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Posted at 3:15 PM ET, 01/ 4/2011

The Putin oil connection

By Jennifer Rubin

Anne Applebaum notes the correlation between the political ascendancy of Vladimir Putin and the rise in oil prices, asking whether the fortunes of Putin aren't affected by the fluctuation in oil prices. ("Is this analysis too simplistic? Sure it is. But I haven't heard a better explanation.") Anne's observation is dead on, and hardly simplistic.

Leon Aron made precisely this point in our conversation yesterday, noting that the "perfect storm" -- that is, the worst repression and most aggressive foreign policy -- would occur if oil prices spike and Putin returns to the presidency in 2012. Aron recently explained the dynamic that is at work:

For Putin, Russian oil and gas are the foundation of the country's progress, prosperity, and national security -- today and 50 years from now. And it is the Russian state, not people like [convicted billionaire Mikhail Khodorkovsky], who is the real owner of Russia's hydrocarbon trove. While nationalizing Yukos, Putin permitted other private oil companies to operate, provided their owners understood that they were managing the national wealth, not owning it. Khodorkovsky's first conviction was a reminder of the rules of the game. It now bears a repetition.

For [Russian President Dmitri] Medvedev, who has decried the Russian economy as "chronically backward" and "primitive," precisely because of its dependence on "raw materials," Khodorkovsky is surely also a symbol -- of what he has called "legal nihilism," the "disdainful attitude toward court and law" and "extra-legal influence on courts' actions."

In other words, when oil prices rise, Putin gains strength as the kingpin in a state-dominated economy; when oil prices fall, he suffers a setback, and the influence of (albeit modest) reformers and entrepreneurs, who press for economic diversification and political liberalization, increases.

For those who want to make the case for domestic energy development, they would do well to note that not only would a lessening dependence on foreign oil undermine the despots of the Middle East, but it would also assist the cause of reformers in Russia. If we really want to "reset' Russia, robust exploration and development of domestic gas and oil reserves would be far more productive, I would suggest, than throwing trinkets at Putin's feet (e.g. a poorly negotiated START agreement) or shying away from support for Russian democracy advocates.

By Jennifer Rubin  | January 4, 2011; 3:15 PM ET
Categories:  foreign policy  
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Comments

See an interview with Khodorkovsky's lead attorney here: http://aamdispatch.org/?p=3396

Posted by: katherinegypson | January 4, 2011 3:34 PM | Report abuse

most of U.S. imports of oil come from Canada, Mexico, Venezuela, and West Africa.

It is Europe and Japan that are held hostage by Russian gas and ME oil.

"...robust exploration and development of domestic gas and oil..." will have zero impact on Putin's Russia. or anyone else except maybe Chavez...

Why do conservatives NEVER mention the unfair trade tariff on U.S. imports of Brazilian sugar ethanol (just renewed in that bi-partisan pork frenzy known as the Bush43 tax cut extension) as the single easiest action to build better relations with Brazil???

In fact, the U.S. should be asking Brazil for assistance in following THEIR model of energy independence that took the thirty+ years that the U.S. has wasted.

Russia's history precludes fast-track advanced democracy. Give it a rest already.

Posted by: K2K2 | January 4, 2011 3:37 PM | Report abuse

Wow, so many people in above column who don't know anything about the commodities market! How did you all find each other?

Applebaums's column is not just simplistic, but simple minded. She ignores the fact that the old Soviet Union was a not major player on the open world market, but supplied oil to it's allies, often at prices not associated with world market conditions.

If anything Russia is thought to be undermining world market prices by driving output at levels the Middle Eastern markets think are too high.

Oil, which is priced in dollars has been driven by world currency speculation more than demand. The price of actual production of a barrel of oil, on average worldwide (understanding there are huge variations between nations and types of crude) is thought to be no more than $50-55.

Oil has only recently come out of a situation knonw as "contango" whereby the market for actual consumption of oil was down far enough that some nations were simply storing oil, rather than using it.

The worldwide increase in consumption is only thought to be around 3.5% for 2011, but Goldman Sachs is forecasting an increase in the price of oil closer to 20% for the year, mainly because of inflationary concerns in the US.

So yes the Russians benefits from their huge oil production, no they don't set or control the market.


"For those who want to make the case for domestic energy development, they would do well to note that not only would a lessening dependence on foreign oil undermine the despots of the Middle East, but it would also assist the cause of reformers in Russia. If we really want to "reset' Russia, robust exploration and development of domestic gas and oil reserves would be far more productive"

Unfortunately for this theory, we get the majority of our oil from countries OUTSIDE the Middle East, with Canada supplying about 40-45% of our imports.

Since 1973, except for a brief period, our Alaskan oil has been banned from export and any new developments would probably be placed under the same restriction. So no, new domestic production would not hurt the Russian oil wealth but probably WOULD undermine the regime of your favorite Middle Eastern "democracy" Iraq, which is currently our most expensive source of imported oil.

I think we can conlusively say that Anne Applebaum does not know her you know what from her you know what, on Russia based on today's column.

Posted by: 54465446 | January 4, 2011 4:33 PM | Report abuse

2011, but Goldman Sachs is forecasting an increase in the price of oil closer to 20% for the year, mainly because of inflationary concerns in the US
Posted by: 54465446

When the Right Wing Lunatics begin to learn what causes inflation,they might become disillusioned about their core beliefs in the "bad guy" origins of all economic problems. When it comes to inflation.we,and the G20 are the bad guys.

Posted by: rcaruth | January 4, 2011 4:47 PM | Report abuse

RC:

14 minutes after I mentioned the word inflation, not bad!

Posted by: 54465446 | January 4, 2011 6:16 PM | Report abuse

Heaven forbid that Russia's natural resources should be considered part of the national wealth of the Russian people when there are thieves flying under the false flag of Free Enterprise who deserve to steal all that wealth for themselves. Particularly when those thieves happen to be members of the same tribe as Jennifer Rubin and Anne Applebaum.

Posted by: Lazarus40 | January 4, 2011 6:50 PM | Report abuse


To All the Liberals:

To all who claimed that homosexuals in the military "would not affect readiness."


WRONG AGAIN


The Navy officer is already embroiled in a controversy over political correctness.


Don't ask, Dont Tell should be put back in.


ALREADY THERE IS AN AIRCRAFT CARRIER SET TO GO TO THE MIDDLE EAST AND A GAY CONTROVERSY IS AFFECTING THE DEPARTURE OF THAT AIRCRAFT CARRIER.


It is over


The liberals have been proven wrong and this too has to be repealed.


The liberals LIED again and again.

.

Posted by: RainForestRising | January 4, 2011 7:49 PM | Report abuse

Greg Sargent is a complete idiot

I read the liberals to hear their point of view.

But this guy writes garbage, and half the time it is almost as if he is throwing a hissy fit.

Why is he trying to start a fight over an old issue>?

Posted by: RainForestRising | January 4, 2011 7:52 PM | Report abuse

Greg Sargent has insisted on making some bizarre statements, and then he has insisted he is right. Almost, a hissy fit over this.


RE: Black Panthers case


So, according to Sargent's lack of logic, it is OK with him if white men with weapons stand in front of places where blacks vote ???


Just want to make sure what the liberals find acceptable.

.

Posted by: RainForestRising | January 4, 2011 9:25 PM | Report abuse

RFR:

Psst, your getting confused on your postings again. This isn't Greg's column. Work with me here, you know I'm your only friend!

Posted by: 54465446 | January 4, 2011 11:12 PM | Report abuse

54465446 AT 11:12 PM


I have many many friends


However I am commenting on the issue between Sargent and Rubin - they got into a little discussion this week on the Black Panthers

Posted by: RainForestRising | January 4, 2011 11:25 PM | Report abuse

Rules of the game? Putin explained the rules of the game to all the oligarchs in 2001: they could keep their billions which they robbed from the Russian people, and in return they had to stay out of the political arena.

Khodorkovsky had his own private army, his own city, and unlimited wealth. Yet he wanted more - to be the Ruler of Russia. He began to buy members of the Duma, hence the reason he sits in prison today. He knew the rules of the game, but broke those rules in his quest for unlimited power.

Much of the American media depicts Khodorkovsky as a democracy loving free-market reformer. He is neither. Nor is he a symbol of "legal nihilism". But for American journalists, it is easier to stick to the narrative than to report facts.

Posted by: johnhiggins1990 | January 5, 2011 12:58 AM | Report abuse


Posted by: RainForestRising | January 4, 2011 7:49 PM

"ALREADY THERE IS AN AIRCRAFT CARRIER SET TO GO TO THE MIDDLE EAST AND A GAY CONTROVERSY IS AFFECTING THE DEPARTURE OF THAT AIRCRAFT CARRIER."

Good. It has no business being there and in any case, US Aircraft Carriers are floating coffins anyway, given the anti ship missiles around.

Aircraft Carriers are an anachronism and practically useless.

Posted by: AndreDeAngelis | January 5, 2011 4:43 AM | Report abuse

"Aircraft Carriers are an anachronism and practically useless."

Posted by: AndreDeAngelis

Oh, they are very useful when attacking countries with no defenses against aircraft or ships, like Iraq, Afghanistan, Iran, etc. That seems to be the only countries we, the U.S., attack these days.

Aircraft carriers against first world countries? Not so much.

Posted by: Lazarus40 | January 5, 2011 9:54 AM | Report abuse

"Aircraft Carriers are an anachronism and practically useless."

Posted by: AndreDeAngelis

Oh, they are very useful when attacking countries with no defenses against aircraft or ships, like Iraq, Afghanistan, Iran, etc. That seems to be the only countries we, the U.S., attack these days.

Aircraft carriers usefulness against first world countries? Not so much.

Posted by: Lazarus40 | January 5, 2011 9:56 AM | Report abuse

The comments to this entry are closed.

 
 
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