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Would This Crazy Plan To Hurt Russia Actually Work?

"Obviously this is a pretty out-there plan, but it almost has that 'so crazy it just might work' kind of feel to it."
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It's hard to find quality journalism out there these days, but sometimes, an interesting thought or opinion can come from the least likely of places.

A piece that was published earlier this week on Jalopnik, the Gawker-owned site covering cars, car culture, and the automotive industry, brought to light an interesting proposal pushed forward by Steve LeVine, the Washington correspondent over at Quartz, a global financial startup by The Atlantic Company.

LeVine, who has a pretty credential-packed resume, gave his two cents about possible options, including limiting Russia's elite's vacation options and putting Ukraine "under the NATO umbrella," but the real headline-grabber was his final plan:

Flood the oil market with our national reserves and watch Russia drown.

Because oil prices are up due to the risk of a supply disruption, Putin has a lot of leverage right now. But, as LeVine points out, economist Philip Verleger shows us that we have the perfect weapon to combat this:

"The tool is the US Strategic Petroleum Reserve, the 700-million-barrel underground cache of crude oil waiting in Texas and Louisiana for a rainy day (see chart below). In an overnight note to clients, Verleger argues that if the US were to ship just 500,000 barrels a day of oil onto the market, it would drive down prices by about $10 a barrel and cost Russia about $40 billion in annual sales. The US could keep doing this for years, he says. “[Russia's] GDP might drop 4%, which would certainly count as a ‘consequence,’” he says. Half would come from lower oil prices and half from gas sales, whose prices Russia indexes to oil."

Saudia Arabia would have to sign off on the strategy and not cut back on production, but there's a chance this could happen. In fact, they've done something like this before:

"In 1985, Saudi Arabia decided to pump a lot more oil and increase its share of global oil sales. As a result, oil prices plunged by more than half, at one point in 1986 reaching $13 a barrel. The primary, unintended victim was the Soviet Union. 'The Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive,' wrote former Russian prime minister Yegor Gaidar. The economy went into a tailspin, as then did the politics, and in 1991, the Soviet Union was no more."

Obviously this is a pretty out-there plan, but it almost has that "so crazy it just might work" kind of feel to it. And there are of course bigger questions that need to be asked.

Is this even our job? Should we go and play Boggle with the international economy just to stick it to Putin? There are lot of ramifications if we decide to knock over that domino.

As, Ra's Al Ghul reminded Bruce Wayne in Batman Begins, economics is now (and always has been) one of the most destructive tools in the old arsenal, and that's because of its wide reach. It is the lifeblood and motivator of almost everything else out there; when the Saudis put an economic chokehold on the Soviet Union back in the 80's, it wasn't exactly a pretty sight for all those involved.

And besides all that, there's probably tons of other fatal flaws with this plan that haven't even begun to be brought up, so have it you wise, hole-poking commenters!