“Putin changed when I was president. Early on, Russia was broke and he wanted help, and I thought he was going to promote a civil society that enabled people to have a big say in their government. When the price of oil went up, Putin began to change.”
Those are the words of George W. Bush. They’re from a 2017 interview with American Way magazine. The sad thing for Bush, Republicans and Democrats, and the foreign policy establishment more broadly, is that none have been able to put two-and-two together about the why behind the evolution of Vladimir Putin from paper strongman in control of a broke nation, to territorial aggressor positioned to ignore the warnings of the West.
It’s sad because the answer to the change Bush and others have witnessed in Putin is the proverbial elephant in the room, and a noisy one at that. To see why, consider what the price of oil was when Bush entered the White House. It was $24.67. This is important because the former oilman in Bush was hardly anti-fossil fuel, or anti-oil extraction, yet the price of a barrel skyrocketed while he was in office. By 2008 it regularly traded over $100 barrel.
So what happened? The answer is quite simple. The dollar happened. Its value fell substantially. If anyone doubts this, consider the price of the commodity that is gold; gold the metal most often used as an objective measure of value. While gold traded at roughly $266/ounce when Bush entered office, by the time he exited to private life the spot price of the yellow metal had quadrupled.
In short, Bush didn’t wage a concerted “war on energy,” but his Administration’s war on the dollar was the equivalent of just that. With the dollar earned by every American in freefall, commodities priced in dollars soared during the Bush years. This included the oil price.
All of which brings us back to Putin. Strongman in a country rich in commodities, Bush’s decision to run away from the Ronald Reagan/Bill Clinton era of stable dollar policy was manna from heaven for Putin. Though Russia was reduced to beggar status by a strong dollar in the 1980s, 1990s and early 2000s, very quickly Bush and his Treasury Department rescued Russia, and by extension, Putin. He came to power in 2000. His timing was near perfect. As the dollar declined, the price of oil predictably rose.
Bush lamented Putin’s evolving countenance for the worse, but couldn’t see that the change was a direct consequence of a weak-dollar policy hatched in his own White House and U.S. Treasury. A look in the mirror nearly twenty years ago could have saved Bush so much grief, and the world so much ongoing aggression from a despot wholly reliant on nominally expensive oil.
About all this, let’s please look at modern oil-price history to connect the dots. In the 1960s, the price of a barrel was flat at $1.80. See the chart embedded if you doubt this basic truth. Yet in the 1970s crude soared, only for it to collapse in the ‘80s and ‘90s, followed by a monumental leap upwards in the 2000s and beyond. Coincidence? A random price walk? No and no.
The answer to the alleged oil-price mystery is dollar policy. In the 1960s the dollar was still defined as 1/35th of a gold ounce. And with the dollar stable, so was the price of oil largely uniform, and uniformly cheap.
All that changed in the 1970s with President Nixon’s decision to sever the dollar’s link to gold. The latter was an implicit devaluation. That oil spiked in the decade that followed wasn’t a “shock” as much as it was a statement of the obvious. Money is a measure, or a “ruler” if you prefer. Shrink the ruler or the measure, and you’re going to increase the length or cost in the commodity being measured. Policy favored a shrunken dollar in the 1970s, and the soaring oil price reflected this policy.
Thankfully dollar policy changed with Reagan in the 1980s, only for the price of crude to predictably fall. The dollar’s decline was arrested and reversed, and oil once again reflected the policy. Lefty historian Richard Reeves long ago quipped that Clinton’s presidency was Reagan’s third term, and in terms of dollar policy, Clinton arguably exceeded Reagan. A strong dollar meant nominally cheap oil. In Bush’s case, he inherited a sound dollar and oil in the $25 range. A major side benefit of Bush’s inheritance was Putin was on the ropes. See above.
Oh well, Bush once again saved Putin from a dollar that was crushing frequently corrupt commodity-rich countries. In another words, what shrunk Putin to supplicant status was a dollar that had sound, rather stable qualities.
Looked at through the prism of the present, presidents get the dollar they want. Repeat the latter over and over again. President Biden could crush Putin’s aggressions rather quickly by taking a page from the Reagan and Clinton policy playbook of the ‘80s and ‘90s. Pursuing a strong, stable dollar would powerfully push down oil prices that would severely weaken Putin, and bring cheer to a U.S. electorate presently angry about nosebleed gasoline prices that were a non-factor in the ‘80s and ‘90s.
The answer to Putin and expensive gasoline is “hidden” in plain sight. Will the U.S. political class finally wake up to this truth?
