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As with Ahmadinejad, the Venezuelan leader's political future hangs on a looming vote: a referendum on Feb. 15 to decide whether to amend the constitution to eliminate term limits that would allow Chávez to run for President indefinitely. "The government is in a hurry," says Ricardo Hausmann, a former Venezuelan Minister of Planning who's now director of the Center for International Development at Harvard University. "It has to approve the constitutional amendment before it is forced to cut subsidies and depreciate the currency."
Hausmann predicts inflation and unemployment will both spike this year, leading to a full-blown economic crisis. While social spending is high, Venezuelans have protested the government's failure to deliver fully on promises of cheap housing and plentiful jobs. Now the country's income has plunged, that anger is sure to increase, says Hausmann. "The train is running at 150 miles an hour and it has a big brick wall ahead of it," he says. "We are heading toward a crash and the pilot is not stepping on the brake."
In Russia, an oil-driven recession has also sparked protests. Late last month hundreds of demonstrators poured onto the streets in several cities after the government announced a 30% tariff on imported cars, a measure designed to protect the country's struggling domestic auto industry.
Unlike Iran and Venezuela, Russian officials squirreled away at least $600 billion in cash reserves during the years of soaring energy prices. But Russia's economic growth has fallen from 7% to about 2%, its stock index is down by some 70%, and investors have withdrawn $190 billion since last August. Zeljko Bogetic, the World Bank's chief economist in Moscow, warned investors last month that if the oil price drops to $30 a barrel and stays at that level through 2010, Russia would be forced to empty the rest of its cash reserves and borrow money abroad. "Clearly we are in the middle of a major growth recession in Russia," Bogetic said.
As Russia spends its savings, its power abroad could ebb. Russia has worked for years to reassert itself as a major international player. It has exported large quantities of arms (often to anti-Western allies like Iran and North Korea), cut off gas exports to Europe (most recently two weeks ago), and hosted the G-8 summit in St. Petersburg. But Russia's clout, built on its growing oil wealth, could now crumble, says James Nixey, Russia expert at London-based think tank Chatham House: "Everything Russia does in foreign policy is about them looking for respect, wanting to be treated as a major player. But that is hugely undermined now. At $50 a barrel this is a very different Russia."
Markedly lower oil prices are devastating not just to those countries that benefited from $147-a-barrel crude. Unlike in Russia, the oil boom barely touched the lives of most people in Africa's most populous nation, Nigeria. About two-thirds of Nigeria's 146 million people still live on about one dollar a day, according to the World Bank. As prices crashed last year, Nigeria's production slumped, too, due to rebel attacks on pipelines in the oil-rich Niger Delta. Last October, Nigeria's central bank governor Chukwuma Soludo announced there was almost nothing left in the country's rainy-day fund because production halts had forced the government to spend its savings on government salaries. With oil prices heading lower, Soludo warned, there was little to protect Nigerians from greater hardship. "Everybody will be affected one way or another," he said.
In Nigeria at least, cheap oil could have an upside: with revenues dwindling, government officials may be forced to exercise greater financial discipline, says Pat Utomi, professor of political economics at Lagos Business School. Utomi points out that the 1980s oil crash led to much-needed privatization of state-run industries in Nigeria, strengthening the economy overall. "Nigerians say they have never benefited from oil," Utomi notes. "Progress is probably best with lower oil prices."
If that's the case, then ordinary Nigerians are in luck. Energy analysts say oil prices are likely to remain low until the recession ends — probably not before 2010 at the earliest. Scrambling to prevent further price drops, the 11 OPEC oil ministers voted in December to pump 2 million fewer barrels a day — the biggest production cut in the organization's 48-year history. But even this may fail to push prices up, since it is the dramatic slowdown in global growth, and not an oil glut, that is driving the cost of oil lower. It is this cold truth and its consequences that have leaders from Ahmadinejad to Chávez so rattled.
The original version of this story misidentified James Nixey, Russia expert at London-based think tank Chatham House, as James Hickey