The Energy Curse: Dependency in Soviet and Russian Policy

34 Pages Posted: 23 Aug 2010

See all articles by Stacy Closson

Stacy Closson

affiliation not provided to SSRN

Date Written: August 22, 2010

Abstract

This paper asks: why has Russia not been more effective over the past four decades in wielding power through its supply of energy‘ That is, what is it about Russian management of its energy system that does not allow it to employ its full authority over the countries that depend on it for energy‘ In particular, why would Russia transfer a failed policy of subsidies onto its newly independent states‘ Critical to answering these questions is an understanding of the Soviet Union’s hydrocarbon sales to the Eastern bloc, all members of the CMEA. The ‘energy card’ was strongest in the Soviet 1970s and in Putin’s Russia from 2000 to the present. Yet, academics have not yet examined the trading practices within the CMEA to see if there are parallels and divergences in Russia’s energy trade with the former Soviet states after 1991. This paper will argue that in both the 1970s and 2000s, when Russia was reaching peak production and windfall profits were high, Moscow had an opportunity to sustain long-term control over the market. Many of the same strategies were employed, which led to the weakening of the Russian economy and its ability to influence external actors. This paper explores the historical and unique conditions in making the comparison and draws lessons for Russia and the West. In the end, by comparing ‘then’ and ‘now’, we see a pattern of negative repercussions when the energy card is employed. Then, it reinforced the growing socio-political disenfranchisement of Warsaw Pact nations, leading to the disintegration of the Soviet Union. Now, it has hampered sustainable economic growth of Russia and pushed Europe to scramble for alternatives to Russian gas. Then and now price subsidization, poor infrastructure, and lack of investment has inhibited development of Russia’s energy sector and, by extension, its ability to manipulate the market. This study employs a within case study cross-temporal comparative framework. The paper will first examine the Soviet-CMEA 1970s oil trade. It will then compare this with the 2000s gas trade with the former Soviet states, all members of the CIS. The paper will conclude with lessons for Russia’s energy management.

Keywords: Russia, energy, CMEA, CIS, dependency

Suggested Citation

Closson, Stacy, The Energy Curse: Dependency in Soviet and Russian Policy (August 22, 2010). Available at SSRN: https://ssrn.com/abstract=1663402 or http://dx.doi.org/10.2139/ssrn.1663402

Stacy Closson (Contact Author)

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