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When oil prices rise, Russia has freedom over a barrel

By Anne Applebaum
Tuesday, January 4, 2011;

The judge had already postponed the verdict without explanation ("The court does not explain itself," said a spokesman). Before reading it, he barred journalists and the defendant's family from the courtroom. No one should have been surprised, therefore, when Mikhail Khodorkovsky - the Russian oil baron who once defied the Kremlin - received a further six years in prison last week, on top of the eight he's served. This time, he was sentenced for "stealing" an impossible quantity of oil, the same oil he has already been accused of selling without paying taxes.

In fact, nobody pretended that the Khodorkovsky verdict was anything but a political statement, one of a series of gestures the Russian government has made to its own public and to the rest of the world in recent weeks. The blocking of corruption investigations; the expressions of support for the brutal and violent "elections" in neighboring Belarus; the deaths of journalists; all of these seem designed to contradict the distinctly friendlier, reformist language that the Russian president, Dmitry Medvedev, was using until recently. A mere two years ago, Medvedev had even denounced Russia's culture of "legal nihilism" - a phrase some construed as a reference to the Khodorkovsky case.

Why the change of tone? Why now? Many complex theories have been hatched to explain it. This being Russia, none can be proved. But perhaps the explanation is very simple: Oil is once again above $90 a barrel - and the price is rising. And if that's the reason, it's nothing new. In fact, if one were to plot the rise and fall of Soviet and Russian foreign and domestic reforms over the past 40 years on a graph, it would match the fall and rise of the international oil price (for which domestic crude oil prices are a reasonable proxy) with astonishing precision.

To see what I mean, begin at the beginning: In the 1970s, oil prices began to rise significantly, along with the then-Soviet Union's resistance to change. The previous decade (with oil prices at $2 or $3 a barrel, not adjusted for inflation) had been one of flux and experimentation. But after OPEC pushed prices up in the 1970s, oil revenue poured in - and the Soviet Union entered a period of internal "stagnation" and external aggression. Soviet leader Leonid Brezhnev invested heavily in the military, halted internal reforms and in 1979 (when oil was at $25 a barrel) - invaded Afghanistan.

Brezhnev was eventually followed by Yuri Andropov, who had the good fortune to run the Soviet Union when oil prices were still high (at his death, in 1984, they averaged $28 a barrel). Andropov could thus afford both an internal crackdown on dissidents and a continued tense relationship with the West. But Andropov was followed by Mikhail Gorbachev, who took over just as prices plunged. In 1986 (with oil down to $14 a barrel), he launched his reform programs, perestroika and glasnost. By 1989 (when oil was still only at $18) he allowed the Berlin Wall to fall, freed Central Europe and ended the Cold War.

Prices fluctuated, but they did not really rise again in the 1990s (plunging as low as $11 in 1998), the years when Boris Yeltsin was still trying to be best friends with Bill Clinton, the Russian media were relatively free and there was still talk, at least, of major economic reforms. But in 1999 (when oil prices rose to $16 a barrel), Yeltsin's prime minister, Vladimir Putin, launched the second Chechen war, the West bombed Belgrade, and the mood in Russia turned distinctly anti-Western once again.

The fortunate Putin took over as president in 2000, at the start of a long and seemingly inexorable rise in oil prices. Indeed, Gorbachev's calls for internal reform were long forgotten by 2003 (when oil prices were creeping up to $27 a barrel). The days when Yeltsin pushed for Russia to join Western institutions were a distant memory by 2008, when Russia invaded Georgia (and oil was at $91 a barrel).

The new Russian president, Dmitry Medvedev, did try to sound nicer in 2009 (when oil prices averaged about $53 a barrel), leaving Putin, now the prime minister again, grumbling in the background. Medvedev locked a draconian treason law, invited democracy activists to the Kremlin, denounced the Belarusan dictator and even seemed to some to have liberalized Russian television just a bit.

But now it is 2011, Putin is very much in the foreground, and Khodorkovsky has just been sentenced by a kangaroo court. As I write these words, oil is at $92.25 a barrel.

Is this analysis too simplistic? Sure it is. But I haven't yet heard a better explanation.

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