Just weeks after the US announced its first test sale of crude oil from strategic reserves since 1990, billionaire philanthropist George Soros is lobbying for the release of more reserves on the market to punish Russian President Vladimir Putin.
On 12 March, the US said it would dip into its emergency stockpile to release 5 million barrels onto the market, causing oil prices to drop to their lowest in a month, and this week, Soros has gone public with his proposal to release more as a way to hit back at Moscow for its annexation of Ukraine’s Crimean Peninsula.
Speaking at a panel in Berlin on 20 March, Soros said that the United States had the power to pressure Putin most effectively by selling oil reserves to depress prices.
“The Russian economy is very weak because the oligarchs who run the country don’t trust it and they send their money abroad,” Soros said. “So if you stop the inflow of funds, that will bring the Russian economy to its knees.”
The logic behind the proposal is based on the fact that Russia’s economic success over the past decade and more has largely been attributed to high oil and commodity prices. So, if oil prices fall, with help from a release of US strategic reserves, Russia could end up heavily exposed.
Speaking with Bloomberg news agency, Philip Verleger, a consultant who worked in the Ford and Carter administrations, suggested that Washington could push down global oil prices by as much as $12 a barrel by selling 500,000 barrels a day from the strategic reserve. This, he indicated, could cost Russia around $40 billion in lost sales.
Ukraine energy expert Robert Bensh agreed, telling Oilprice.com earlier this month that oil prices were Russia’s “Achilles Heel”.
The plan, however, would depend on cooperation from OPEC. Analysts have pointed out that the plan will require compliance from other major producers such as Saudi Arabia, Venezuela and Iran—who are also dependent on oil prices. If they were to counter the US move, it would have zero effect.
Some lawmakers are on board, but there are no indications that Washington would be willing to adopt this policy at this time.
“America can and should be an energy superpower,” Senator Mary Landrieu, chairman of the Energy and Natural Resources Committee, said this week at her first hearing as head of the panel, according to a Bloomberg report. “The last thing Putin and his cronies want is competition from the United States of America in the energy race.”
US Energy Secretary Ernest Moniz is not on board, and has denied any connection between Russia’s move on the Crimea and the 12 March announcement of the strategic crude test sale.
According to the US Department of Energy, US strategic reserves equal 696 million barrels stored in underground salt caverns in Texas and Louisiana since 1975. In 2011, amid unrest in Libya, the US drew 30 million barrels from the reserve.