Whenever you fill up your European compact car’s gas tank, or that of your American SUV, you pay as much as a Russian schoolteacher earns in a month. And every time you pay, you subsidize a regime that relies on energy, not information, as its main product. You finance the pre-modern and the inefficient, and perhaps worse: every time you pay, you may be collaborating with political evil.
Russia began 2006, the year of its chairmanship of the G-8, by launching a gas war with Ukraine. Having a virtual monopoly on supply, Russia decided that it could dictate prices. But Ukraine has a virtual monopoly on delivery, so Russia blinked in this standoff as soon as gas supplies to Western Europe dropped.
Modern economies rely not on monopolies, but on competition. Contemporary Russians consume competitive products: Nestle cereals, Mercedes cars, Hollywood movies. The problem is that they do not make them.
Russians pay for this consumption from the profits of gas and oil. State-owned and private multinational companies drill fuel in Russia and sell it to Europe and North America. The government partially redistributes profits by collecting taxes and paying salaries. Gas prices are growing, and so are Russian salaries. This causes inflation, because, other than fuel, Russians do not produce much else. To avoid inflation, the government deposits a large part of its profits into a Stabilization Fund.
But, because the Kremlin does not trust its own stocks and bonds, the Stabilization Fund invests in Western securities. Thus, the government loses its chance to modernize Russian cities, roads, hospitals, and universities. But inflation still grows, as do real estate prices. Mortgages are available at outrageously high interest rates. No civil servant, military officer, or professor is able to buy even a modest apartment, unless they have an additional — often illegal — source of income. Most don’t.
Russia exposes an ugly truth of our era: illiberal societies can grow just as fast — even faster — than open ones. Oil-rich states need global networks to sell their oil, to export their capital, and to import technologies and technologists. Among current United Nations members, countries with large natural resource endowments are also more likely to have a non-democratic regime.
In the 1980’s, Mikhail Gorbachev warned that Soviet oil resources were exhausted. Of course, due to the Western engineering and management that became available after Gorbachev launched his perestroika reforms, the country was soon producing more oil than ever — indeed, more than was ever believed possible — and oil men like Mikhail Khodorkovsky arose out of the blue.
But, while machines work everywhere, managers must abide by local traditions and belong to indigenous social networks. If the cultural component is important, why share the profits with Western-minded people like Khodorkovsky? So no surprise that other managers, with better relations with those in power, now run Khodorkovsky’s Yukos Oil, as well as another major firm, Sibneft.
Foreign managers don’t seem to mind. On the contrary, some of these managers, such as former German Chancellor Gerhard Schroeder, who now chairs a Gazprom subsidiary building a pipeline under the Baltic sea, are helping to expand Russia’s oil-based imperial designs over Europe.
In the strange new world of today, the modern and the pre-modern depend on each other. Thus, Russians trade oil for the products of knowledge. Imported technologies are cheap if you convert their prices into barrels of oil, so the country produces a shortage of its own geologists and chemists, not to mention economists and lawyers. It needs only one gang of politicians.
In fact, for such a country, local experts are not just redundant, but dangerous. In their moments of sincerity, Russian policymakers admit that Russia is, from their point of view, overeducated. They recently discovered what their Arab colleagues have known for a long time: that for an oil-rich regime, it is cheaper and safer to buy knowledge than to produce it.
So hidebound conservatives run Russian universities. Scientists go on trial for technical espionage, while ex-KGB spies sign multi-billion dollar contracts. Non-governmental organizations are met with suspicion and harassment, with new legislation seemingly designed to vanquish them. Political parties are created or banned by anonymous Kremlin clerks. Elections are either canceled or faked. Oil-poor neighbors like Ukraine are blackmailed.
An illiberal society can produce growth, but it cannot enjoy it. Redistribution schemes benefit the population if, and only if, they are controlled by democratic feedback. The Russian Stabilization Fund embodies an unstable combination of anxiety and greed that is typical for an undemocratic regime.
Dependent on gas, oil, and multinationals, the G-8 countries accept quite a lot of guff from their current chair, Vladimir Putin. Still, the arrogance of Russia’s rulers may have breached the West’s tolerance. Alternative sources to Russian energy are not the only means to decrease prices. Global civil society has developed instruments to halt consumption that produces harm. Elegant ladies, for example, no longer buy fur coats. Many Westerners eagerly pay more for “Fair Trade” coffee.
Would a similar approach work for the gas in your oven? A century ago, the idea of decolonization sounded just as absurd. Public awareness is as crucial now as it was decisive then.
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Alexander ETKIND teaches Russian Studies at Cambridge University.
