No. 113: Energy

This edition examines the latest trends, strategies and dynamics driving Russia's energy policy. In the first article, Andreas Heinrich and Heiko Pleines analyze the political challenges facing Russia as an energy rich country. It is argued that under the current Russian model, inefficient governance allows the exploitation of resource revenues within political patronage networks, but that the insulation of the management of resource revenues from these patronage networks guarantees the future availability of rents. At the same time, the distribution of smaller parts of the rents to the larger population is meant to ensure that no serious political challenge to the patronage system will occur. In the second article, Jonas Grätz considers Russia's strategy towards the Nord Stream and South Stream pipelines. He suggests that, by emphasizing Russian foreign policy goals and not economic efficiency, Gazprom's reliability and competitiveness is being eroded, because investment resources are being diverted towards long-term potential benefits of market monopolization, rather than the immediate necessity of improving storage capacity and production. In the third article, Li Lifan assesses Russian-Chinese energy relations, concluding that there is great scope for mutually-beneficial cooperation in the years ahead, but at the same time a number of obstacles and limitations persist and need to be overcome. In the final article, Peter Rutland examines the impact of the Fukushima accident in Japan on nuclear energy in Russia, and concludes that it has not altered Russia's strategy of constructing new reactors at home and abroad to free up natural gas for lucrative export. However, Rutland argues that the current slump in global natural gas prices poses a serious challenge to this approach.