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Oil prices increasing due to tension around Syria

August 29, 2013, 11:06 UTC+3

For Russia, which is opposed to military aggression against Syria, the current price hikes are an unexpected present

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Oil prices have again soared. On Wednesday, a barrel of oil sold at more than $115, although a week ago, it cost $109, the pro-government newspaper Rossiiskaya Gazeta reported. World market analysts believe that oil prices might go up to $150 per barrel in the near future. Oil prices have increased by 13% since July, the newspaper noted.

"Oil prices have been increasing in the last days only because of the tense situation in the Middle East, in the first place in Syria," the newspaper said. "Once the problem is resolved, oil prices might backtrack to a customary $100 per barrel. Reaching $150 per barrel is only possible in case of a large-scale military operation in the Middle East," the Rossiiskaya Gazeta said.

The Novye Izvestia newspaper noted that "a surge in prices promises the Russian economy billions in dividends."But the oil bubble might burst as easily as it appeared," the newspaper warned. "On top of that, an oil price increase would only mean the strengthening of Russia's status as exporter of raw materials, because investing in processing industries would still be regarded as disadvantageous."

"Oil prices have soared on fears of forthcoming large-scale military operation in Syria which western countries' armed forces are preparing. This explains daily oil price increases of 3% on average. It is the maximum indicator in the past 18 months," the Novye Izvestia noted.

"Traders are worried about the mounting political tension in Syria, as a military operation might disrupt oil supplies from the Middle East. The Syrian war might spread over the entire region.

The conflict in this country actually became a confrontation between two main political forces of the Persian Gulf: Iran and Saudi Arabia," the Novye Izvestia said. "Iran supports President Bashar Asad's regime, while Saudi Arabia backs the Sunni insurgents. The market will face major upheavals if Iran, Bashar Asad's ally, joins the war. Unlike Syria, which produces a relatively small amount of oil, Iran is one of the world's largest oil exporters. "If Iran is bombed after Syria, it will mean the beginning of a large war in the Middle East, which will engulf the main oil producing countries of the region, including Iraq and Saudi Arabia," the newspaper noted.

"For Russia, which is opposed to military aggression against Syria, the current price hikes are an unexpected present. As the budget is going to pieces under the load of generous social commitments announced before the election and the falling GDP, expensive oil might just secure the authorities' delivering on their promises," it said.

Valery Mironov, chief economist of the development center at National Research University - Higher School of Economics, commented on the situation thus: "An increase in oil prices by 1.5 times would mean an additional revenue of $100 billion a year for the Russian budget, or one quarter of the budget." At the same time, expensive oil will make investment in processing industries disadvantageous, which in effect perpetuates Russia's status as raw-materials exporter.

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