The Magazine

Putin's Power Politics

Rebuilding Russian clout, one natural-gas pipeline at a time.

Jan 16, 2006, Vol. 11, No. 17 • By DANIEL TWINING
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IN A WORLD OF AMERICAN preponderance, European integration, and Asian ascent, it is sometimes hard to take Russia seriously as a great power. In many respects, the country has been in steady decline since the end of the Cold War. Its population is shrinking. Life expectancy is falling. It cannot adequately safeguard its nuclear weapons stockpiles. Its military is in an advanced state of collapse.

Russia faces a threat from Islamist terror in its southern regions. Parts of Siberia contain more Chinese immigrants than Russians. Moscow's attempts to retain a Eurasian sphere of influence have been set back by democratic revolutions in Georgia, Ukraine, and Kyrgyzstan. Russia risks being eclipsed by the rise of Asia in the east and the vibrancy of Atlanticist democracies in the west.

But Russia has a secret weapon in what would otherwise be a modest arsenal of national power. Like many Third World states and Arab autocracies--and quite unlike either the rich West or a globalizing Asia--Russia relies on oil and gas revenues for nearly half its government budget. Moreover, it is transforming this typical indicator of economic backwardness into a hidden strength, making it the vehicle for its aspiration to reemerge as a global leader.

Unlike corrupt politicians who view their country's oil wealth as a means of elite enrichment, President Vladimir Putin is methodically consolidating state control over Russia's energy resources and deploying them as a tool of international statecraft. Russia's energy exports have replaced both nuclear arms and the Communist International as the principal agent of Russian influence abroad.

Russian officials are constructing a grand strategy that more closely resembles the mercantilism of 17th-century European empires--in which managed trade was a strategic tool for building up state power in a global contest for primacy--than the policies of market capitalism seen in Asia and the West. Rather than liberalizing its economy, as China has done to such explosive effect, Moscow is reasserting state control, in a concerted strategy to make Russia a great power once again.

A closer look at the way Russia has wielded energy supplies to support its allies and bludgeon its rivals in Eurasia suggests that major economies increasingly dependent on Russian gas and oil exports--including great powers in Europe and Asia, and even the United States--are rendering themselves vulnerable to the ambitions of an autocratic, imperial state that has not refrained from using energy as a geopolitical weapon and has been ruthless in its treatment of both internal political opponents and neighboring states.

THE CIA FORECASTS that "growing demands for energy" will have "substantial impacts on geopolitical relations" in coming years. The need for energy increasingly will be "a major factor" shaping the foreign policies of key states. Total energy consumed globally will rise by 50 percent over the coming two decades, most of it in the form of oil and natural gas. To maintain growth, rising powers like China and India will need to double or triple their energy consumption. The European Commission estimates that Europe's requirements for imported energy will rise from 50 percent of total demand in 2000 to nearly 70 percent in 2020, with gas imports increasing most rapidly.

Russia today is the world's largest exporter of natural gas and second-largest exporter of oil, after Saudi Arabia. Russia also possesses vast, untapped oil and gas reserves, which dwarf sources of supply in the Americas, Europe, and Asia outside the Middle East. The CIA predicts that "Russia . . . will be well positioned to marshal its oil and gas reserves to support domestic and foreign policy objectives."

Russia is a leading producer of liquefied natural gas, which, because of its ease of transport and environmental friendliness, is increasingly in demand by advanced economies. This will have "a transformational effect on Russia's geopolitical position," writes the Observer.

Gazprom, Russia's leading energy conglomerate, is the largest energy company in the world. It controls gas and oil reserves larger than those of British Petroleum, Royal Dutch Shell, and ExxonMobil combined. It produces a fifth of the world's natural gas, making it a price-setter in the international market. It controls the world's biggest pipeline network. It has its own media empire, including prominent television and radio stations and a newspaper. Gazprom is owned by the Russian government.

Gazprom is expected to float shares on the Russian stock market for the first time next year, which will make it the world's largest emerging-markets stock and will raise significant international capital for the company. Nonetheless, as with other Russian energy companies, foreign ownership will be limited to preserve state control.