Turning Back the Clock?
Someone who had slept through the last fifteen years and woke up now to read the headlines out of Russia might be forgiven for thinking the USSR was still in place. The disputed election in Ukraine and President Putin's recent announcement concerning a new generation of ICBMs provide an interesting context to the unfolding Yukos endgame. Despite this, I still think we should avoid reading too much into these events, or at least their implications for the energy industry. The Financial Times appears to share this view. (subscription required.)

About all one can say with certainty is that if we thought Russia would emerge as a democratic, market-oriented counterweight to OPEC, that now looks naive. Oil and gas have been the engines of recent Russian economic success, and are fueling its inevitable reassertion of power and influence on the world stage. Russia may never again be as important as it was during the Cold War, but neither does it seem likely to be as marginal as it was in the 1990s, when pundits frequently compared it to the Netherlands.

It is also worth recalling that the late Soviet Union was an important and fairly reliable supplier of energy to the West, even during periods of high political tension and saber rattling. So even as it clamps down on freedom of the press and meddles in the affairs of its near neighbors, Vladimir Putin's Russia will remain an important trading partner, particularly for the EU. It also contains some of the best prospects for dramatic new oil and gas finds outside the Persian Gulf, and accessing some of them will require international capital and technology.

The deeper question is not where Russia is headed, but how comfortable we are with this. Are we as enthusiastic about Russian oil and gas as an alternative to greater reliance on autocratic Middle Eastern countries, now that Russia is reverting to being an autocratic Eurasian country? If not, then we had better gear up our other alternatives quickly, including demand management, more renewables and some options that have been unpalatable for environmental reasons, such as new nuclear power plants and drilling in the Arctic National Wildlife Refuge and offshore Florida and California.