My old homeland, the Soviet Union, is gone, tossed into the proverbial dustbin of history a quarter-century ago. By the end, its only significant export was the toxic ideology of communism, which left it both intellectually and financially bankrupt. Though few care to admit it today, the USSR and communism had their defenders in the free world, many of whom preferred to believe in the utopian fantasies of socialism instead of looking at its disastrous realities. Such is the dangerous power of a big idea.
As a believer in the importance of big ideas myself, I actually sympathize with those misguided dreamers more than I do with the current generation of western cynics and profiteers who defend doing business with the world’s most corrupt and brutal regimes. They are aiding and abetting human rights abuses on a monstrous scale with full knowledge of their actions and the damage they cause.
Despite Vladimir Putin’s best efforts to cobble together a Frankenstein’s monster “USSR Lite” by intimidation and economic extortion of Russia’s neighbors, the only unifying idea this time is money. Russia’s military and nuclear arsenal, while still formidable, are not the vanguard of this offensive. And where Soviet ideology once found its way into the cracks of the western world, Putin has found that cold, hard cash is far more effective in recruiting allies and deterring potential foes.
A western engagement policy of “all carrots, no stick” doesn’t work with dictators like Putin who take the carrots and use the profits to fund repression at home.
Russia’s massive energy reserves and its domination of the pipeline system to Europe—and the hundreds of billions of dollars these assets provide—are the Kremlin’s weapons in this fight for geopolitical influence. This is a relatively recent development because Putin has what his Soviet predecessors never dreamed of: Economic leverage handed to him on a platter by western corporations and leaders eager to make deals. When the Iron Curtain fell, Europe and America rushed to engage the newly free nations. This was the natural and humane thing to do and it worked very well in Eastern Europe, where the new governments and their people very much wanted to reform and to join the modern world.
Where engagement failed to lead to sufficiently profound economic and political transformation was in the countries where those in power actively worked against democratic and economic reforms. A western engagement policy of “all carrots, no stick” doesn’t work with dictators like Putin who take the carrots and use the profits to fund repression at home. In cases like Russia, engagement has not only failed to bring reform, it provides despots with the cash they need to build up the internal security apparatus, to buy influence and spread corruption abroad, and to keep their repressed citizenry fed just enough with pensions and labor subsidies to avoid mass uprisings in the streets.
Putin and his gang realized this potential very early on in Russia, even though the price of oil was only around $20 a barrel when he took office in 2000. To centralize power as the former KGB man wanted, Russia’s natural resources had to be under the Kremlin’s direct control. The recently privatized industry was quickly reigned in. Oligarchs who resisted and who wanted to make their companies truly multinational, such as Mikhail Khodorkovsky and his company YUKOS, were exiled or jailed and their assets looted by Putin’s cronies to create the state-controlled giant Rosneft.
Putin has not hesitated to use oil and gas as the weapons he always knew they could be.
Aside from generating huge amounts of cash reserves as the price of oil skyrocketed, putting these “national champion” energy companies under state control also gave Russia greater political influence. Putin has not hesitated to use oil and gas as the weapons he always knew they could be. His tough stance and the collective cowardice of European leaders and their lack of long-term vision has given Russia outsized economic influence.
The EU gets a third of its oil and gas from Russia. Substantial, and some EU countries get much more, although in many ways this dependence is shameful since it has been clear for years that Putin is not a reliable partner. Russia’s invasion of Ukraine and annexation of Crimea took place in March 2014 and Europe did nothing for seven months to find an alternative to Russian gas. Today we still hear that “Europe could freeze” if Putin cuts the gas supply. A third is a lot, but Russia exports over 80 percent of its oil and gas to the EU! Who really has the leverage here? By boycotting or taxing those exports, or even making a credible threat to do so, Europe could cripple the cash flow that keeps Putin and his gang in power.
For most of the world, energy independence has become a political cliché and an eternal chimera. In the globalized world it is nearly as inefficient and risky to depend purely on domestic production as it is to depend too greatly on imports. The goal, especially when it comes to dealing with unreliable or outright aggressive producers, is to be independent enough to maintain flexibility and therefore leverage. Do business with the Russias of the world if you must, the way China has become the world’s factory, but do not put your economies and political stability at the mercy of dictators and their brutal regimes. Do not provide these autocratic regimes with democratic credentials or treat them as political equals when they use western money to oppress their people and sponsor hostile action abroad.
Russian strongmen, Middle Eastern mullahs and sheiks, and Venezuelan thugs will always exploit this leverage to protect their power and to export the corruption that inevitably goes along with every barrel of oil and every cubic meter of gas.
“Dictatorship substitution” in the commoditized world of energy is not as easy as organizing boycotts of brands that use sweatshop labor or shunning and divesting from countries like apartheid-era South Africa. But where engagement has failed to bring political reform it is unacceptable for the world’s democratic powers to be so dependent on the whims and wiles of Russian strongmen, Middle Eastern mullahs and sheiks, and Venezuelan thugs. They will always exploit this leverage to protect their power and to export the corruption that inevitably goes along with every barrel of oil and every cubic meter of gas.
As long as the Russian treasury is full of oil profits, the Putin regime has no need of its people, no need for them to be well-educated or to start new businesses.
Putin is more afraid of fracking than he is of any sanction or NATO action. (That the Kremlin creates and sponsors puppet anti-fracking groups around the world confirms this theory.) If the price of oil stays too low for too long, Putin’s regime will no longer be able to keep up its end of its deal with the Russia people, that it would provide economic stability in exchange for their freedom. As long as the Russian treasury is full of oil profits, the Putin regime has no need of its people, no need for them to be well-educated or to start new businesses. The same is true of every other petro-dictatorship.
It has long been said, accurately, that energy policy is security policy. That is truer than ever today and in a very literal way as violence erupts with several of the world’s largest energy producers at its center. Greater energy independence for Europe and America—whether it comes from increased fossil production, nuclear, or green tech innovation—is not only crucial for geopolitical balance, but a crucial tool for human rights and democratic reforms worldwide.