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First Yukos, Then Georgia
The article on this page is owned
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article: http://online.wsj.com/article/SB121858636836735065.html?mod=djemEditorialPage
Holman W. Jenkins, Jr.
Wall Street Journa
August 13, 2008
Now the world is getting an idea of what a "war for oil" really looks
like. Few in the West appreciate the degree to which Vladimir Putin and
the Soviet, er, Russian, elite subscribe to a prewar view of power
relations and national greatness. Their view is not based on
self-reproducing institutions and innovation and the power of trade,
but on territory and resources -- lebensraum, as one of their
intellectual progenitors called it.
Whatever the pretexts and emotional resonances, the Republic of
Georgia, transit territory for two important energy pipelines, was also
a challenge to Mr. Putin's pursuit of power through control of energy
supplies, especially for home heating, to Western Europe.
Western governments and Western oil executives have played an unwise
role in Mr. Putin's plan. No amount of contract abrogation, outright
seizure of property or subsidiary mayhem by Russian authorities seems
able to dissuade them from throwing good money after bad in pursuit of
Russian resources. Western minority shareholders in Yukos were wiped
out with nary a peep when the Russian government seized the oil company
on tax charges. There's been virtually no official pushback as
environmental offenses were alleged as a reason to squeeze Western
partners out of various drilling and pipeline projects after billions
of dollars were committed.
Indeed, with what breezy confidence Mr. Putin must have turned Western
oil companies into his political punching bags, knowing that back home
Western politicians (Nancy Pelosi, Byron Dorgan, Dick Durbin, etc.)
were doing exactly the same in pursuit of their own narrow and
shortsighted political quests.
Barack Obama thinks the solution to high gasoline prices is punitive
taxes on Exxon. All this in the background could not have failed to
reassure Mr. Putin that the West would not invest political capital in
protecting the interests of its oil companies. He learned that his
allies could go so far as to commit nuclear terrorism (so it has been
alleged) to murder one of his political critics in London without
consequences. Why expect any blowback from merely repeatedly defrauding
Western energy investors?
All along, governments and CEOs have reasoned that sooner or later
Russia would discover its stake in commercial comity: Russia needs
Western capital and technology to develop its oil. To get, you have to
give; potential partners must see over time that Russia's word is
reliable.
Westerners miscalculated Mr. Putin's ability to miscalculate, a mistake they've made before.
More than once, we've likened Mr. Putin to Saddam Hussein. Both got the
upper hand over aging mentors, and forced them into retirement. Both
launched wars (Chechnya and Iran). Both gambled that their control of
energy made them immune to Western pushback. Never mind that a U.S.-led
coalition willingly shut Iraqi and Kuwaiti oil out of world markets
after Saddam's invasion in 1990, even at the cost of spiking prices and
recession in the West. Saddam to the end believed dangling oil
contracts in front of French and Russian companies would be proof
against a second President Bush's determination to remove him.
Likely, Mr. Putin miscalculates too. Western powers may not do much
immediately about his squeeze on Georgia, but over time he will find he
has created conditions for the emergence of a coalition to contain
Russian energy power. His immediate neighbors, with fresh memories of
Soviet domination, will be even more eager to align themselves with the
West and NATO. Possibly even the myopic Germans will discern they've
gone too far in putting themselves in energy hock to Moscow. They may
even start asking pointed questions about the presence of former
Chancellor Gerhard Schroeder on the board of Nord Stream, a Gazprom
affiliate devoted to increasing German reliance on Russian gas.
Those of escapist bent will see in all this a reason to put Congress in
charge of spending billions aimed at the false utopia of "energy
independence." You will hear such blather in the coming months, but it
will amount to little. America instead will grapple with the need to
administer the reality principle to the Russian regime; we will face up
to our responsibility to diversify our energy supplies -- dropping our
trade barriers to Brazilian ethanol and opening up our domestic
resources to development would be good places to start. The time to
really worry will be when America, in pursuit of primitive concepts
like energy independence, decides to follow Mr. Putin back to the 1930s.
