Why $40 oil is killing Iraq, Venezuela and others, but not Russia

Why $40 oil is killing Iraq, Venezuela and others, but not Russia

John Lloyd
It’s not the economy, stupid. At least it isn’t where hearts are warmed by the fiercer flame of nationalism, rather than rising living standards.

Oil prices as low as $40 a barrel are separating the oil haves from the oil have-nots. The oil producers happily rode a wave of high oil prices for years, buying popularity with increased state spending while excusing themselves from the hard pounding of legitimate economic reform. The oil-buyers - like India and Egypt - now enjoy prices as low as a third of those they paid as recently as two years ago and can cut fuel subsidies, saving spending or redirecting it to broader social uses.

As a result, most of the oil-producers are now in a troubling position.  Venezuelan President Nicolas Maduro faces parliamentary elections in December with falling popularity and a poll showing Venezuelans will vote for the opposition rather than his Socialist Party by a factor of two to one. Maduro lacks the charismatic populism of his predecessor, Hugo Chavez - a popularity based on the former president’s insistence that the high oil revenues were benefitting the poor (they did) and making the nation great, while sticking it to the Americans.

In Canada, now a major oil producer from Alberta’s tar sands, polls are jumping about nervously, as Conservative Prime Minister Stephen Harper seemed up in April, then down in July. Harper has been in power since 2006, so “regime fatigue” is judged to be a large factor in the public’s ambivalence toward him.

The fall in the price of the commodity that accounts for a quarter of the country’s export revenue and nearly 10 percent of its GDP is not his fault - but it’s happened on his watch. This will only aggravate the fatigue.

Elections are in October; a credible critique of Harper’s economic policy at a time of falling revenues could tip it for the opposition.

Nigerian President Muhammadu Buhari doesn’t have to face an election soon - he just won one. But like other leaders from oil-producing nations, he does have to cope with a price slump in the commodity, which comprises 80 percent of the government’s revenue. It has meant civil servants in most states are owed months of pay, capital projects have been frozen and an already restive and divided country shows more signs of revolt.

The turmoil is felt by countries throughout the Middle East - by those desperately reliant on oil revenue (Iraq, Syria and Libya) and those with vast riches (Saudi Arabia).

And yet the Russian Federation and Scotland buck this trend. Their leaders are the Teflon Kids of the oil slump: Hit by sliding prices but not public scorn.

The ruling party in the state’s regional parliament, the Scottish National Party (SNP), presented an economic program to the Scottish people before last year’s independence referendum (independence was voted down 55-45) promising higher social, infrastructural and education spending.  And, perhaps most critically, better infrastructure based on an oil price above (as it had been) $100 a barrel. This should have doomed them in today’s court of public opinion, in a landscape dominated by cheap oil.

Yet the falling price hasn’t affected the result of either the Scottish or the U.K. parliamentary elections one whit. An independent Scotland would now be in an economic crisis. But the fall in the oil price has had less effect on the economy of the U.K. as a whole than the benefits from cheap oil - a fact that should make Scots relieved they live in the larger state. Yet since the election, and as the price has gone down further, the popularity of the SNP and its leader Nicola Sturgeon has gone up.

A similar phenomenon has occurred in Russia. Rising prices, falling employment, stagnant or reduced wages have had one political result above all others: an outpouring of support, amounting to veneration or even love, for President Vladimir Putin.

What unites Sturgeon and Putin? What makes them exempt from public scorn as oil prices slip and slide? They are ardent nationalists. Neither loses an opportunity to glorify their country.

Putin, in a visit to the Baltic fleet in the port of Baltiysk, depicted his country as again facing hostility from the West, again drawing on its own human reserves to repel the foreigners (it is worth noting that Sturgeon’s predecessor in the SNP, Alex Salmond, is an admirer of “certain aspects” of the Russian president).

Sturgeon is less emphatic than Putin. But her party’s celebration last year, through a reenactment of the 1314 victory of a Scots army over an English one in the Battle of Bannockburn, shows that the SNP’s heart remains deeply anti-English. It keeps alive the popular myths and heroes of centuries’ old triumphs. During the referendum campaign, then Labor leader Ed Miliband was forced to abandon speeches and walkabouts in Edinburgh and Scots Labor leader Jim Murphy was abused into silence in Glasgow. The SNP deplored those actions; but once released and encouraged, nationalism takes increasingly aggressive forms.

Putin and Sturgeon’s popularity is propelled by a force more powerful - at least to date - than the desire for better living standards. Especially in Russia, there is a pride in displaying courage and patriotism in the face of deprivation and aggression, seen as coming largely from the United States. In Scotland, the propaganda is more muted and the English enemy less clearly delineated, but nationalism needs a foe, and the English are it.

There is no question of which nationalism is more dangerous. An independent Scotland would reduce the U.K.’s authority, further weaken the EU and greatly damage the state itself. Russian nationalism on the other hand is a danger, perhaps a disaster, on a global scale, not least because its political success spawns imitators. For example, China, heading into harder times and taking the world with it, has a leader keen on promoting the “Chinese dream” — a stronger, more nationalistically inclined China.

Nationalism hasn’t gone out with the tide: it’s coming in waves.

This article was originally published in Reuters