Russian Politics Today Stability and Fragility

This chapter traces the evolution of the Russian oil and gas sector. We argue that, at least since 2000, Russia’s vast natural resources have been a source more of stability than of fragility for the economy. This is in part due to the distinctive history and role of fossil fuels in the context of a Soviet economy that was designed to be self-sufficient and thus diversified. While this did not prevent economic stagnation in the late Soviet period (1970s–80s) or a steep decline in production during the early years of post-Soviet transition (1992–99), it created the foundations for a petrostate that gradually came to be more resilient and adaptable in the face of fluctuations in energy prices, financial crises, and increasingly contentious relations with the West. Following 2000, while the state played an increasingly assertive role in the oil and gas industry, the government also adopted various measures to limit dependence on resource rents, to reduce vulnerability to sudden shifts in global energy prices, and to increase economic stability in the face of new geopolitical challenges. These included a Stabilization Fund, new budgetary practices to control spending and support other industries, diversification of supply flows and export composition, and intensified investment in new infrastructural projects. While there are now growing concerns over carbon emissions and the technological demands of further exploration, hydrocarbons have been mostly a positive force in the Russian economy. Whether that holds true following the war in Ukraine and the imposition of massive Western sanctions in 2022 remains to be seen.