Friday, May 9, 2008

Price of oil jumps, Putin grins

The WSJ has a front page story today about the recent authentication of documents implicating Venezuela directly in arm shipments to the Colombian rebel group FARC:

These documents indicate Venezuela appears to be making concrete offers to help arm the rebels, possibly with rocket-propelled grenades and ground-to-air missiles. The files suggest that Venezuela offered the FARC the use of one of its ports to receive arms shipments, and that Venezuela raised the prospect of drawing up a joint security plan with the FARC and sought basic training in guerrilla-warfare techniques.

In the second paragraph, the WSJ says that the revelation is likely to "is likely to ratchet up pressure for the U.S. to impose sanctions on one of its most important oil suppliers." Sure enough, oil traders have responded and prices have risen to a new high of $126 a barrel.

And how exactly was Venezuela going to get those arms to sell to FARC rebels? The same place all dictators get their weapons – Mother Russia:

At the meeting with Gen. Carvajal, another Venezuelan general is described as offering the port of Maracaibo to facilitate arms shipments to the guerrillas. The general suggests piggybacking on shipments from Russia -- from which Venezuela itself is buying everything from Kalashnikovs to jet fighters -- to "include some containers destined to the FARC" with various arms for the guerrillas' own use.

A spokesman at the Russian embassy in Washington declined to comment.

The Russian government can't have been blind to the fact they were doing something that would potentially destabilize an ally with vast energy resources. Energy politics are crucial to the survival of Putin's regime, and a higher price for oil because of conflict (or simply the possibility of conflict) in Venezuela means a higher price for natural gas (see: substitute good), of which Russia is the world's largest producer. This strategy of aiding rogue states in doing unpalatable things is also seen in Iran, to whom Russia has sold nuclear reactors which have provoked the ire of many American foreign policy mavens. Seeing as how Iran is one of the world's largest energy producers, the threat of military action against the regime has been a force in the recent upward climb in the prices of oil and natural gas.

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