One can assume to find the Russian government meddling heavily in the internal affairs of OPEC members in order to influence market prices.
By ARTIOM HILDEBRANDTRussian President Vladimir Putin(photo credit: REUTERS/MAXIM SHEMETOV)
While Russian foreign policy – in particular with regard to Ukraine and Syria – is quite adventurous, Russian President Vladimir Putin might go down in Russian history as Vladimir the Great.Russian leaders such as Peter the Great gained a reputation for expanding borders and modernizing the Russian Empire. However, a state remains to be a slave of its resources. In that matter, in order for Putin to leave positive marks in the annals, he needs to make sure that state revenues – which to a great extent are a function of and ability to export oil, gas, arms and nuclear technology – remain stable. Following Western imposed sanctions due to adverse oil prices and poor policies, this has not been the case. Unable to deliver economically, Putin might soon face a déjà vu of what he called the “greatest geopolitical catastrophe of the 20th century” – the collapse of the Soviet Union after, among others, a disastrous war in Afghanistan.Trying to avoid the fate of Soviet leader Mikhail Gorbachev, Russia is fostering relationships with almost all members of the Organization of the Petroleum Exporting Countries (OPEC), the intergovernmental cartel that accounts for almost half of global oil production and four-fifths of world’s proven oil reserves. Effectively, OPEC is able to influence global prices of oil, the commodity that makes up roughly two-fifths of Russia’s federal budget revenues. As such, one can assume to find the Russian government meddling heavily in the internal affairs of OPEC members in order to influence market prices.In that respect, Russia is backing Libyan General Khalifa Haftar, who is about to gain control of the capital, Tripoli. Libya holds one of the greatest oil reserves in the world. In Syria, Russia is the dominant player that checks and balances the Syrians, the Iranians, Iraq and Israel. Iraq and Iran are members of OPEC.In addition, having won tenders to search for and develop major oil fields in the Middle East – in particular in Iraq’s West Qurna-2 – Russia also expanded ties across practically every major oil and gas sector in the Middle East and Africa – to name but a few, Qatar or Iran, members of the informal Gas Exporting Countries Forum (GECF).Beyond that, Russia is the world’s second largest military equipment exporter and leads the world in nuclear-reactor exports. In that respect, among other states, Russia cooperates with Angola on trade, arms and natural resource exploration, as well as with Saudi Arabia by signing lucrative deals. Moreover, the Wagner Group – a Russian mercenaries firm, run by an oligarch close to President Putin himself – sells its services to dictators across the Middle East and Africa, further augmenting Russia’s sphere of influence and making the Kremlin’s cash tills ring.HOWEVER, WHEN it comes to trade with the Middle East or Africa, Russia should be more cautious and not rely on these regions for several reasons. First, the political instability could hurt Russian investments, especially in the ongoing popular support for regime change in those countries. Hence, the Middle East and Africa may become unsustainable partners. Historically speaking, the Soviet Union – and Russia itself – had written off dozens of billions of dollars of debt in the past in these regions.Second, the majority of the Middle East and Africa is anything but accountable to the rule of law and property rights. Although this mirrors the domestic Russian economic climate, it still makes Russian investments locked into arbitrary justice.Third, with the United States and its fracking capacity and export of liquefied natural gas, Russia has found a new competitor. Therefore, the United States, through its export of energy, can support the European Union and others, allowing them to become a more favorable energy demander, as opposed to being energy dependent. In effect, this would further disrupt Russia’s strained economy.Fourth, while energy exports may in the short-term lead to stable Russian revenues, high energy prices stifle economic reform and modernization in the long term. This phenomenon can be observed across OPEC.
Peter the Great, who not only extended Russia’s borders, but also modernized the country, turned to the West at the end of the 17th century and during the 18th century. In contrast to Peter the Great’s Grand Embassy to Europe, Putin is turning to the East. The future belongs to those who prepare for it today. As there is a danger of “putting all the eggs in one basket,” Russia can only avoid future disruptions to its economy – similar to those occurring in 2014 – by diversifying it. Notwithstanding that the Chinese are less interested to educate Russia on democracy and human rights, the Kremlin should inculcate the risks associated with leaving the Russian bear dependent on its rising neighbor, the mercantilist Chinese dragon. While Chinese President Xi Jingping has recently called Vladimir Putin his “best friend” and signed major energy deals, it is worth remembering what former British prime minister Lord Palmerston famously indicated, “Nations have no permanent friends or allies, they only have permanent interests.”The writer is a postgraduate government student at IDC Herzliya.
