Russia’s Oil Woes

By Leon Aron

Moscow’s attachment to statist economic policy is undermining its bid for global energy dominance, writes LEON ARON. By re-nationalizing its energy sector, Putin’s regime is slaying its largest golden goose.

The idea that Russia is a new “energy super­power” is all the rage in Moscow, thanks in part to President Putin’s vigorous salesmanship. The coun­try holds between 6 and 10 percent of the world’s known oil reserves and exports around seven mil­lion barrels a day—second only to Saudi Arabia. Last summer, the Kremlin pushed hard to make energy security the centerpiece of the G8 summit in St. Petersburg. Lost in the crash of cymbals, however, is Russia’s uncertain ability to keep up with growing world demand—or even to maintain its current level of production, after a dazzling run from 1999 to 2004. While there are several reasons for concern, the underlying problem is sadly familiar in Russian history: a state ideology is poised to undermine the country’s progress at precisely the time when Russia seems on the verge of a breakthrough.

January 9, 2007 | 3 Comments »

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3 Comments / 3 Comments

  1. Um, Venezuela is not communist.
    The author seems to think the privateers in Russia were martyred when in fact they were a bunch of Enrons multiplied.
    Any oil company was stupid in thinking their own interests were going to be safegaurded in Russia or her former (and sooner or later returned) colonies. It was a no brainer this breach stood a very good chance in occuring — which is probably why those who supported the oligarchs in Russia and abroad never saw it coming.
    This oil battle will sooner or later whittle down to a non-avoidable clash between Schroeder and Merkel — again, as usual.
    Putin is playing his cards well, the AEI is grasping for straws.

  2. If Russia does destroy its oil sector, they may be more inclined to use their formidable nuclear arsenal. Policy makers should be prepared for this. This does not mean Russia should not be challenged. It simply means policy makers need to think carefully about what they do.

  3. The moral of this story is centralized economic planning along with a lack of transparency never works. The Russian leadership may be so drunk on their power that they really would wreck their major income producing asset. It seems other Communist countries like Venezuela might be about to do the same thing.

    Environmental groups should push for more drilling in the US. American companies can drill more efficiently and with less risk to the environment than can oil companies in other countries. This is especially case since US companies operate with a large amount of oversight to hold greedy executives accountable. In Communist countries this over sight does not exist.

    I’m not as optimistic as this article is that Russia will destroy its golden goose but we should pray that they either change their behavior or that they destroy their golden goose. A weakened Russia would be far less dangerous to Israel and to the Western world. Right now Russia is by far and away our most dangerous enemy.

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