Professor Marshall Goldman of Harvard has a letter to the editor published in today’s FT, disputing Gideon Rachman’s claim that Russia’s build up of currency reserves is politically harmless because Moscow would never be willing to sacrifice its reputation as a supplier of energy. Goldman writes:
I am afraid this is wishful thinking. Russian oil and natural gas have been used not only as economic but also as political weapons at least a dozen times in countries ranging from Israel, China and Yugoslavia to Lithuania and Estonia. Since we tend to have short memories and since there are not many alternative sources of supply available, especially for natural gas, you might say that the Russians have us, especially Germany (which imports 40 per cent of its gas from Russia), as well as several east European countries (which import 100 per cent of their gas from Russia) over a barrel. Vladimir Putin understood this and he encouraged Gazprom, along with other Russian energy companies, to extend their reach, even to the UK and the US.