Russia’s New Aims

Perhaps I shouldn’t call them new – Vlad Putin’s had a plan in mind for quite a while, I now understand – but his real objectives are new to me.  It’s a bit embarrassing, really, to have missed the obvious.

Putin’s policies (and tantrums) have never been about Iraq, although that little debacle has certainly helped Putin more than it hurt him – a lot more.  And it’s not about the proposed European missile defense system, which Putin denounced in what could only be called an aggressively belligerent reaction.

No, it’s always been about oil.  Mike Baker says:

Publically, Shell, BP, Exxon and smaller companies talk nice about their cooperation with the Putin administration, even while they continue to lose control of legally licensed and paid for major holdings inside Russia.

Privately, they all concede that they have no option but to give in to Putin’s various demands as he continues to create a massive energy monopoly under the Gazprom brand name.

On the global stage, the European Union, and soon Asia, understand that upsetting Putin can impact the quality of living… everything from the availability of gas to the ability to heat your home. It must be difficult for Putin to run the entire country while keeping one hand on the oil and gas spigot.

His administration has bullied the oil majors into making a variety of concessions and will continue to do so as he pushes for energy dominance. Frankly, who’s going to stop him?

No one.  Vlad’s objective is now clear: the re-creation of Russia as a world power using oil as a tool.

Russia has strayed a long way from the path we’d all hoped for during the days of Gorbachev and Yeltsin.  The Japan Times says:

Putin has systematically eliminated the rudimentary democracy Yeltsin had built. One television channel after another was taken over by the state under various pretexts, as were major newspapers. Opposition candidates and parties were denied registration for the slightest formal complaint. Falsification of elections became the rule.

Many prominent Russians favored the Pinochet model of authoritarian politics and liberal economics. But growing authoritarianism also hit business. In October 2003, Putin cracked down on Mikhail Khodorkovsky, the CEO and main owner of Yukos oil, Russia’s most valuable company, who was thrown into prison on dubious charges of tax fraud after backing Putin’s political opponents. Moreover, Putin’s associates wanted Yukos’ wealth, which was confiscated by the state oil company Rosneft through lawless taxation, leaving Putin’s tax reform and judicial reform in tatters and severely undermining property rights.

In fact, since 2003, Putin’s main economic policy has been re-nationalization. Well-run private companies have been more or less forced to sell out to state-dominated companies. Gazprom is buying up oil (Sibneft), gas and power companies at knockdown prices, reinforcing its monopoly. That, in turn, allows Gazprom to boost its profitability through price increases, despite stagnant production. Indeed, with state companies now producing one-third of Russia’s oil, output growth has plummeted, as owners of private enterprises — the source of dynamism in the sector — are now afraid to invest in new capacity. Among foreign investors, both Shell and TNK-BP are being pushed out by Gazprom in their main gas fields in Russia.

This are not the actions of a nation or a leader who cares about either world opinion, democratic principles, or business ethics.

We may talk tough, but the U.S. is certainly not going to do anything about Putin’s ambitions any time soon.  Like it or not, Vlad’s the least evil oil baron on the international stage today and he’s immune to America’s blustering.  For the sake of our national dignity I hope we don’t bother trying to pressure the Russians.  It simply would not work.

Author: marc

Marc is a software developer, writer, and part-time political know-it-all who currently resides in Texas in the good ol' U.S.A.