lmost from the start of the international oil boom of the late 19th century, Russia was a major player. The city of Baku, now in Azerbaijan but then a southern outpost of the empire, was producing half the world’s oil in 1900, and though it lost market share during the years of revolution and civil war, Russia remained an oil power through the Soviet era. Soviet geologists discovered oil in the Volga-Urals basin and then, most rewardingly, in western Siberia. The Samotlor field, discovered in 1965, was one of the largest in the world, and its oil would subsidise Soviet military and social programmes throughout the period of late socialism, right up until the collapse of world oil prices in 1985. In a lesson about oil dependence that was quickly forgotten, the price collapse was followed by the collapse of the entire country.
Since 1991, two things have happened to Russian oil. First, as the Russian economy was opened up to global competition, hydrocarbons became not less but more important: no one wanted Russian cars or electronics or Russian shoes, but Russian oil was pretty much as good as any other. And so the great post-Soviet fortunes were largely oil fortunes. It was oil that paid for Roman Abramovich’s purchase of Chelsea football club, and it was oil that paid for Mikhail Khodorkovsky’s attempt to mount a challenge against Vladimir Putin. Most important of all, it was oil that paid for the Russian economic “miracle” of the Putin era, when oil prices rose steadily for years on end, and Russian living standards with them, and Putin got all the credit.
The second thing that happened was that the western Siberian oil fields started to run dry. In fact many of them were past their prime by the late 80s, and it was only aggressive western specialists in “tight oil” (light crude oil found in shale and rock formations), hired by people such as Khodorkovsky, who managed to get everything out of them that they could. Nonetheless, the resource was finite.
One thing that failed to happen was any major new discoveries. In the uncertain legal climate, if you happened to gain control of an oil company, you’d have to be crazy not to pump all the oil you could from existing wells before someone came and took your company away from you. What’s more, the Soviets had done a good job of covering the country. There may not be another western Siberia or Baku.
The one exception – the bright spot for Russian oil – was the Arctic. Thanks to global warming, the Arctic was no longer as forbidding as it had once been, and oil companies could start exploring there. In 2007, the state-owned oil and gas giant Gazprom announced that it had found oil in the Pechora sea, a small stretch of water between the Russian mainland and the archipelago Novaya Zemlya. And in 2011, Russian oil company Rosneft, which is majority owned by the Russian government, announced that it was going to start exploring for oil even further north, in the Kara sea, with its new best friend, Exxon Mobil. Arctic oil was the Russian regime’s best hope of staving off an oil production decline and the untoward political consequences that could follow.