Russia's Oil and Gas Industries and Russian Foreign Policy

Russian oil and natural gas industries are very important players in the global energy market, particularly in Europe and Eurasia. Another key trend has been the concentration of these industries in the hands of the Russian government in the past decade. This latter phenomenon has been accompanied by an authoritarian political system under the tight control of President Vladimir Putin, a former officer of the Soviet KGB intelligence service. The global economic crisis hurt Russia's energy firms, Russia's economy, and Russia's international clout, as energy prices tumbled. Russia has tried to purchase a controlling stake in pipelines, ports, storage facilities, and other key energy assets of European countries. Russia needs these assets to transport energy supplies to Western European markets, as well as to secure greater control over the domestic markets of the countries of the region. In several cases where energy infrastructure was sold to non-Russian firms, Russia cut off energy supplies to the facilities. Another objective Russia has pursued has been to eliminate the energy subsidies former Soviet republics have received since the fall of the Soviet Union, including by raising the price these countries pay for natural gas to world market prices. It is not clear whether the pursuit of Russian foreign policy objectives is always the primary explanation for the actions of its energy firms. Few would disagree in principle that the elimination of subsidies to post-Soviet countries is a sound business decision, even if questions have been raised about the timing of such moves. The pursuit of multiple pipelines can also be portrayed as a business decision, although some analysts disagree about its wisdom. Many countries of central and eastern Europe are concerned that Russia may use their energy dependency to interfere in their domestic affairs or force them to make foreign policy concessions. Countries of the region also fear that by controlling energy infrastructure in their countries, Russia is able to manipulate the internal political situation by favoring certain local businessmen with participation in local business ventures of Gazprom or other Russian energy firms. U.S. Policy

The United States has criticized what it has viewed as Russian efforts to use its energy supplies as a political weapon. U.S. "Pipeline Diplomacy"

The United States has urged European countries to diversify their energy, supplies, reducing their dependence on Russia. The United States has strongly advocated the building of multiple pipelines to supply energy from Central Asia and Azerbaijan to Europe. Congressional Response

Members of Congress have expressed concern about the impact of Russian energy dependency on the countries of central and eastern Europe. Congress has also passed resolutions that refer to concerns about Russian energy policy.
The Russian oil and natural gas industries are key players in the global energy market, particularly in Europe and Eurasia. Another trend has been the concentration of these industries in the hands of the Russian government. This latter phenomenon has been accompanied by an authoritarian political system, in which former intelligence officers play key roles.
Russian firms have tried to purchase a controlling stake in pipelines, ports, storage facilities, and other key energy assets of European countries. They need these assets to transport energy supplies to lucrative western European markets, as well as to secure greater control over the domestic markets of the countries of the region. In several cases where assets were sold to non-Russian firms, Russian firms cut off energy supplies to the facilities. Russia has also tried to build new pipelines to circumvent infrastructure that it does not control. Another objective Russia has pursued has been to eliminate the energy subsidies former Soviet republics have received since the fall of the Soviet Union, including by raising the price these countries pay for natural gas to world market prices.
It is not completely clear whether the pursuit of Russian foreign policy objectives is the primary explanation for the actions of its energy firms. Few would disagree in principle that the elimination of subsidies to post-Soviet countries is a sound business decision, even if questions have been raised about the timing of such moves. Even the pursuit of multiple pipelines can be portrayed as a business decision. On the other hand, many countries of the region are concerned that Russia may use their energy dependency to interfere in their domestic affairs or to force them to make foreign policy concessions. Countries of the region also fear that by controlling energy infrastructure in their countries, Russian energy firms are able to manipulate the internal political situation by favoring certain local businessmen and politicians. However, the current global economic crisis has hurt Russia's energy firms and Russia's international clout, as energy prices have tumbled.
Bush Administration officials repeatedly criticized what they viewed as Russian efforts to use its energy supplies as a political weapon. The Obama Administration, like its predecessor, has urged European countries to reduce their dependence on Russian energy, but has said the United States is trying to cooperate with Moscow on the issue. The United States has strongly advocated the building of multiple pipelines from Central Asia and Azerbaijan to Europe. Members of Congress have expressed concern about the impact on European countries of their dependence on Russian energy. In the 111th Congress, committees have held hearings that have touched on the issue. Congress has also passed resolutions that refer to worrisome aspects of Russian energy policy.