Energy and Russian Policy with a close view on Putin's third presidential term

Russian Energy Policy: A Closer View on Putin’s Third Presidential Term Name of student Course Institution Date due Introduction Energy policy refers to the approach that governmental entities take to address issues pertaining to development of energy, particularly its production, distribution, and consumption. Energy policy is surrounded by many factors that affect it, which include legislative policies, investment incentives, treaties, taxation policies, and energy conservation, among many other public policy factors. The Russian energy policy is contained in a strategy document, which outlines the nation’s energy policy until the year 2020. Russia has been proved to have the largest natural gas reserves in the world, and it recurrently alternates the top oil producer position with Saudi Arabia. Russia is responsible for supplying over a third of the oil and natural gas that Europe uses, and it is even starting to export its surplus to East Asian markets, which are hungry for energy. The energy sector is obviously a vital commercial asset for Russia, but it is much more than just that; for more than a century, Russia’s energy sector has been one of its major pillars in the country’s stabilization and escalating power. Energy security has been classified as the most fundamental aspect of Russia’s national security, and more so because of the recent changes in global trends, which make the continuation of the strength of Russia’s energy sector doubtful. Through out the history of Russia, its energy sector has undergone cycles of fluctuating strength and weakness. Since the czarist times, it has been the focus of the country’s policy to manage these cycles. However, this history can be traced back to Vladimir Putin’s regime. This paper, therefore, will discuss the political pressure activated by Russia’s trade of oil and natural gas in Europe during Putin’s third presidency. Russia’s Essentials – the Energy Factor To understand the history of Russia’s energy sector and the happenings surrounding Putin’s regime, then it is necessary to understand the essentials of Russia’s energy sector. Against the common belief, Russia is a naturally susceptible country, because it is surrounded by other great power and it possesses no borders that are easily defensible. Additionally, Russia is such a massive country whose inhospitable territory is populated by ethnic groups that are not only diverse but have been at odds, since time immemorial, with the centralized authority of Moscow. These two factors alone already depict the vulnerability and dilemma of Russia, because its main battle is the delicate balance of keeping itself together as a country along with establishing itself as a regional power. Russia must first consolidate its people under the umbrella of a single authority and, secondly, proceed to create buffers against other regional powers by expanding its powers across the immediate neighborhood. A clear example of Russia in action on this imperative is the creation of the Soviet Union. Finally, Russia must control the natural resources it is endowed with to achieve a balance with the other powers beyond its locality (Doyle & Isenberg, 1997). Throughout history, Russia has employed the use of various tools in an attempt to achieve these essentials. These tools range from agricultural exports to conquest and intimidation using its military force. During the late 1800s, Russia attached an extra tool to the list that it could use to realize these strategic imperatives – energy. By the 1950s, the energy sector of Russia had become its major economic and political pillar. How Russia’s energy sector gave Kremlin the power to consolidate the country is evident from the revenues that the country gathers from natural gas and oil exports. Russia began enjoying revenues from the export of energy in the late 1800s, with over seven percent of the export earnings coming from oil export only (Baylis, Smith, & Owens, 2008). During the early stages of the Soviet Union in the late 1920s, oil export revenues doubled to about 14 percent and then to over 50 percent by the 1950s. Currently, half of the Russian government’s budget is funded from its energy sector. This influx, which is capital to Russia, continues to be its backbone in building a strong industrial and military basis, which is essential in maintaining its current status – a regional – if not global – power. On the other hand, this extreme dependence on energy by the Russian government continually became, and still is, an enormous vulnerability to it. Apart from the export revenues earned, Russia’s energy sector has created an industrialized and domestically stable state. The consumption of energy in Russia is very high especially because of the extremely cold temperatures throughout the better part of the year. Because of these inefficiencies plus the high cost of energy production, Russia has been forced to create its own reserves to ensure that its citizens and its industries are supplied with energy at the lowest prices. Russia has also been able to extend its influence to its regional neighbors. Russia’s use of energy has acted as leverage in the surrounding buffer states, and this has helped a lot to control regional production of energy, promotion of cheap energy supplies, and control over the energy transport infrastructure. Similarly, Russia has used these strategies to form its relationships with nations that are beyond the former Soviet states. A case in point is Europe, which has Russia as one of its two main suppliers of energy; Russia is Europe’s only supplier whose oil and natural gas reserve are the largest and whose prices are cheapest, historically. Russia’s ability to undercut all its competitors, plus its physical connectivity to Europe, has become the foundation of its relationship with Europe. Evolution of the Russian Energy Policy: From the 1800 Monarchy to the Vladimir Putin Regime and Beyond The usefulness of energy as the means through which Russia achieves the three essentials highlighted above has altered over time because of changing domestic and international circumstances. Therefore, Russia has been forced to revolutionize its policy, for its strength lies in its elasticity when it comes to the management of its energy sector. Russia’s energy policy was established during the monarchy in the late 1800s, when it was perceived that the Russian Empire had a great potential only if it would make large scale developments on its energy sector. However, the empire lacked both the capital and technology needed for such an indigenous energy industry. To solve this problem partially, the monarchy simplified its restrictions on foreign investment, which encouraged and invited firms from the U.S. and Europe to develop the Volga and Baku oil fields. This step caused the Russian Empire to enjoy warmer relations between itself and many Western countries, especially the U.S., UK, and France. Soon, all parties involved came to one agreement – the only way to make this venture profitable, despite the costliness caused by Russia’s harsh and vast geography, was to make Russia a massive producer. Through this policy, the Russian Empire produced over 32 percent of all oil exports globally by the end of the century (Barysch, 2007). Russia’s modern policies were initiated after the Second World War. The Soviet Union was left towering over a divided Europe as one of the two powers left standing. Therefore, Moscow took this as an opportunity to achieve global dominance in the energy field. By the 1960s, the Soviet’s output of oil had doubled; a factor that put Russia back to its position as the world’s second largest oil producer. Because of the en masse production of oil by the Soviet Union plus its ability to keep labor costs cheap, Russia managed to export its oil at unbelievably low prices – at almost half the price of oil from the Middle East. This was dubbed the “Soviet Economic Offensive” by the CIA. However, this policy was not designed by the Soviet Union to make money, but to shape a sphere of influence and top undermine the West. However, this policy was unhealthy for Moscow, because its production of oil was inefficient and its fields were rapidly becoming depleted. In the 1970s, oil prices soared following a series of crises from the Middle East plus the strain that Russia was already feeling of maintaining the vast Soviet Union. This was during Leonid Brezhnev...