Russia views energy as a tool for achieving its larger modernization objectives. As explained by Putin, the role of the energy sector is to work with the state to promote these objectives. Relying on market forces is essential, but insufficient: “Even in developed countries, market mechanisms do not provide solutions to strategic tasks of resource use, protecting nature, and sustainable economic security.”37 The state therefore has to shape policy outcomes by actively seeking to control social resources, coordinating the activities of key social players and assisting the country in finding its niche in the global economy. In order to achieve these tasks the state had to be sufficiently concentrated, and relatively autonomous of interest group pressures.
The Kremlin was therefore ruthless to those oligarchs whom it perceived as violating his “new deal” -- that is, not staying out of politics and not cooperating with the state in the implementation of its economic vision. Boris Berezovski and Vladimir Gusinski, who launched an anti-Putin propaganda campaign using their media empires and their own TV-channels, were charged with not paying their financial debts to the state and fled the country to avoid prosecution. Mikhail Khodorkovski too was given time to leave the country, but chose not to, and on October 25, 2003 was arrested on charges of multiple fraud and tax evasion. Despite their selective nature and questionable legality, the Kremlin’s actions against oligarchs were strongly supported by the general public that overwhelmingly felt robbed by Yeltsin’s reforms. In a country where notions of law and justice were severely undermined, there was hardly a legal solution to the problem of excessive wealth concentration and the restoration of a balance between state authority and big business.38
With the overall objectives of economic recovery and political independence, Russia has developed a coherent strategy of exploiting the country’s abundance in natural resources. In the world of growing energy prices, the emphasis shifted from providing macroeconomic discipline and tough fiscal policies toward the desire to capitalize on Russia’s reserves of natural gas and oil. Russia’s strategy has included several important elements. Among them are increasing the state’s share in energy companies, such as Gazprom and Rosneft, often at the expense of Western capital; building pipelines in all geographic directions; seeking to negotiate long-term contracts with energy consumers and obtain access to their markets and distribution networks; raising energy prices for its oil and gas-dependent neighbors; moving to control transportation networks in the former USSR and coordinating its activities with other energy-producers. Acting on these policy guidelines, the state renegotiated production-sharing agreements with Western companies in the most lucrative oil fields in Siberia and the Far East. Foreign energy giants, such as Royal Dutch Shell and British Petroleum, now had to play by different rules as introduced by the more assertive Russian state. In the Caspian Sea Russia sought to remain an important oil producer and preserve its status as a major transit country through which to carry energy from the Caucasus and Central Asia to Europe.
Although it has generated anxiety in a number of energy-consuming countries in Europe and the United States, the strategy reflects – more than anything else – Moscow’s legitimate desire to capitalize on its energy reserves and improve its chances to serve as a reliable oil and gas supplier of primarily Western countries. Against the advice of some energy analysts and geopolitical thinkers, the Kremlin did not think it would be better off sharply re-directing its oil and gas supplies toward Eurasian countries, such as China and India. Judging by statements of its key officials, Russia continues to welcome energy cooperation with the United States and other Western nations. As Russia’s ambassador to the U.S. Yuri Ushakov wrote, although American investments in Russia grow every year and Russian oil supplies to America reach an unprecedented level every year, “in real terms, our energy cooperation is way below potential.”39