RIYADH: History is under spotlight. Way back in the mid-80s when Afghan jihad was at its peak, Riyadh on the urging of Washington opened its taps, flooring the oil markets.

The mighty superpower USSR, dependent on oil income, could not sustain the sharp fall — and simply melted away. The free world had won the round!

Writing of the episode, Paul Kegnor in his book writes: “In an amazingly innovative, gutsy and largely unknown plan, Reagan and Casey convinced (King) Fahd to help the administration hurt the Soviets economically via control on oil flows. In late 1985, the Saudis agreed to increase oil production dramatically — ultimately raising the output from less than two million barrels a day in mid-1985 up to nine million barrels a day by Fall 1985.” And then he says: “the price plunged from $30 a barrel in the fall of 1985 to $10 in April 1986.” And the USSR disintegrated.

Is a similar move in making now?

With the referendum in Crimea, the world is almost back to the cold war days.

Oil is very much a part of the ongoing strategic calculations being made all around. Could the US (in coordination with Saudi Arabia and allies) unleash a flood of oil that would drive down prices and punish Russia for flexing its political muscle — remains a big moot of discussion all around?

The administration could release oil from the Strategic Petroleum Reserve, in a bid to reduce global oil prices and damage the Russian economy, underlined billionaire investor George Soros in a recent interview.

“The strongest deterrent is in the hands of the United States because it can release oil from the strategic oil reserve,” Soros says, “which would then reduce the price of oil and that would ruin the Russian economy, which lives on oil.” Soros must be taking history lessons these days!

Steve LeVine says the strategy under discussion (in Washington) is to drive down the price of global oil. If it could be done, a price in the $90-a-barrel range (Brent has been trading around $106.60 at the time) would be a big hit to the Russian state budget. The idea is for the US to sell sustained volumes of 500,000 to 750,000 barrels a day from the SPR into the market. And if there is a fall in price by only $12 dollars per barrel, Russia would lose $40 billion revenue in the budget.

America could push down global oil prices by as much as $12 a barrel by selling 500,000 barrels a day from its strategic reserve, argued Philip Verleger, who worked in the administrations of both President Ford and Carter.

The lower prices would cost Russia about $40 billion in lost income from oil and gas sales, equivalent to 2 per cent of its economy, he said.

A well established and well informed industry expert, preferring to stay anonymous, is of the view that if the Americans in coordination with Saudi Arabia engineer a US $20 per bbl drop in the price of Brent crude oil, this could potentially reduce the Russian budget by some 15pc and hence make life extremely difficult for the Russian government and indeed Putin.

Russian think tanks though are taking the threat lightly. Sergei Demidenko, an expert at the Institute of Strategic Studies and analysis told Pravda. Ru that “first of all, the situation in the 1980s and the current situation in the oil market and general political situation in the world are very different.”

And indeed times have changed. Saudi cash requirements have gone up and any significant drop in oil prices could result in considerable budgetary deficit. Bank of America Merrill Lynch says its preliminary spending projections for 2014 place Saudi Arabia’s fiscal break even oil price at $85 a barrel.

Former Saudi intelligence chief Prince Turki al-Faisal has also been hinting in recent weeks that any such coordination may not be feasible today. “I am skeptical whether there can be something called an energy weapon to be used (today),” he said. Despite all the musings, all around, such a move may not be plausible and feasible today. The world has changed!