The Role of Oil and Gas in Russia’s State Economy


As Winston Churchill famously said of Russia, “It is a riddle, wrapped in a mystery, inside an enigma.”

Indeed, the opaque nature of Vladimir Putin’s most recent aggression in Ukraine – Russian-speaking “insurgents” with balaclava’s and unmarked uniforms, mysterious pipeline explosions followed by near real-time Russian media coverage, and a script that echoes past Russian adventures in Georgia, 2008 – tempt some in the West to explain away Putin’s actions to a sheer desire to return to the old boundaries of the Soviet Union, pure and simple.  While power lust and misty-eyed Russian nostalgia to go back to the USSR have their place, it would be a mistake to say that these are the only reasons driving Putin and the Russian’s territorial grab. They are not: there is a much more serious, and pragmatic motive at work.  Simply put, it is the interests of Russia’s massive oil and gas industry, and its central role in the Russian state economy.

The following excerpt is from our white paper entitled Oil & Gas Perspectives: The Russian Enigma and Ukraine – ‘Since Putin completed the state takeover of the Russian oil & gas industry in 2006, he has demonstrated a willingness to wield this industry as a geopolitical weapon against adversaries. “Adversary,” in this context, is any state or corporate enterprise that tangibly supports alternative supplies of natural gas to Europe, thus undercutting Russian dominance in the region. This poses very specific risks to oil and gas companies vested in or operating in Europe and surrounding countries.’