Jenkins: First Yukos, Then Georgia

I think that this column by Holman W. Jenkins, Jr. in the Wall Street Journal, if not well intentioned, does a lot of projecting and stretching, including a number of favorite ideological issues attached to unrelated events. His central argument, however, is very interesting: “Western powers may not do much immediately about his squeeze on Georgia, but over time he will find he has created conditions for the emergence of a coalition to contain Russian energy power.” But Mr. Jenkins is assuming that Washington and the EU are capable of acting strategically in their own interests in relations with Russia – something that I have not seen evidence of in quite a long time. Furthermore, the “containment” of Russian energy imperialism is in essence the promotion of market competition – which is actually very good for Russia’s future. Let’s not be tricked into thinking that Russia can’t be powerful and successful while at the same time there is stability in the Caucasus and near abroad. There’s no reason to assume that Putin’s grandiose and confrontational foreign policy ambitions represent the interests of the Russian people.

First Yukos, Then Georgia August 13, 2008; Page A15 Now the world is getting an idea of what a “war for oil” really looks like. Few in the West appreciate the degree to which Vladimir Putin and the Soviet, er, Russian, elite subscribe to a prewar view of power relations and national greatness. Their view is not based on self-reproducing institutions and innovation and the power of trade, but on territory and resources — lebensraum, as one of their intellectual progenitors called it.

Whatever the pretexts and emotional resonances, the Republic of Georgia, transit territory for two important energy pipelines, was also a challenge to Mr. Putin’s pursuit of power through control of energy supplies, especially for home heating, to Western Europe.Western governments and Western oil executives have played an unwise role in Mr. Putin’s plan. No amount of contract abrogation, outright seizure of property or subsidiary mayhem by Russian authorities seems able to dissuade them from throwing good money after bad in pursuit of Russian resources. Western minority shareholders in Yukos were wiped out with nary a peep when the Russian government seized the oil company on tax charges. There’s been virtually no official pushback as environmental offenses were alleged as a reason to squeeze Western partners out of various drilling and pipeline projects after billions of dollars were committed.Indeed, with what breezy confidence Mr. Putin must have turned Western oil companies into his political punching bags, knowing that back home Western politicians (Nancy Pelosi, Byron Dorgan, Dick Durbin, etc.) were doing exactly the same in pursuit of their own narrow and shortsighted political quests.Barack Obama thinks the solution to high gasoline prices is punitive taxes on Exxon. All this in the background could not have failed to reassure Mr. Putin that the West would not invest political capital in protecting the interests of its oil companies. He learned that his allies could go so far as to commit nuclear terrorism (so it has been alleged) to murder one of his political critics in London without consequences. Why expect any blowback from merely repeatedly defrauding Western energy investors?All along, governments and CEOs have reasoned that sooner or later Russia would discover its stake in commercial comity: Russia needs Western capital and technology to develop its oil. To get, you have to give; potential partners must see over time that Russia’s word is reliable.Westerners miscalculated Mr. Putin’s ability to miscalculate, a mistake they’ve made before.More than once, we’ve likened Mr. Putin to Saddam Hussein. Both got the upper hand over aging mentors, and forced them into retirement. Both launched wars (Chechnya and Iran). Both gambled that their control of energy made them immune to Western pushback. Never mind that a U.S.-led coalition willingly shut Iraqi and Kuwaiti oil out of world markets after Saddam’s invasion in 1990, even at the cost of spiking prices and recession in the West. Saddam to the end believed dangling oil contracts in front of French and Russian companies would be proof against a second President Bush’s determination to remove him.Likely, Mr. Putin miscalculates too. Western powers may not do much immediately about his squeeze on Georgia, but over time he will find he has created conditions for the emergence of a coalition to contain Russian energy power. His immediate neighbors, with fresh memories of Soviet domination, will be even more eager to align themselves with the West and NATO. Possibly even the myopic Germans will discern they’ve gone too far in putting themselves in energy hock to Moscow. They may even start asking pointed questions about the presence of former Chancellor Gerhard Schroeder on the board of Nord Stream, a Gazprom affiliate devoted to increasing German reliance on Russian gas.Those of escapist bent will see in all this a reason to put Congress in charge of spending billions aimed at the false utopia of “energy independence.” You will hear such blather in the coming months, but it will amount to little. America instead will grapple with the need to administer the reality principle to the Russian regime; we will face up to our responsibility to diversify our energy supplies — dropping our trade barriers to Brazilian ethanol and opening up our domestic resources to development would be good places to start. The time to really worry will be when America, in pursuit of primitive concepts like energy independence, decides to follow Mr. Putin back to the 1930s.