Oil prices changing the face of global geopolitics

Iran: Falling Oil Prices Spur Peace Dividend

Some have speculated that the oil price crash was orchestrated by the Saudis, possibly in collusion with the United States and other Gulf states, to punish Iran, its main political and religious rival in the Middle East.

Whether or not that is true, there is no denying the effects of a low oil price on Iran's economy. "Iran is already missing tens of billions of dollars in oil revenue due to Western sanctions and years of economic mismanagement under former President Mahmoud Ahmadinejad," Bloomberg reported on Jan. 7. Like Russia, Iran is looking at spending cuts in next year's budget, which is based on an overly-optimistic $72 a barrel crude oil price.

However, unlike Russia, which is "circling the wagons" and pulling further away from the West currently, the oil price drop could actually lead to more of a détente between Iran and Western countries. In a speech on Jan. 4, President Hassan Rouhani said Iran's economy "cannot develop in isolation from the rest of the world," while at the same time, Iran's foreign minister was negotiating a nuclear deal that could see the lifting of UN sanctions, the Washington Post observed.

Then there is the cooperation between the West and Iran over the terrorist group ISIS. The National Post's J.L. Granatsein wrote in a column on Tuesday that Iran has deployed substantial numbers of its Revolutionary Guard elite Al Qods brigade into Iraq and Syria to fight ISIS, along with Western allies including the US, Britain, France and Canada. This is despite Iran's support for Hezbollah in Lebanon and Syria's president Assad.

"Politics makes strange bedfellows indeed, but not much can be stranger than this. Led by the Americans, hitherto the Great Satan to the Iranian leaders, the ties between the West and Iran are becoming tighter, each side reacting to the horrors of Islamist fundamentalism throughout the region," Granatsein writes. "The Iranians have been hurt by sanctions, and they are being wracked even more by the falling price of oil. Easing curbs on trade and Iranian banks may mitigate the effects of the oil price collapse."

Venezuela Bracing For The Worst

The other major loser in the oil price collapse, Venezuela, may not see such a positive outcome. Wracked by decades of economic mismanagement by Hugo Chávez, the South American oil producer was already struggling to pay its debts when new president Nicolás Maduro came to power.

Now, with inflation running at 60 percent and lines forming outside state grocery stores for food and other basic supplies, Maduro faces the specter of serious social unrest if conditions do not improve. The country has some of the world's cheapest gasoline prices, but Maduro has refused to end fuel subsidies, fearing, no doubt, a repeat of widespread riots in 1989 that left hundreds dead after gasoline prices were allowed to rise.

Venezuela is even more dependent than Russia on the price of oil, earning some 96 percent of its foreign currency from oil sales, putting Maduro in the untenable position of either borrowing more, despite crushing debts, or slashing spending:

"With only $20 billion left in its reserves, and $50 billion in debt to China alone, Venezuela appears headed toward a choice between abandoning its oil giveaways and defaulting on its debts, or starving its own population to the point of revolt," according to the Washington Post.

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