuria, sometimes called “lost territories in the Northeast (China)”, to be Russian territory.

Could a vastly weaker Russia lose control of Siberia in some informal way.
Putin’s term as president is to go to 2017. Putin is also getting older.
Other than Putin most Russian leaders have been relatively weak since the 1980s.
Even if formal control of that part of Siberia did not pass to China. Defacto control of those regions and Russia could be achieved through bribery of local officials, economic influence and economic dependence.

* Welcome Instapundit readers

If you liked this article, please give it a quick review on ycombinator or StumbleUpon. Thanks

Subscribe on Google News