Russia Burning Through Cash; Rainy Day Funds Running Out As Early As Next Year; When Shove Comes To Push In The Mideast -- October 27, 2015

Back on October 20, 2015, I wrote this "not for prime time" essay:

In response to a reader talking about $30 oil in the near future, I had this reply:

The problem I see is that Russia can't survive on $30 oil, and now getting into a shooting war, they will spend even more money.

Maybe a year of stability ($30 oil) but once Russia has eradicated those fighting Assad, Putin can look at the bigger picture: Russia/Iran/Syria vs Saudi Arabia.

It might take awhile, but I have trouble believing Putin is in as deep as he is in Syria just because he "likes" Assad. As someone else said, Obama handed Putin the "key to the Mideast" and I think Putin will take advantage of that -- Pan-Shia Persia (90-95% of Iranians are Shi'a and 5-10% are Sunni [Wiki]).

Persia is chomping at the bit to be the Mideast leader once again. Putin is chomping at the bit to be the "Lawrence of Arabia Putin of Persia" and/or Alexander the Great. There's probably already a Hollywood writer fleshing out the movie script.

I had no plans to post that (which I wrote last night) but then this story popped up this morning:

Saudi Arabia's foreign minister on Monday urged Iran to stop "meddling" in the affairs of the kingdom's neighbours, warning that Riyadh stood ready to confront Tehran's actions. 

Iran openly backs President Bashar al-Assad in the Syrian war and is accused of also being behind rebels who overran large parts of Yemen last year and early this year.

Also, this story was linked/posted a few days ago: Saudi Arabia is waging an oil war with Russia, reported in The Chicago Tribune:

President Vladimir Putin tries to restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack on Russia's traditional stomping ground by supplying lower-priced crude oil to Poland.

At a recent investment forum, Igor Sechin, chief executive of Rosneft, Russia's biggest oil company, complained about the Saudis' entry into the Polish market. "They're dumping actively," he said.

Other Russian oil executives are worried, too. "Isn't this move a first step toward a redivision of Western markets?" Nikolai Rubchenkov, an executive at Tatneft, said at an oil roundtable Thursday. "Shouldn't the government's energy strategy contain some measures to safeguard Russia's interests in its existing Western markets?"

European traders and refiners confirm that Saudi Arabia has been offering its oil at significant discounts, making it more attractive than Russian crude. And, even though most eastern European refineries are now technologically dependent on the Russian crude mix, Russia's oilmen are right to be worried.

It may be getting more urgent for Russia every day. Being reported today:

Russia says it's likely to deplete one of its two rainy day funds by the end of next year as tries to plug the state deficit amid the economic downturn.

The economy, battered by low energy prices and Western sanctions, entered recession this year for the first time since 2009.

Finance Minister Anton Siluanov told the parliament Tuesday that the Reserve Fund, which holds 4.7 trillion rubles ($74 billion), is likely to halve by the end of the year with oil prices as low as they are — and be depleted by the end of 2016.

The other fund, now at 4.9 trillion rubles ($75 billion), is largely used to support infrastructure projects.

The Russian economy is forecast to contract by 3.9 percent this year and grow by 0.7 percent next year.

Russians are used to austerity. But the risk is that this becomes more about "existence" than "austerity" for Putin. And that's why I re-posted the "not ready for prime time" comments above.

We're getting closer and closer to asking which countries default first?