Russian gas is foreign policy tool, analysts say
It could be called Petro-Kremlin. Over the past year the Russian state has effectively renationalised a third of the country's vast energy resources, creating an oil-and-gas goliath that could be used to revive Soviet-style great power status.
'Instead of the military force the Soviet Union used to use to project its power, Russia is using oil as a major tool of foreign policy,' says Michael Heath, a political analyst with Aton, a Russian brokerage.
Last week's gas war with Ukraine, which ended with Kiev accepting a nearly fivefold increase in the price of Russian energy, handed a symbolic victory to the Kremlin.
Ukraine, which broke free from Moscow's influence in the 'Orange Revolution' a year ago, had protested that Russia's proposed price rise - to US$230 per thousand cubic metres of gas - was more than twice the rate paid by other neighbours of Russia, including Georgia, Latvia and Estonia. Belarus, a loyal ally of Russia, pays just US$47 for the same amount of gas.
'This may not be a great geopolitical policy, but it's better than nothing' says Vladimir Zharikhin, deputy director of the official Institute of Commonwealth of Independent States Studies in Moscow.
The Kremlin has gone far beyond taxing energy profits, and moved to take over the industry.
Russia's third-largest oil firm, Yukos, was dismantled along with the prosecution of its politically defiant owner, Mikhail Khodorkovsky, and its production units gobbled up by state oil firm Rosneft. The government took a controlling 51 per cent stake in Gazprom, the natural-gas giant that holds a quarter of the world's reserves.
'Now the state directly controls about 30 per cent of petroleum production in Russia and the big question is, how much more will it take?' says Valery Nesterov, an energy expert with Troika Dialogue, a Russian investment bank.
