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Russia-Ukraine conflict, oil price world's key concerns in 2015

Staff writer ▼ | December 17, 2014
Russia-Ukraine conflict, oil price crash and instability in the Middle East will continue to put the world on alert in the coming year, leading U.S. economists Francis Fukuyama and Paul Krugman said.
Oil price
Predictions   Francis Fukuyama and Paul Krugman:
They made the remarks at a one-day Arab Strategy Forum focused on the economic and political outlook in 2015.

Fukuyama, a political science professor at Stanford, said he was worried about the on-going dispute between Russia and Ukraine would be a challenge for European countries.

Political uncertainty and the steep decline of Russia's ruble currency in relation to other major global currencies were a risky mix for Moscow and its neighbors in Europe, he added.

Paul Krugman, Nobel prize Laurate for economics in 2008, agreed with Fukuyama on Russia.

He said Russian President Vladimir Putin was running out of option as Russia has already spent 80 billion U.S. dollars to defend the ruble against further devaluation.

However, with oil prices falling to a five-year low amid lower global demand and unchanged production quota by OPEC states, Russia's state revenues are going all the way downhill, he said.

The oil price decline will also have major economic implications for economies in West, said Krugman.

The United States was a major oil importer, and low oil prices are good for the world's biggest economy. But it also have an effect on the shale oil industry in the United States and the implications are "too complex and too early to judge," he said.

Fukuyama said China's economy will continue to expand and is surely to become more influential than the United States in 25 years.

Regarding turmoils in the Middle East, Fukuyama said he believed the strength and importance of the Islamic state (IS) militant group was overstated by the media.

"I do not see the IS becoming and remaining a major force in relation to geopolitical significance," said the renowned Stanford professor.

He added that while there was "some sympathy" and sporadic support from private sources in Turkey and Qatar for the IS, no major foreign power has offered any financial support for the militant group.

The IS has been managing its finance mainly through selling oil, but the militants have to smuggle oil from territories they control in Iraq and Syria, he said, adding that the IS will not remain a strong force in the Middle East in the future.