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| When the price of oil falls to $60 a barrel this man will be on his way out |
US shale gas has already weakened Vladimir Putin's regime, but when the price of oil drops to $60 a barrel - which could well happen in the near future - the former KGB agent will be gone within a year:
There is nothing behind the facade of Vladimir Putin's regime in Russia, says William Browder from Hermitage Capital Management.
"All it will take is a fall in the price of oil to $60 a barrel and Putin will be gone within a year. You'd be surprised how brittle the system really is," he told me at the World Economic Forum in Davos.
The "fiscal break-even price" of oil needed to balance the Russian budget is now $117 a barrel. A protracted slump in crude would force the government to dig deep into its reserve funds, and that in turn would set off further capital flight.
The hedge fund manager – who describes himself as Putin's "enemy number one" – says Russia's $499bn foreign reserves would not prove much a defence in the end. "We saw this in 2008 when everything fell apart in a few months even though Russia had the world's third biggest reserves. It wasn't supposed to happen but it did."
A drop in Brent crude to $60 is not impossible. Both Deutsche Bank and Bank of America have warned of a potential glut in oil this year as sanctions against Iran are phased out and Libya's exports revive. The US is expected to add more than 1m barrels per day (b/d) this year. The Saudis may choose not to stabilise the market by cutting output, deliberately letting crude slide below the marginal cost of production of shale.
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