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Crude Oil 8

The first oil crises took similar course to the modern times banking crisis. At first, there is panic but after public opinion has calmed down everything goes on as usual. In 1972, one considered raising the price of one barrel (159 litres) to 3 to 4 dollars in order to dampen the growing demand and to make the search for new sources affordable, but these ideas were gaining ground only very slowly.

The friendship between Saudi Arabia and the United States, which was at war with Vietnam, worked so well that supplies continued to flow in undiminished despite the embargo. The USSR wages war in Afghanistan. A republican Ronald Reagan becomes the president and the world is in danger of becoming a powder keg. The Europeans are looking for alternatives to secure their energy supplies.

It is the time of the first natural gas pipeline from Siberia to Western Europe, which will later become the cause of so much trouble with Ukraine for the Russians. There is more convergence and avoidance of sanctions, even though the Soviet Union has just (1981) procured martial war in Poland, introduced to prevent liberalisation achieved by the Solidarity trade union. Americans are having a hard time to convert Europe to a tougher approach.

However, German politics also experiences a certain turning point. While the Chancellor Willy Brandt sought for the reconciliation with the East and relief to the people, his successor Schmidt is substantially involved in the plan of the deployment of Pershing-II-missiles against the Soviet SS-20. Up to a million people take to the streets to protest against it.

Probably, what ultimately brings about the downfall of the dilapidated system, again has to do with oil. The USA has realised that the USSR has been living for a long time now almost exclusively of loans. Considering the cost of their war in Afghanistan and rearmament, and despite the oil and gas revenues, the Russians have been living beyond their means. The United States decides to arrange for a reduction in crude oil prices.

Once again it is the U.S. - Saudi Arabia axis that obviously brings the breakthrough. More oil flows on the market, the price decreases and therefore the revenue of the USSR disappears in a flash. Mikhail Gorbachov changes the politics of his country, starting from 1985. The mighty empire of the USSR melts down to the core of Russia. The economic difficulties have defeated communism. 05/18

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