Oil DA – HKPZ Lab – Wave Two
***RUSSIA
1nc russia
Russia is in the process of shifting to a non-oil-dependent economy—but they’re still vulnerable to price swings now
CIA 6/15(Central Intelligence Agency, The World Factbook, JUNE 15 2011, ZBurdette)
Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russiawas the world's largest exporter of natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices.The governmentsince 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged 7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. The Central Bank of Russia spent one-third of its $600 billion international reserves, the world's third largest, in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010. However, a severe drought and fires in central Russia reduced agricultural output, prompting a ban on grain exports for part of the year, and slowed growth in other sectors such as manufacturing and retail trade. High oil prices buoyed Russian growth in the first quarter of 2011and could help Russia reduce the budget deficit inherited from the lean years of 2008-09, but inflation and increased government expenditures may limit the positive impact of these revenues. Russia's long-term challenges include a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments.
Russian economic collapse causes global nuclear war
Steven David, January/February 1999;Professor of International Relations and Associate Dean of Academic Affairs at the Johns Hopkins University, FOREIGN AFFAIRS, ,
If internal war does strike Russia, economic deterioration will be a prime cause. From 1989 to the present, the GDP has fallen by 50 percent. In a society where, ten years ago, unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to be much higher. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 a month). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the country's cure-all, but in a land without well-defined property rights or contract law and where subsidies remain a way of life, the prospects for transition to an American-style capitalist economy look remote at best. As the massive devaluation of the ruble and the current political crisis show, Russia's condition is even worse than most analysts feared. If conditions get worse, even the stoic Russian people will soon run out of patience. A future conflict would quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with the Communist Party out of office, what little civilian control remains relies on an exceedingly fragile foundation -- personal friendships between government leaders and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership, increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow ever more dependent on local governments for housing, food, and wages. Draftees serve closer to home, and new laws have increased local control over the armed forces. Were a conflict to emerge between a regional power and Moscow, it is not at all clear which side the military would support. Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does little to keep them together. As the central government finds itself unable to force its will beyond Moscow (if even that far), power devolves to the periphery. With the economy collapsing, republics feel less and less incentive to pay taxes to Moscow when they receive so little in return. Three-quarters of them already have their own constitutions, nearly all of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If these rebellions spread and Moscow responds with force, civil war is likely. Should Russia succumb to internal war, the consequences for the United States and Europe will be severe. A major power like Russia -- even though in decline -- does not suffer civil war quietly or alone. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. Massive flows of refugees would pour into central and western Europe. Armed struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poison the environmentof much of Europe and Asia. Within Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a second civil war might produce another horrific regime.
2nc eurasian stability scenario
Russian growth now is key to EU integration
IRT 9(EU-Russia Industrialists Round Table, 11/18/2009, “Closer EU-Russia economic integration would help to kick-start growth”, ZBurdette)
As the world’s economies are struggling to deal with the effects of the global economic crisis, EU and Russian business perceives little progress in formal EU-Russia economicrelations since the previous summit. However, some notable developments concerning the EU and Russia deserve to be highlighted:
o There has been important alignment in the context of the G20 on general approaches to addressing the economic crisis, including on the part of the EU and Russia.
o Both the EU and Russia have shown resolve to find constructive solutions to the Ukrainian gas crisis.
o Recent transactions in a number of industries signal that economic cooperation continues to deepen despite the crisis.
On the other hand, certain developments cause uncertainty among the EU and Russian business communities:
o Despite the agreement at the recent G20 summits, in particular the commitment to refrain from protectionist measures, a number of measures have been taken that impede imports and exports between the EU and Russia; other decisions seem to make increases in tariff related trade barriers more probable in the future.
o Russia’s accession to the World Trade Organisation (WTO) can be seriously delayed by the formation of a Russia-KazakhstanBelarus customs union, especially if the future customs union’s Common External Tariff includes provisions departing from those agreed at bilateral negotiations between Russia and WTO members.
o Demand in the EU’s gas market, the most important export destination for Russian gas, as well as Russian domestic demand, have dropped significantly.
Against this mixed backdrop, the EU-Russia Industrialists’ Round Table (IRT) makes the following recommendations.
IRT recommendations
Government intervention in the EU and Russia has helped to soften the impact of the global economic crisis. We now need a recovery with sustainable economic growth that will enable business and industry to provide sustainable, high-quality jobs. This requires measures to promote economic modernisation and conditions favouring innovation. A number of opportunities exist and should be grasped jointly by the EU and Russia.
1. Modernisation, WTO Membership and the new EU-Russia agreement
o Deeper economic integration is a key driver of modernisation, innovation and economic growth.IRT’s long-term policy objective therefore remains the creation of an integrated EU Russia economic area, featuring a rules-based framework for mutual trade and investment, fair competition and freedom of cross-border movement for professionals.
o The process of Russia’s WTO accession is the driver for the implementation of rules that will foster the modernisation of the Russian economy.
o An ambitious new EU-Russia Agreement would represent a further step towards deeper economic integration. IRT expects this agreement to improve conditions for mutual trade and investment, and to spur closer cooperation on issues related to business and industrial policy. As the basic rules of the WTO lay down the principles guaranteeing a mutually beneficial trade relationship, they are the only viable basis for a new EU-Russia economic agreement on trade. Without WTO Membership, therefore, all the basic rules would need to be spelled out explicitly in the new agreement. If Russia was a WTO member, on the other hand, the new EU-Russia agreement would take WTO Membership as a basis, simply referring to the WTO commitments binding both parties. In the new context of a customs union being set up, IRT calls upon the political leadership of the EU and Russia to continue active steps towards Russia’s accession to WTO, which would significantly facilitate negotiations on a new agreement and bilateral economic integration in general.
o For IRT, Russian WTO accession therefore remains a priorityas the most promising way to return quickly to economic growth,and achieve progress in the modernisation and transformation to an innovative economy that provides sustainable and high-quality employment.
o Independently from the new EU-Russia agreement, IRT finds it is crucially important for both the EU and Russia to apply the principles agreed at the recent G20 summits, in particular the commitment to refrain from protectionist measures even in the context of the crisis. For example, the ‘excise package’ currently under discussion in the State Duma appears to propose a disproportionate increase of excise duties on the products of an industry characterised by a large proportion of foreign investment, namely the brewery sector. Less favourable conditions for foreign investors operating in the industry could have unwanted effects on the perceived investment climate. IRT suggests that a bilateral expert group should be set up to compile a joint report on the effects on EU-Russia trade of government measures taken during the economic crisis.
European integration is key to prevent war
Asmus ‘6 Ronald Asmus, Executive director of the German Marshall Fund’s Transatlantic Center in Brussels, Rethinking the European Union, Edited by Simon Serfaty, 2006, p. 25
There are four fundamental reasons why the United States has a real and growing interest in the success of the EU and European integration more broadly. The first is simply to sustain peace and stability in Europe. It is often taken for granted that Europe has ceased to be a theater of geopolitical competition and conflict. This is an extraordinary historical accomplishment, for which Americans and European statesmen labored for most of the last century. It is stating the obvious to note that the United States has a core interest in Europe remaining peaceful and secure. Just imagine what the world would be like if washington-in addition to the problems of the broader Middle East and Asia-was also confronted with the prospect of strategic turmoil in Europe. The success of the EU is the best guarantee that Europe remains peaceful, democratic, and secure in the decades ahead.
The impact is a global war
Khalilzad ‘95
Zalmay Khalilzad, Defense Analyst at RAND and Former US Ambassador to Iraq and Afghanistan, Washington Quarterly, Spring, 1995, p. Lexis
With the shifting balance of power among Japan, China, Russia, and potential new regional powers such as India, Indonesia, and a united Korea could come significant risks of preventive or proeruptive war, Similarly, European competition for regional dominance could lead to major wars in Europe orEast Asia. If the United States stayed out of such a war -- an unlikely prospect -- Europe or East Asiacould become dominated by a hostile power. Such a development would threaten U.S. interests. A power that achieved such dominance would seek to exclude the United States from the area and threaten its interests-economic and political -- in the region. Besides, with the domination of Europe or East Asia, such a power might seek global hegemony and the United States would face another global Cold War and the risk of a world war even more catastrophic than the last.
2ncunique internals
Current prices will be high enough to sustain Russian growth – decreases cause economic instability
RIA Novosti 10 (Oct 10, 2010, “Russian economy to show stable growth with oil price above $60 - Kudrin”
The Russian economy will demonstrate stable growth next year if global oil prices stay above $60 per barrel, Finance Minister Alexei Kudrin said on Sunday. According to the Russian government's forecast, the price of Russia'sUrals oil blend is expected to stay at the level of $75 per barrel in 2010 and 2011 and rise to $78 per barrel in 2012 and to $79 per barrel in 2013. The government's projections for Russia's federal budget in the next three years are based on the average annual price of $70 per barrel. According to data of the Russian Finance Ministry, the average price of Urals oil blend was $77.4 per barrel in September 2010 compared with $67.15 per barrel in September 2009.
Oil key to the Russian economy—stock trends prove
Stocker 7/6(Frank, Die Weltm “IS RUSSIA REALLY SUCH A SOLID INVESTMENT?”, ZBurdette)
Even if a few innovative Internet companies have cropped up, like the Mail.ru e-mail service or the Yandex search engine, both of which are listed on the stock market, they are mostly active only in Russia and therefore remain small players. They don’t have what it takes to be an international success story; they couldn’t even begin to compete with companies like Google or Facebook.
Russia‘s stock market will for the foreseeable future remain geared to oil and gas prices. That much is clear from the share prices on the Moscow exchange -- in dollars they follow oil prices almost slavishly. Let me rephrase: make that followed. Over the past few months, they’ve been a little lower than the price of oil. Definitely not a growth story.
High prices now are key to the Russian economy – 40% of GDP
Bornell 2011 – business major (Jason, 4/5, “Russia Benefits from Increase in oil Prices”
Russia is the world’s biggest energy exporter, Russia depends so much on oil and its prices, whereas the prices per barrel is expected to reach at $100 this year, which will totally erase the deficit from Russia’s budget .sooner the prices will reach $27 per barrel which will benefit Russia to great extent by leading to take 90 cents for each dollar. While the slow down of privatization can be a result of main focus of the total emphasis on oil earnings. Until the Japan Nuclear crisis occurred, the energy pendulum was emphasized on nuclear power, but the situation is leading to change the views, and Russia being rich in natural gas resources might benefit largely from the new movement of the present world’s scenario as Oil and Gas pays about 40 percent of Russia’s budget. And Although Russia is profiting to greater extent in terms of rise in oil prices, yet, it faced loss in investment sector, Leonid Grigoriev, who studies Russia’s energy economics at Moscow’s Higher School of Economics. “We have seen it in the Gulf Arab countries. and we saw it in Russia in the last 10 years that as the oil price is rising governments talk about the need for reform and using the money wisely, but as the price goes up too high, the whole process slows down, people become complacent, they become lazy, they live the good life as it were, until the collapse comes,” he said. “And then whole process starts again.”