At the 20-year mark of the Soviet Union's collapse, protests have broken out now in two of its oil-soaked constituent states -- Russia and neighboring Kazakhstan. In the latter, at least 15 oil workers and others died over the weekend. There is debate whether we are witnessing a spread of the Arab Spring, but I do not know why -- clearly we are.
The key matter is context -- Russians and Kazakhs are in the street of their own accord, but against the backdrop of wholly unpredicted upheaval in some of the world's most compleat police states. Former Russian Prime Minister Mikhail Kasyanov probably exaggerates when he tells London's Sunday Telegraph that he could beat Prime Minister Vladimir Putin in a second-round of presidential voting next year, but his general point is accurate: No longer can it be said with certainty that Putin can defeat any opponent in a fair fight. Whether consciously or sub-consciously, others including the Russians have absorbed courage and inspiration from the Arab Street.
Those are pure politics. Kazakhstan is a different story -- there we see the Arab Spring not most interestingly in the people in the street, but in the government's reaction to them. The image is of a Kazakh officialdom palpably terrified of the post-Muhammad Al Bouazizi world, in which no petrocrat seems safe (pictured above, a Tunisian memorial raised to Bouazizi's legacy two days ago).
Fethi Belaid AFP/Getty Images
Vladimir Putin now has something in common with Barack Obama -- approval ratings in the fortieth percentile. So he and his machine are figuring out how to give Russians a better picture of who he is, and what he plans in the next six years. As a first step, he took questions for four-and-a-half hours in a live call-in broadcast today. Russia's government needs "an update," Putin said, seeming to throw fuel on the fire of some who think that one of Putin's main tactics ahead of the March 4 presidential election will be to get President Dmitry Medvedev to quit, and blame Russia's troubles on him.
Yet, according to Russia hands Fiona Hill and Clifford Gaddy, Putin's main obsession at the moment may not necessarily be the election, but shale gas. Hill and Gaddy gathered this idea at the annual Valdai dinner, which Putin has hosted for eight straight years (they have just posted their impressions of the dinner, held last month, at the Brookings Institution web site).
Putin was extraordinarily flat this time, the pair say, becoming suddenly and solely animated on the subject of hydraulic fracturing, or "fracking," the controversial method in which gas is drawn out of hard shale by shooting a water-and-chemical mixture into the rock at tremendous pressures.
Alexey Sazonov AFP/Getty Images
Until September, Russia was ruled in a careful choreography: President Dmitry Medvedev was the face on a tough but reformist agenda that included the construction of Skolkovo, a richly financed version of Silicon Valley in the Moscow suburbs, and a more conciliatory approach to western foreign policy initiatives. Actual power was held by Prime Minister Vladimir Putin, who nevertheless in public was the "chest," spending much time traveling the country in service of showing off his physique and harpooning abilities.
On Sept. 24, however, Putin announced his intention to return as president in elections next year; he would swap with Medvedev, who would take occupancy of the lesser post of prime minister. It would be Putin's third term in the Kremlin, a home he surrendered in 2008 because of a constitutional limit of two consecutive terms. Putin thought that his word, along with the largesse-enabling factor of high oil prices, were sufficient in terms of setting in motion Russia's next political transition. But on Sunday voters told him otherwise -- the ruling United Russia party received less than half the total vote, and had to cheat to get that much. Russians informed Putin that he will have to campaign for victory on March 4.
So why did the ostensibly long-suffering Russians turn on Putin and deny United Russia continuation of the two-thirds margin that it won in the Duma four years ago?
Russia's Vladimir Putin and his associates sought political victory in the usual ways -- barring election opponents from running; flooding the airwaves with favorable "news"; and cheating on voting day. Far from succeeding, however, their result was an "election blow," Reuters reports in a typical account of yesterday's parliamentary balloting. This is because the pro-Kremlin United Russia party picked up about 50 percent of the vote rather than the 64 percent that it got in the last elections. Yet, one senses a ghoulish strain of gloating, as though observing the distribution of shovels for a funeral.
Has the petro-fueled Putin machine in fact suffered a knockdown? This is arguably the case for President Dmitry Medvedev, who according to plan is to swap positions with Prime Minister Putin next May. As this blog has written, a bad election outcome could mean Medvedev being shoved aside and not getting the prime ministerial slot, deal or no deal with Putin. In a jolly video appearance as the results rolled in, the pair seemed prepared to proceed as planned, but Putin -- the country's decider -- can change his mind.
Putin himself has suffered a bruising. But are we witnessing signs of an Arab Spring-like crumbling of his power? As of now, no one sensible is forecasting a Putin defeat in March presidential elections. He appears nowhere near the bloodthirsty-crowds-at-the-palace-gates stage of autocracy.
So what would be a plausible worst-case scenario for Putin?
Dmitry Astakhov AFP/Getty Images
A tail risk called Iran: Back in September, New York oil analyst Edward Morse wrote a paper called "Tail Risks and the Oil Market: Expecting the Unexpected." The paper (if anyone finds an open-sourced on-line link for all to avail, please let me know) describes the outsized impact of big surprises on oil prices -- "hurricanes, floods, refinery fires, tanker spills, accidents, terrorism, unpredictable geopolitical strife within OPEC," Morse writes, could drive oil prices through the roof, or just as easily cause them to collapse. That quality, he suggests, makes oil a great investment vehicle -- for those prepared to accept the risks, of course. I write about the role of tail risks this month in Alberta Oil magazine. Others have noted this general law of physics -- Nassim Taleb named it the "black swan" affect; coming from another angle, Stephen Greenblatt calls it "the swerve." For the rest of us, there is a focus on the pure impact on our lives, which at the moment includes what will happen with Iran. Will it develop nuclear weapons? If stymied by sanctions, imposed this week by the U.S. and Europe, will it send Hezbullah against Israel? Will it block the Strait of Hormuz? Will it elect to withdraw its 2.2 million barrels a day of oil exports off the market, as the Financial Times' Javier Blas asks? The FT published a column by two British writers who suggest that we might be "sleepwalking into a war with Iran."
The Obama administration is attempting to navigate the shoals by shaking the stick of death-strike sanctions, but not actually imposing them. As this blog has suggested, tough sanctions can bite, but companies and countries eventually figure out how to bypass them through the good offices of smugglers and assorted other wily middlemen. Yet the tail risks remain. This is especially so with a nation like Iran, whose essence of power lies in its menacing hint of roguish mischief.
Vladimir Putin's decision to crown himself king anew has not gone as planned. Most recently, Russia's strongman leader has found himself for the first time commenting publicly on the general belief that he is responsible for the career of one of Russia's richest oligarchs, a St. Petersburg man who until a few years ago was a nobody. Putin denied helping Gennady Timchenko, who runs Gunvor, the world's third-largest oil-trading empire, and Novatek, Russia's second-largest natural gas producer. Why is it not possible to be a self-made oilman oligarch in Russia absent Kremlin support, Putin suggests. Indeed, why not?
In any case, with the clarifying benefit of a few days, we return to the matter of the Kremlin Contest, O&G's betting competition for the identity of Russia's next set of rulers. President Dmitry Medvedev's four-year term as president ends next year, with elections scheduled in March. The prevailing wisdom was that Putin would return, but was that a fait accompli? During the summer, we challenged O&G readers to bet on their beliefs.
On Saturday, Putin announced his decision (he would in fact return as president), but a bit of confusion followed when now-former Finance Minister Alexei Kudrin rejected the corollary -- that not only would Putin take up residence again in the Kremlin, but Medvedev would become prime minister. It seemed that Kudrin himself expected to be named to the latter slot. But Medvedev and Putin have put the kibosh on Kudrin's aspirations -- the two will swap positions -- and no one else has challenged Medvedev.
So we proceed with confirmation of Saturday's announcement. We have dual winners of the contest. They are Theo Francis, a writer at footnoted.org, a newsletter that digs into Securities and Exchange Commission documents; and Michael Perice, a fresh political science graduate from Temple University. Both guessed that Putin and Medvedev would swap positions, and that Putin would make his announcement Dec. 8, which was the best estimate of the actual date.
In the coming days, I will personally email, tweet or Facebook the other entrants with instructions on how to mail their wagers to one of the winners. I am going to assign the booty this way: The alphabetical first half of the entries will go to Francis, and the second half to Perice, in order of their own places in the alphabet. Since I bet two objects -- a glass of Rioja and a signed copy of The Oil and the Glory (the book), I will share the wine with Francis and mail Perice the book.
I myself guessed wrong -- I bet that the tandem would stay in place, Medvedev as president and Putin as prime minister (with the decision on Dec. 9, the same date on which he announced in 2007). My reasoning was that everyone knew that Putin was truly in charge, so that he did not need the presidential title -- in other words, the current system worked, and why mess with success? But after the smoke cleared, my wife provided the best and simplest analyses I've heard of what happened: "The tsar wants to be the tsar."
So how did the winners reach their conclusions? I found the methods surprising. Read on to the jump.
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Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.