Friday, March 21, 2014

US crude oil export ban and Russian sanctions

Soros today suggested that releasing from the SPR would be the best way to sanction Russia, if sanctioning Russia were really what we wanted to do.  But that Putin would likely retaliate, leading to escalating lose-lose scenarios.  But what about just lifting the crude export ban?  That would raise WTI prices, and also drop other worldwide prices, including Russia's, slightly.  That change would be obviously sustainable, something that would hit Putin without having an inherent timer before conditions revert, as releasing from the SPR would do.  Removing the export ban could simply be framed as beneficial to our own interests (which it is) without ever needing to mention that it hurts Russia's.  That would be a great way to avoid escalating tit-for-tat activity, although it precludes Obama from being able to come across as a tough guy to the American people, which is something he badly would like to do since his approval ratings have been falling.

In sum, while lifting the export ban obviously would be a boon for our economy, something which is often lost on government authorities, the added bonus that it would hurt Russia might serve as a catalyst for them doing so.  I'm watching the WTI-Brent spread closely....