Time to use an economic warfare strategy against Putin

After his dinner with King Abdullah in Saudi Arabia last Friday, President Obama took a phone call from Vladimir Putin.  Fresh off of his successful seizure of Crimea, the Russian ruler wanted to discuss Iran, Syria and other security issues.

Perhaps he felt that the timing was rather fortuitous.

Leverage and lucre from oil and gas enabled Putin to dismember Ukraine with impunity and is empowering the Russian leader's moves to militarily subjugate that country and other former Soviet satellites.  And if Putin succeeds in his scheme to create a Russia-allied Shia Axis, encompassing fellow major oil producers Iran, Syria and Iraq, he will become even more pernicious.


Obama’s economic sanctions against Russia are laughably lame – and he seems unlikely to push-back against Putin by bolstering the defenses of former Eastern Bloc nations or deploying anti-missile systems in the Czech Republic and Poland.

More On This...

The one efficacious alternative is an economic warfare strategy based on energy.

For all of President Putin’s strutting, he’s acutely aware that $100 per barrel oil is the only thing standing between Russia and a Brezhnev era-like economic stagnation that would imperil his grip on power.

So, what Obama should have told President Putin in Friday’s call is that if he doesn’t stand-down in Ukraine, stop aiding Syria’s Assad and cease undermining our efforts to prevent Iran from developing nuclear weapons, America will catalyze the collapse of world oil prices.

And the president should have used his dinner with Abdullah to enlist Saudi cooperation in this forceful economic warfare strategy.  After all, Abdullah requested the meeting with President Obama to express his alarm about our softened stance toward Iran and unwillingness to arm anti-Assad rebels in Syria.

Iran, already in a depression, would be even less capable of enduring a significant drop in oil prices than Russia.  Thus, helping the U.S. sink world oil prices would be the best way for the Saudi monarch to both de-nuclearize Iran and neutralize Iran and Russia, Assad’s indispensable backers.

The Saudis have another compelling reason to collaborate with us. Given the tumult in its backyard, Saudi Arabia needs U.S. weapons and military support more than ever. With its low cost of production and sparse population, the Saudis can absorb lower oil prices with relative ease.

And, this economic warfare strategy must also incorporate China. That nation has repeatedly aligned with Russia against us on the international front, provided ongoing aid to our enemies and pursued policies that debase our economy.

Therefore, in addition to inducing the Saudis to maximize oil output, President Obama should immediately take the following five synchronized steps:

1. Authorize a massive release of oil from the U.S. Strategic Petroleum Reserve (SPR) and push for a commensurate release from the International Energy Agency (IEA) reserves.

To President Obama’s credit, he authorized a “test release” of five million barrels from the SPR on March 14.  Oil analysts credit that action with a $2 retreat in world oil prices.  The U.S. and IEA together could release seven million barrels of oil per day for several months – representing almost half of the combined Russian and Iranian production.  That would drastically impact world markets.

With the dramatic increase in North American oil production, our ability to replace a significant amount of oil with other fuels and the Saudis on our side, the risk of an oil supply shock is significantly less than when the SPR was created in the ‘70s.

Allowing President Putin to continue his bellicosity and Iran to develop nuclear weapons is far more ominous for U.S. national security and global stability.

2. Launch a real “All of the Above” American energy policy.

President Obama can use the pretext of global crises and weak U.S. job growth to sideline his party’s environmental extremists.  Using his “pen and phone," he should fast-track the Keystone XL pipeline, jumpstart oil and gas production offshore and on federal lands, freeze all EPA anti-fracking regulations and incentivize utilities to rapidly bring more natural gas electric power plants online.

Ohio State University has developed an exciting clean coal technology which, unlike “carbon capture,” actually works.  The research was jointly funded by the government and the private sector.  President Obama should exponentially increase investment to scale this clean coal technology.

The government should also continue aggressively developing renewable energy – but through funding of that kind of basic research, not Solyndra-style crony capitalism.

3. Accelerate approvals for U.S. Liquefied Natural Gas (LNG) export facilities

While ramped-up LNG export infrastructure won’t immediately impact the Ukraine situation, it will substantially degrade Russia’s ability to use energy for extortion in future years.  The U.S. government should also foster deals between our gas producers and European nations that will help them fully exploit their natural gas reserves.

4. Deploy additional military assets in the Straits of Hormuz to forestall any Iranian moves to impede oil tanker traffic.

This new paradigm of all-out American energy production, opportunistic SPR and IEA reserve releases and coordinated Saudi production increases would wring the “fear premium” out of world oil prices.  It could quickly drive down oil futures by $20 per barrel or more.

The radical pro-domestic energy policy shift would be a boon to our oil and gas industry, more than offsetting any ill effects from less artificially-inflated oil prices.

5. Offer China a “carrot and a stick”

President Obama should privately warn China that “due to sustained, deleterious government currency manipulation,” he will seek imposition of a 20% duty on all Chinese imports – unless China stops supporting and selling arms to Iran and Syria, desists from its U.S. intellectual property theft and computer hacking and makes a colossal financial contribution to our clean coal effort.

The carrot for China:  economically beneficial lower oil prices brought about by the new U.S. energy policies and much quicker clean coal commercialization, crucial to ameliorating China’s environmental devastation.

This cohesive economic warfare strategy is an exquisite expression of American “soft power” –potent but not militarily provocative. It would eviscerate the Russian and Iranian economies – potentially resulting in regime change.

It would severely impair Iran’s nuclear weapons program.

It would likely induce Russia and Iran to withdraw support for Syria’s Assad – precipitating his fall from power.

And with Russia, Iran and China no longer empowering its enemies, and fewer petrodollars enriching Islamic terrorists and Iran’s malevolent mullahs, Israel would be significantly stronger.

President Obama, with fervent Republican support, should launch this audacious strategy right now.