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Oil drop ends crude swagger

As prices rose to $147 a barrel, nations such as Iran, Russia and Venezuela had revenue to back their ambitious policies, and bluster. But the dip to $70 may put a dent in plans. Keeping an air of confidence

October 20, 2008|Megan K. Stack | Times Staff Writer

MOSCOW — Few people like to say it out loud, but Vladimir Putin has been a very lucky leader.

It took the recent slump in oil prices to reveal the underlying fragility of his Russia, which recently sent troops into Georgia with an air of invincibility.

At the time, oil prices were shattering records and seemed almost certain to stay high. Russian economists dismissed the possibility of a serious price slump as a doomsday scenario.

In 2000, Putin's first year as president, oil peaked at $35 a barrel. This year, it was $147. He presided over a dizzying comeback, steering Russia from a bankrupt and demoralized post-Soviet state to a wealthy, haughty powerhouse.

When oil dipped below $70 a barrel last week, Moscow tensed. That figure has been a sort of budgetary red line.

Oil is since back above $70, and officials seem determined to project an air of confidence.

But amid layoffs, a credit freeze and stocks more than 70% down from May, the government is being forced to spend heavily to keep the economy afloat. It has pledged more than $200 billion in bailouts, and over the weekend it unveiled an additional package to prop up the "real economy": construction, the defense industry, manufacturing, agriculture and small businesses.

But just last week, Putin's successor, Dmitry Medvedev, contended that the financial crisis reveals the need for a multipolar world order -- echoing Putin's arguments that the U.S. is not equipped to be a global superpower.

But if oil prices stay low, Russia could taste a new wave of vulnerability.


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