Tough Choices for Russia

Over the past decade, oligarchs and oil have shaped the contours of the Russian landscape. After the Cold War, Russia was taken over by a handful of gangster-oligarchs, who purchased the country’s oil companies from the nation’s insolvent banks. The companies were corrupted by their leaders, who received manufactured goods at below-market prices and sold them at normal rates. Profits were retained outside Russia, and the country was, to say the least, robbed—for as much as $500 billion from 1993 to 1998. These egregious steals cultivated animosity among Russian oligarchs who fought amongst themselves throughout the 1990s.

Back then, the U.S. rhetorically toasted democracy while separating itself from Russia’s “internal” power struggles. But today, Russia’s domestic scene is of international concern because a good deal of oil and Russian President Vladimir V. Putin’s political career hang the balance.

Over the past six months, Russian oil companies have undergone rapid and considerable consolidation, attracting attention and investment from American and European firms. In April, the country’s biggest and fourth-biggest oil companies, Yukos and Sibneft, merged to form the largest Russian company in post-Soviet history; ExxonMobil and Shell immediately announced their interest in joining the new partnership. Prior to this, British Petroleum merged with Russian oil company TNK, and the new company rebounded financially. Such an influx of foreign investment is the first step toward linking Russian oil with the United States.

Transportation of oil has also long hindered Russian oil from reaching the United States, which imports eight million barrels a day, primarily from the Middle East. Until now, most Russian oil has reached Western Europe—whether through Ukraine and Belorus, Northern Europe, or Turkey and the Mediterranean. But after Sept. 11, the United States has become increasingly concerned that dependence on Middle Eastern oil could jeopardize national security. As a result, Russia’s five largest oil companies have been looking into constructing a pipeline from Western Siberia to Murmansk on the Arctic Ocean. From there, a supertanker could transport oil to the eastern seaboard of the United States, helping to alleviate its dependence on OPEC.

The U.S. will presumably welcome Russia’s efforts to diversify America’s oil supply. A potential stumbling block arises, though, in that the main orchestrator of the Murmansk project is Putin’s political nemesis, Mikhail Khodorovsky. Chairman of YukosSibneft and expected presidential candidate in March, Khodorovsky has been a motivating force in the industry’s drive to expand west. Given President Bush’s effusive rapprochement with Putin after Sept. 11, this places the U.S. in a tough spot: backing the project could give Khodorovsky a boost and undermine Putin’s political desirability.

Putin could also suffer from U.S. support of another Russian titan, not of oil, but of the media: Vladimir Gusinsky, former owner of the TV station NTV. Guilty of loan fraud, Gusinsky fled Russia to escape charges but was recently arrested in Greece. Israeli Prime Minister Ariel Sharon, who has received favorable media coverage from Gusinsky, has defended him, as have some U.S. business leaders and members of Congress. Even if the media magnate isn’t a national security threat as Putin claims, he is a political threat—unafraid to voice his opposition to current Russian leadership. Thus, the prosecution of Gusinsky is high on Putin’s agenda, in anticipation of Gusinsky-led media coverage damaging him before the election.

If President Bush can help it, he will undoubtedly try to avoid the oligarchs until after the Russian presidential election (to say nothing of his own). But banking on this political moment, the anti-Putin oligarchs might try to force Bush’s hand. They know that if the Bush administration backs Murmansk and recommends that extradition charges be dropped against Gusinsky, Putin will suffer the political blows.

This is a peril for the United States, which ostensibly finds a friend in Putin. More pernicious, however, is the dangerous trend this situation represents. Khodorovsky and Gusinsky are using the pull of American investors in Russian oil companies and Americans supportive of Sharon against Putin. Thus, while fractured in their individual ambitions, both are trying to blackmail the United States to get what they want at home.

In the 1930s, the U.S. did not meddle in Stalin’s purges because Americans believed that factions within Soviet leadership would destroy each other (and Soviet socialism) through internecine fighting. Today, we cannot bank on such grand designs and must reassess our position vis-à-vis Russia’s “internal affairs.” (In fact, Putin already seems to be losing this battle as Greece has recently refused to extradite Gusinsky.)

Instead, the U.S. needs a firm response. First, it needs to be clear that it will not be manipulated—whether by an oil baron, a media tycoon, or the Kremlin itself. Second, it needs to assert priorities with respect to Russia and determine whether the benefits to national security really outweigh the complications an oil project would bring. Finally, the U.S. needs to decide whether Putin is in fact a facilitator of U.S. interests. If not, it must ask whether it is prepared to embrace global partnership with a handful of oligarchs who bankrupted their own country during the first decade of reconstruction after the Cold War.

Christine A. Telyan ’04 is a social studies concentrator in Eliot House.