There is a comforting thought for those alarmed by Vladimir Putin's large electoral triumph, in which he suggested that his opponents are traitors and foreigners out to commandeer the Russian state. It is oil and gas, which while they fuel Putin's confidence, could also step in and serve as a leash on his tendency to over-reach.
Putin's history closely tracks the inclination of petro-rulers to shift from hubris to malleability with the decline of oil prices. Oil and gasoline prices are currently high, but they also seem close to a tipping point at which consumer tolerance could break, demand fall, and prices plunge. Deutsche Bank's Paul Sankey is forecasting a more-than 25 percent long-term plummet from that inflection point, which he puts at $135 a barrel for European-traded Brent crude. If this scenario materializes, look for Putin to revert to a friendlier form.
Are there other under-appreciated aspects to Putin's return to the Kremlin? I asked a few O&G readers specializing on Russia to weigh in. Andrew Kuchins, who runs the Russia program at the Center for Strategic and International Studies in Washington, replies that insufficient attention has been paid to the impact for U.S. foreign policy in places like the Middle East. Kuchins writes:
While Putin may be conservative and pragmatic by nature, with the United States his emotions are more raw and palpable. We are likely to need Russia's support even more in the future in management of the Afghan drawdown and Iran, and his bargaining is likely to be tougher. And if domestic troubles intensify and he feels more threatened, certainly that will not bode well for ties with Washington. Already we see inclinations for closer ties with Beijing, and, in the context of the Arab Spring, with Iran as well. It is not hard to envision further drift in this direction given certain domestic and/or external developments.
At the Council on Foreign Relations, Stephen Sestanovich, who was the Clinton Administration's ambassador-at-large for the former Soviet Union, says too little has been discussed about how "Putin's ferocious rhetoric makes it harder for him to try to co-opt liberals and modernizers in forming a new government."
One could easily be led to believe that Putin intends no such big tent, but instead to continue to surround himself with other former KGB officers, political conservatives and oligarchs. But Sestanovich suggests that Putin could mean to cast his net wider. Only, any such plan will have problems, he writes:
Many people have speculated that co-optation will be his strategy, but what kind of liberal modernizer is going to sign up after this campaign? To join Putin now is to lose all credibility not only with the protesters themselves but also with people who have sympathized with the protests. Anyone who wants a political career in the future representing reformist ideas will be putting that hope at risk if he agrees to work for Putin now.
As for the oil patch itself, in the campaign Putin warned against foreigners coveting Russia's oil, but Edward Chow, a former Chevron executive and a senior fellow at the Center for Strategic and International Studies, says one should not conflate such talk with antagonism toward foreign oil companies. Putin "understands that Russia needs foreign investment in oil and gas particularly in frontier areas such as Arctic or offshore." Chow writes:
One should not confuse the hostile rhetoric against the West, especially during the campaign period, with this recognition of the need for the know-how, managerial and financial capabilities of Western firms. In some peculiar way, the more Russia turns against Western governments, the more it will turn toward Western companies to show that it is still an attractive place for investment.
Alexey Druzhinin AFP/Getty Images