As energy prices rose over the last 4 years, so did Russia’s desire to once again become a major player in world politics.  This time, however, the country could actually afford to do so because the huge amounts of capital the sale of oil and gas provided to its government.  The new found money allowed Russia to start expanding their military once again, and it also provided them a means of purchasing (for lack of better words) it’s way into situations.  Think of it as a pay for play.

Now that energy prices are falling, and the demand for oil and natural gas is low in Europe (and in the world in general at this moment) Russia finds that all may not be as positive as they had previously expected.  In order to counteract the decline in energy and the credit crisis, Russia has devalued their current – the rouble – 9 times.  This has the potential to cause inflation/hyperinflation if energy prices to not improve, not to mention that fact that it also can wipe out the savings of the average Russian citizen.  

Russia is vulnerable simply because their empire is built on natural resources. They have no major industry to speak of, no goods that are produced and consumed on a mass world wide scale, so what is the country to do when their base is threatened?  Use it as a weapon – be it for self-preservation or aggression.

If you take note, Russia is talking about cutting off natural gas supplies to the Ukraine once again.  The last time this took place was in 2006.  Both sides have their own version of what is taking place.  Russia says the Ukraine is expecting unrealistic prices and that they pay off their debt.  The Ukraine says they’ve paid their debts and believes the cost of gas it too high.

I am not saying Russia is in the wrong, just imagine if Russia was acting with purely political interests in mind.  “We don’t like the President you chose, ok, we are shutting off your supply to gas.” or “You didn’t vote in our favor during the last session of the UN, your oil transfers now will come in at 10% of what you were previously getting” all suddenly become possible tools within their power.  

Not a big deal, you may be thinking – wrong.  Russia provides roughly 25% of the EUs natural gas.  If it wanted to make life difficult as an act of aggression or self-preservation, it could do so really quickly.

This is the power Russia truly has.  Unless the EU takes steps to prevent dependence on Russia, they run the risk of being help at Russia mercy. I hope that someone in Europe is paying attention to this…

So, the world markets have no crashed and the world did not end. Markets are actually mixed the day after the “great sell-off”. Also take into account that DOW futures are 145 points in the positive makes one wonder if the market is OK with the current situation.

For those who blame Republican policy – not greed and poor oversight – please explain to me why Europeans are rescuing banks? Dexia, a large Belgian, wouldn’t be getting a $9.2 billion government bailout if this was simply a U.S. / Republican party issue, would it?

Finally, there is still no word on where we go from here….

I wonder what today will bring.

Just a quick reality check.

Iran has the second largest proven natural gas reserve in the world, second to to Russia. Iran also roughly 10 percent of the world’s total proven petroleum reserves and sits on one of the largest oil fields in the world so, when the Iranian government says their nuclear program is of a “Peaceful nature” I am a bit skeptical.

Now Mohamed ElBaradei, head of the the UN’s International Atomic Energy Agency, has “serious concern” and stated:

Iran needs to give the agency substantive information to clear up suspicions…We need, however, to make use of all relevant information to be able to confirm that no no nuclear material is being used for nuclear weapons purposes”

I have no issues with the Iranian people, I simply have a great deal of skepticism of government (Iranian or otherwise) at this point. Furthermore, the U.N. has proven itself to be a lame duck organization, unable to govern itself out of a paper bag, which only raises my doubts even more.

At this point the E.U. needs to wake up and look at what is in their back yard. The only way Iran will disclose their activities is from financial pressure from Europe.

UPDATE:

Here is an interesting WSJ Opinion write up by Richard Holbrooke, James Woolsey, Dennis Ross and Mark Wallace – a good bi-partisan group of highly qualified individuals. The article can be summed up by this paragraph:

Tehran claims that it is enriching uranium only for peaceful energy uses. These claims exceed the boundaries of credibility and science. Iran’s enrichment program is far larger than reasonably necessary for an energy program. In past inspections of Iranian nuclear sites, U.N. inspectors found rare elements that only have utility in nuclear weapons and not in a peaceful nuclear energy program. Iran’s persistent rejection of offers from outside energy suppliers or private bidders to supply it with nuclear fuel suggests it has a motive other than energy in developing its nuclear program. Tehran’s continual refusal to answer questions from the International Atomic Energy Agency (IAEA) about this troublesome part of its nuclear program suggests that it has something to hide.