Delegates to the latest round of talks by the OPEC oil cartel regularly visit Vienna to discuss setting price levels and production quotas for its twelve member countries – but they are likely to have missed the geopolitical implications of their decision to keep levels unchanged.
It's been 100 years since the assassination of Archduke Franz Ferdinand, heir to the imperial throne of the Austro-Hungarian empire in Sarajevo, which triggered an unfortunate series of events that led to the first of two devastating wars in the 20th century.
The plan behind the assassination, carried out by Serbian nationalists, was to break away the South-Slav provinces of Austria into a greater Yugoslavia.
Otto von Bismarck, the great statesman who united Germany in 1871, said towards the end of his life that "One day, the great European War will come out of some damned foolish thing in the Balkans." He was right.
A generation later, after millions of deaths, another Austrian led the united Germany and Austria into the second Great World War, leaving even more millions dead.
Pundits have suggested Hitler's rejection from an art school in Vienna might have indirectly contributed to his rise as a leader, although the punishing sanctions and reparations against Germany may have had something to do with it.
And this month in Vienna, nearly 70 years after the end of that war, Austria was again the backdrop for a decision which may in time lead to the next great European war, one which is already simmering in Ukraine and occupied Crimea.
Oil prices plummet
OPEC, the largely middle-East oil cartel made the decision last week to maintain its oil production at current levels. On the surface, this seems like an innocuous bureaucratic action, but certain factors suggest otherwise.
The current conflict in Ukraine, in which a civil war is apparently being fueled by 'holidaying' soldiers from Russia, is stirring nationalistic feelings across greater Europe, and especially in the former Soviet Union.
Most of the OPEC members who left the table were unhappy with the result. Maintaining the current production level among OPEC members of 30 million barrels per day, coupled with the increasing shale-oil production originating from the US, as well as falling demand means that oil prices are plummeting.
OPEC’s ultimately misguided attempts to take back control of the market are doomed to failure, as the US sees a clear strategic aim in collapsing prices.
Possibly in consultation with its close ally Saudi Arabia, which also benefits indirectly from soft prices, the US is essentially using the global oil price as a stick to beat Russia, as punishment for its engagement in the Ukrainian adventure, likely hoping to curtail President Putin’s return to an imperialist mindset.
Venezuela, Nigeria and Russia will most likely be hardest hit, as the price of oil, which has dropped more than 30 percent since June, is well below the sustainable break-even point for each country, with Russia needing $107 per barrel to maintain a balanced budget moving into 2015.
Sanctions begin to bite
The announcement this week that Putin sees no future in the planned Southern Stream pipeline, which would bring Russian gas to central and western Europe via a route that bypasses troubled Ukraine, is a clear sign that Russia is being confronted on several levels.
With Russia’s economy flagging in the face of tough European and US economic sanctions, and having burned through billions of currency reserves trying to prop up its collapsing currency, many western states see this as an appropriate response to put pressure on Putin to curb his Ukrainian adventurism, and thereby hope to bring peace to a newly troubled Europe.
In my view, this is a mistake, and a dangerous miscalculation.
Placing the Russian bear into such a trap, where a beleaguered Putin is cornered by oligarchs concerned at the loss of their wealth, and a deeply dissatisfied populace fed up with a collapsing economy, is a strategy doomed to fail.
Nationalism will trump economics, as Russia will place the blame for its flagging economy on the oil war which is winding up the economic tension. Echoes of the reparations against a post-World-War-I Germany will be heard as the drum beat of increasing sanctions against a more belligerent Russia is heard across Europe.
As a master of judo, Putin knows how to use the strength of his adversaries against themselves. Without knowing the specifics, it is apparent to many that Russia’s response to this apparent Western aggression will not be as European bureaucrats and President Obama’s inept foreign policy pundits are hoping.
Eventually, this action may lead to a series of escalations, and possibly provocations – as we see daily tests of European defenses by Russian military aircraft – which could lead inexorably into a third great European War.
If Bismarck was alive today, he may well chide OPEC for performing this century’s “damned foolish thing” – with Austria once again in the eye of the storm.
The opinions of the author do not necessarily reflect those of The Local.