Russia and the Curse of Oil

Putin could have transformed Russia. He chose yachts and war instead.

You probably don’t need another reason to judge Vladimir Putin harshly. Crushing liberal democracy. Murdering critics. Stealing vast wealth. Running a government that resembles a crime syndicate, fomenting war and terrorism, invading neighbours, and committing widespread crimes against humanity. These would seem to be sufficient grounds for judgment.

But I want to add another reason to despise Vladimir Vladimirovich Putin. In terms of human suffering, it may be worse than all the others.

To see it, let’s zoom back and look at a chart of the inflation-adjusted price of oil across 75 years:

The big moves are obvious: The 1973 OPEC oil embargo shatters the post-war stability, causing unthinkably high prices through the remaining years of the 1970s; the Iranian revolution of 1978-79 causes another surge; in 1985, as exploration and development spurred by the 1970s shocks starts bringing oil online, the price plunges; it stays low until a long climb up starts in 2002.

So what does that have to do with Putin? Everything.

In 2015, the late Senator John McCain said “Russia is a gas station masquerading as a country.” A touch hyperbolic, but he had a point. The Soviet Union, then Russia, had and has giant reserves of oil and gas. That is a fact with enormous consequences.

See the 1970s? It was the era of Brezhnev stagnation in the Soviet Union, but the surging price of oil gave the Soviet system a shot in the arm. Some political scientists argue that it’s not a coincidence that the riskiest post-war foreign military adventure the Soviets undertook, the invasion of Afghanistan, was launched in 1979.

Now see the price slump in the early 1980s, and the collapse in 1985? Gorbachev came to power in 1985 with the conviction that the Soviet system couldn’t go on without major reform. Again, not coincidence.

In the late 1980s and early 1990s, Soviet oil production crumbled. Compounded by low prices, it was a devastating economic blow. Farewell, USSR.

The 1990s were the “Yeltsin years.” Oil prices slumped further. Economic chaos, decay, decline. Russia seemed to be on a trajectory to oblivion.

In 1999, Yeltsin made Putin prime minister. A year later, Putin became president. Not much changed. Remember the sinking of the submarine Kursk? The gross mishandling of the school siege in Beslan? The decline of the Yeltsin years continued and Putin hardly looked like the strongman he sought to portray.

But things did turn around, for Putin and for Russia. You can see exactly where by looking at that chart of the price of oil.

Gushing oil money gave Putin the opportunity to enrich himself and the crime family around him, solidifying his hold on power. It also allowed him to start a massive rebuilding of the Russian military. By 2010, Putin was in a much stronger position. He increasingly became emboldened, willing to murder opponents not only within Russia but abroad. Cracking down harder on dissent. Starting border conflicts. Funding insurgencies. Getting involved in Syria. And finally, launching the first invasion across international borders in Europe since the Second World War.

Boris Yeltsin inherited a disaster and never had the resources needed to turn it around. Drunk or not, he was doomed.

But Putin? He took charge shortly before the watershed moment when oil money started gushing into Russian coffers.

Putin promised a “dictatorship of law,” meaning he was going to crack down on corruption and provide Russia with a government that was harsh but fair, a government that respected the rule of law — a government that would promote genuine, lasting economic development and growth. Russia has never had what a Westerner would regard as good government and the dreams of Russia becoming Sweden with nukes were never going to happen. But Putin had more than a decade and a half with both the power and the resources to at least curb the worst excesses of Russian governance, to diminish corruption, to reward competence, to promote civil society, and to advance economic development at home and economic integration with Europe and elsewhere. He had the chance to set Russia on a path with a real future.

Instead, he used this historic moment to enrich himself, entrench his crime family, and bully his neighbours. As a direct result, it is highly likely that Russians will be much poorer and much less free for decades to come: In terms of the sheer quantity of human suffering inflicted, this may be Vladimir Putin’s worst crime.

But let’s broaden the lens to see beyond Russia, because there’s an important lesson here for us, too. It involves what is sometimes called the “resource curse.”

Heaps of research shows that in countries that don’t already have strong, effective governance, an abundance of natural resources can do terrible damage. Price swings inflict various economic harms. But worse, governments become less concerned with popular opinion, democracy declines, civil society withers, and human rights are restricted. That’s because popular support is no longer the principal source of power in such a society. The money generated by the natural resources is. So rulers seek to control that revenue while repressing the population to ensure it doesn’t get in the way.

Oil is the worst offender. Oil makes the connected few rich while impoverishing and degrading everyone else. Vladimir Putin would never have been able to do all he has done without oil money. Same for Iran. Same for Saudi Arabia.

This means something profoundly important about transition to clean energy. Yes, it’s absolutely essential if humanity is to have a fighting chance against climate change. But it also promises to lift the curse that has blighted countries worldwide and endangered global security.

Do you despise Vladimir Putin? Put up a Ukrainian flag. Then put up a solar panel.

This dynamic is already well underway. After having felt Putin’s knife at its neck, the European Union is weaning itself off Russian energy as fast as it can, in part by accelerating the energy transition programs already underway to fight climate change. This means, according to a new analysis of the International Energy Agency, that the level of wealth and power Russia derived from oil and gas in the Putin years will likely never return.

This is happening as a direct result of Vladimir Putin’s geopolitical blundering — so in the long run it may be the best thing Putin ever did for Russians.