03/25/2025

Amidst the latest round of talks between the United States and Russia in Saudi Arabia, Reuters is reporting that the Russian Central Bank is considering scenarios of a prolonged collapse in oil prices. The report specifically highlights that the fall in oil prices since the mid-1980s was one of the key causes of the economic crisis and the collapse of the USSR in 1991.

The Russian Central Bank warns of the risk of a prolonged collapse in oil prices

In a Reuters article, American experts analyze a presentation by the Russian Central Bank on economic risks for the coming years. It is indicated that this analysis was prepared in February 2025, a few weeks before the start of negotiations between Presidents Donald Trump and Vladimir Putin, for a closed event of the Russian economic leadership chaired by Prime Minister Mikhail Mishustin.

Overall, the analysis suggests that the US and OPEC could flood the global market with oil in a relatively short period of time, potentially triggering a repeat of the protracted price collapse of the 1980s that led to the collapse of the Soviet Union. In fact, the Russian economy’s dependence on oil prices is itself considered a significant risk, especially in the context of Russia’s protracted war in Ukraine.

Russia’s economy is almost entirely dependent on energy prices

In general, this dependence is easily traced in the historical example of the USSR and independent Russia after its collapse. It was with the infamous embargo of the Arab countries in 1973 (against the backdrop of another Arab-Israeli war) that the rapid growth of world oil prices began, and the Soviet Union was able to gain a significant share of the markets of Western countries, which led to a fairly successful “period of stagnation” in the history of the USSR and gave the opportunity to continue the arms race with the USA on equal terms.

Instead, the fall in world oil prices in 1985-1986 led to a sharp drop in the USSR’s export revenues and a severe economic crisis, which, together with other factors (the Chernobyl accident, the unsuccessful war in Afghanistan, the separatism of national republics, etc.) led to the collapse of the Soviet Union. With such prices, Russia, which remained the heir to the USSR, continued to exist in a crisis economy in the 1990s. And only a new cycle of oil price growth in the early 2000s allowed the Russian Federation to overcome the economic crisis and return to the revival of militarization and expansion in the post-Soviet space thanks to billions of dollars from oil and gas exports.

In fact, this is what the entire concept of Putin’s resource economy, which is both a strength and a weakness of the modern Russian Federation, was based on. In addition, it is precisely on these super-profits that the Kremlin’s ability not only to start wars (in particular in Ukraine) but also to wage a war of attrition quite steadily is based, surpassing the European Union’s military-industrial complex in some indicators.

Oil prices could be an important element of the Trump administration’s pressure on Russia

Therefore, Russian experts are privately warning the leadership about “a significant increase in oil production in the United States and outside OPEC.”

In addition, it is noted that the spare capacity of OPEC countries is close to a record level and is equal in volume to all Russian crude oil exports. And although the materials cited by Reuters do not specify the probability that the US and OPEC can fill the market with their own oil, such a scenario is quite realistic. This is exactly what the Trump administration discussed as a tool for pressure on Russia shortly after his inauguration as US president, as our publication wrote about at the time.

Not only OPEC countries, but Latin America can fill the market with cheap oil

It can be stated that, as in our previous article on this topic, ️the Reuters article also discusses the possibility of the United States increasing its own oil production, which the current President Trump promised during his election campaign. Given that OPEC may not agree to American conditions for many fundamental reasons, the main increase may be provided by non-OPEC countries, such as Guyana, Brazil, Ecuador and even Kazakhstan. In general, the traditionally high influence of the United States on South America gives grounds for assuming that such a scenario can be implemented in this format.

Therefore, we can conclude that the Russian financial and economic leadership is seriously considering the possibility of a prolonged collapse in oil prices, although it does not explicitly state the level of such probability. Therefore, it can be assumed that this is directly correlated with negotiations between the US and the Russian Federation regarding the end of the war in Ukraine and other issues of bilateral relations.

Understanding the Trump administration’s strategy, we can assume that a blow to oil prices could be one of the most important elements of pressure on Russia, especially on its ability to continue waging a criminal war against Ukraine.

https://www.obozrevatel.com/ukr/novosti-mir/rosiya-mozhe-zitknutis-iz-katastrofichnim-obvalom-tsin-na-naftu-vostanne-tse-prizvelo-do-rozpadu-srsr.htm