Andreas Goldthau

Resurgent Russia? Rethinking Energy Inc.

Resurgent Russia? Rethinking Energy Inc. 2008. Policy Review 147, February/March, pp. 53-65

Abstract:

Russia is back on the international stage. After a decade of eroding political and economic power, the domestic economy flourishes and, as state budget revenues grow, so do egos in the Kremlin and Russia ’s global aspirations. The Russian resurrection is mainly attributed to high oil prices, which have enabled the country to overcome the 1998 meltdown, to maintain an average rate of economic growth of 6.7 percent for the past decade, and to build a $1 trillion economy, the basis of its new strength. At the same time, Russia’s energy policy has become the subject of increasing controversy. Western observers regard energy as the Kremlin ’s major foreign policy tool, as countries like Ukraine or Georgia have come recently and painfully to learn. Fears have emerged that a looming Sino-Russian alliance, glued together by oil and gas deals, could challenge existing power structures — and U.S. dominance — on the international scene. In other words, as conventional wisdom reckons, the Western world is faced with a “corporate Russia” which is economically fueled by oil and gas, steered by a semi-authoritarian government with a clear geopolitical agenda, able to lubricate political alliances by oil and gas deals, and equipped with a foreign policy arm called Gazprom.

These common perceptions of Russia are understandable at first sight. Russia owns 26.6 per cent of the world’s proven gas reserves, and 6.2 per cent of the world’s proven oil reserves. In 2005, the country accounted for 21.6 per cent of global gas production and for 12.1per cent of global crude oil production. In that respect, Russia could in fact be perceived an “energy superpower.” However, conventional wisdom is wrong on five counts. First, Russian energy is not primarily about geopolitics. Its rhetoric to the contrary, the Kremlin does not dispose of an effective “energy weapon.” Second, the rationale behind Russia’s recent “gas disputes” with its neighbors is to a large extent profit maximization, rather than punishing renegade governments in the neighboring Commonwealth of Independent States ( cis). Third, Moscow will not subordinate its economic interests in the name of a geostrategic Sino-Russian alliance. Fourth, Russia will have a hard time retaining the status of an “energy superpower” as it risks running out of gas instead. Finally, Russia is less reliant on oil and gas than assumed, at least as regards the drivers of its recent economic success story. In a nutshell: Western excitement about the Russian “Energy Inc.” appears to be caused largely by a well crafted piece of Russian pr.

By examining the five greatest “myths” of Russian energy, this article challenges some of the key assumptions underlying Western policy towards Russia. It reveals the limits of the prevalent argumentative lines on Russian energy, and offers an alternative explanation for some recent Russian policy choices. Finally, it draws some conclusions on foreign policy implications for the U.S. and the Western world.

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