Russia is again emerging as a superpower -- but the reason has less to do with nuclear weapons than with oil.
The country has its swagger back, as its economy expands for the fourth consecutive year and the world price of oil at more than US$45 a barrel. Now the second-largest oil producer behind Saudi Arabia, Russia has positioned itself as an important alternative supplier to the increasingly unstable Middle East.
But Russia's oil supply is looking none too stable these days. The Kremlin's protracted battle with its largest producer and exporter of crude oil, Yukos, has raised doubts among some skittish traders about the reliability of Russian supplies and helped drive up prices in unusually tight global oil markets.
The Yukos affair began last October, when the government arrested Mikhail Khodorkovsky, the company's founder. Officially, he was detained on tax and fraud charges, though there has been speculation the arrest may have been retribution for his support of political parties opposed to President Vladimir Putin.
Not long after that, Yukos was hit with a U$3.4 billion tax bill for 2000, and some analysts said tax bills through last year could total US$10 billion. At the same time, the government has barred the company from selling assets to raise cash and has frozen its bank accounts. Yukos' share price has tumbled -- and concern about the reliability of Russian oil supplies has soared -- amid the appearance that the Kremlin is driving the company into bankruptcy.
Commitment
People in the industry are split on whether Yukos will survive in its current form, but they are almost unanimous in dismissing concerns about Russia's commitment to remain an oil-exporting superpower. They, and the government, point out that even amid the back-and-forth over Yukos, Russia's oil production has not dropped by a single barrel.
Indeed, Russian oil production has risen strongly over the past year. And Viktor Khristenko, the industry and energy minister, publicly reassured Putin and the world on Wednesday that the Yukos situation would not disrupt exports.
"Production is growing steadily," Khristenko told the president, in remarks that led national news broadcasts. For the first seven months of this year, Russia produced about 2 billion barrels of oil, and the year's total should be almost 3.3 billion barrels, he said. Last year, Russia produced 3.073 billion barrels.
Oil markets are likely to remain jittery for a while, because of sabotage in Iraq, yesterday's referendum on President Hugo Chavez of Venezuela and the Aug. 31 deadline for Yukos to pay its 2000 tax bill. But the Kremlin is unlikely to let Russian exports drop significantly as a result of its fight with Khodorkovsky, industry executives and analysts said.
For one thing, Russia can produce more oil than it has the pipelines to export, so any dip in Yukos' production could be made up elsewhere. For another, high prices are letting Russia reap windfall profits from oil sales. Lastly, the Kremlin is unlikely to risk the international opprobrium that turning off Yukos' taps would generate.
"Russia's international standing would be destroyed," said Christopher Weafer, chief strategist at Alfa Bank here. "The Kremlin wouldn't jeopardize its position in the global economy by what would be nothing short of an act of global economic terrorism."
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