1. The Politics Behind Putin’s Oil

2. Fossil Fuel-Driven Economy
The “Semi-Petro-State”
Oil + oil products + natural gas= 65% total exports
=48% Federal budget revenue
=15% GDP

3. Oil Production

4. Putin’s Pre-Presidential Vision
1996 PhD Dissertation
Supports Russian market economy with STRONG state regulation and pre-emptive power
State control/influence/supervision of “strategic” industries
 Revenue-generating natural resources sectors
Once President, would need to re-assert centralized oversight over the oil/gas/mining industries
But how?

5. Step 1 Demonize the Previous System
-Verbally bash the era of Yeltsin as chaotic/”time of turmoil”/”period of weakness” etc…
-exploit peoples exasperations with ongoing economic and political chaos
-Shock Therapy=supposed to improve Russian economic conditions in short order in the early 1990s
-rapid privatization of Soviet-State owned industries
-November 1992: Decree 1403 sanctioned creation of 3 new private oil companies Lukoil/Yukos/Surgut
Demonize the Previous System
=Yeltsinian Western-style Capitalism (& Democracy)
Exploit failures of “Shock Therapy”

6. Step 1 (continued) Effects of privatization not felt by most populace
-Sale of the Century= loans for shares: elites loan $ to treasury who can’t repay them in exchange for state-owned shares of oil companies
-Khodorkovsky got control of Yukos / Berezovsky and Abramovich got Sibneft
-PUTIN SO SUCCESSFUL IN DISCREDITING YELTSIN YEARS: now perceived by Russians not as victory over communism but as simply a period of extreme hardship
Effects of privatization not felt by most populace
Created new elite class of tycoons
“Sale of the Century” and rise of oligarchs Khodorkovsky, Berezovksy, Abramovich

7. Step 2: Non-Interference Pact
Rein in the Oligarchs
Threatens to revise the results of privatization early in 1st term unless:
Stay out of politics and voice no opposition, or lose everything…
Some oligarchs got the hint; others did not…
JAILED
EXHILE
EXHILE
Abramovich
-Beresovsky sold his Sibneft shares to partner Abramovich who ceded to Putin’s demands
-Beresovsky and Gusinsky charged with fraud while overseas and never returned
-Beresovsky alleged suicide in England 2013
-Khodorkovsky still imprisoned with appeals ongoing
Khodorkovsky
Gusinsky
Beresovsky

8. Operation Putin Influence: Complete
Sibneft acquired by Gazprom 2005
After Kordokovskii affair, Yukos absorbed by state oil company Rosneft 2006
TNK acquired by Rosneft 2013
Remaining ‘private’ oil/gas companies have Putinist loyalists on their boards
Kremlin control over key strategic natural resource industries re-established

9. Oil $$$=Good Politics Putin’s Lucky Coincidence
Rise in world oil and gas prices becomes the prime motivator in Putin-era Russian economic improvement
“A-politicalness” of Russian general population = default vote of confidence in Putin in hopes of protecting recent economic and public welfare improvements
Prosperity more important to masses (esp middle class) than democratic liberalization or rule of law
***THEREFORE: Keys to Putin’s hold on power remains the ‘support’ (i.e. ambivalence or non participation) of elites and public
Perpetual economic prosperity essential and therefore oil/gas money remains critical
Keeps elites rich and the public better off relative to Yeltsin years

10. OIL/GAS $ To Buy ‘Support’
State funded pensions (largely unpaid during Yeltsin era)
Elderly, poor, veterans, orphans, etc…
Across the board salary and wage hikes
Public housing projects
Military re-vitalization

11. Opportunity to Challenge Putin?
Russian reliance on oil/gas exports makes Putin politically vulnerable to U.S. or foreign influence by way of energy markets?
Damage to Russian economy could damage Putin’s domestic credibility; attack Putin by attacking his source of money
How?
Challenge Russian market share of European energy market
Russian energy export market relies on Europe, but Europe’s import market much more diversified
North American shale gas (LNG) and oil exports could reduce Russia’s market share in Europe by 50%

12. Really Worth the Trouble?
A Stable Putinist Russia vs The Desired Putinist Russia?