Russia faces two challenges that will affect its preeminence as an energy supplier and its ability to wield oil and gas as geostrategic tools. At stake are the stability of the regime — and perhaps even its survival.

Putin’s Petro State Approaching Empty

By Leon Aron

The centrality of hydrocarbons to Russia’s economy is hardly a new issue, but it is one well worth revisiting today. One of the two largest oil producers in the world, Russia accounts for 12 percent of global output. Russia is also the top producer of natural gas, accounting for about 20 percent of the world’s total.

Russia faces two challenges that will affect not only its preeminence as an energy supplier but also its ability to wield oil and gas as geostrategic tools. New technologies are helping other countries develop their own natural resources more easily and inexpensively, threatening billions of dollars of Russian state revenue. At the same time, to maintain the current level of production, not to mention increase it, Russia must make huge investments in exploring and recovering oil from virgin deposits (“greenfields”) of the east Siberian region and the Arctic shelf. The likely result is a significant thinning of oil and gas rents — jeopardizing the stability of the regime and perhaps even its survival.

President Vladimir Putin’s commitment to oil and gas as the mainstay of Russia’s progress stems from a deep and abiding conviction about its importance to the nation’s economy. Long before he came to power, he had believed that “the restructuring of the national [Russian] economy on the basis of mineral and raw material resources” was “a strategic factor of economic growth in the near term.”

In an article published a year before he became president, he reiterated that Russian mineral resources would be central to the country’s economic development, security, and modernization. For Putin, oil and gas were also paramount politically as guarantors of the security and stability of the Russian state. As he put it, “The country’s natural resource endowment is the most important economic and political factor in the development of social production.” Furthermore, he believed the mineral extraction sector of the economy “diminishes social tensions” by raising the “level of well-being” of the Russian population.

State control or outright ownership of the oil and gas industry became a central element in the “Putin Doctrine,” which postulated the recovery of the state’s political, economic, and geostrategic assets following the antitotalitarian revolution of late 1987–91. The state was to again become the only sovereign political and economic actor in Russia, with the private sector, civil society, and its institutions mere objects.

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