he geopolitical upheaval resulting from Russia’s invasion of Ukraine continues to be felt around the globe. At the time of this review’s writing, Moscow’s advance has stalled in the face of stronger-than-anticipated Ukrainian resistance and worse-than-expected Russian military performance. Much can change in war—indeed it is the only constant, that and friction—but the global response to Moscow’s invasion has taken nearly everyone, including President Vladimir Putin, by surprise.
Looking at the geo-strategic stage on the eve of the invasion, one wondered what Putin stood to gain by launching his war. Europe was reluctantly tied to Moscow by its reliance on Russian fossil fuels. NATO and the European Union were internally cohesive, but certainly not politically unified amid NATO budget tensions and Brexit. Russia’s oligarchs enjoyed the best Europe had to offer. Moscow’s mobilization had secured the world’s attention, including potentially a tête-à-tête with President Joe Biden.
With just one decision – the Kremlin’s decision to invade Ukraine – the entire landscape of European security shifted tectonically. In the weeks since nearly three decades of economic integration with the West have been all but severed, perhaps irreparably. Moscow’s only firm allies at this point are pariah states, and it has tepid and uncertain support or acquiescence from India and China—how long this acquiescence lasts remains to be seen.
It was not as though Russia did not have its own set of problems that it could afford to look abroad for dragons to slay. Indeed, as Thane Gustafson shows in his illuminating book “Klimat”, the future of Russia’s economy, security, and politics were already unsettled, being intimately tied to climate change and energy.
Gustafson’s “Klimat” is a fairly wonky book, but it is deeply insightful about Russia’s energy politics – a topic which is largely ignored except when it is contentious e.g. Europe’s energy politics in a time of crisis. Gustafson breaks down Russia’s energy economy in exceptional detail and looks at how the age of climate change will affect Russia as a whole.
This is not a “the sky is falling” rising sea-levels book. It is much more measured and much more holistic than many of the climate-related books on the market today. To be sure, the effects of climate change within Russia’s territory—particularly its permafrost and southern agricultural regions—will eventually be real and severe. In the longer-term, climate change will exacerbate structural and systematic weaknesses within Russia, making it both harder to address endemic issues as well as the climate-driven challenges.
Gustafon’s focal point is the structural challenges that climate change will pose for Russia’s political economy. Russia’s fossil fuel export-driven economic model will come under increasing strain as the energy transition accelerates. Moscow has few ways to affect these trends, and its energy will be in declining demand. This in turn will mean a growing budget shortfall as Russia has no other exports to make up the percentage of its revenue that energy exports represent. As a result, Moscow will have fewer rubles to meet greater climate-based demands on its coffers. The government will also lose much of its ability to support economic inefficiencies, subsidize energy, and re-invest in infrastructure that was already beleaguered, but which will suffer still further because of climate change. A thawing permafrost will also complicate efforts to exploit Russia’s remaining energy reserves.
The downward spiral of Russia’s energy and economy looks to be self-reinforcing, and that was prior to the addition of political corruption and Putin’s personalist autocracy. Rents from energy resources that should have been reinvested into the economy or energy industry were instead directly or indirectly expropriated. The net outflows of Russia’s economy far surpassed any net inflows, save perhaps the three years prior to the 2008 financial crisis.
Politics and energy are fundamentally inseparable, and this is nowhere more true than when related to climate change. Gustafson wrote “Klimat” prior to Russia’s invasion of Ukraine, and he forecast that these changes would begin to manifest themselves around 2030, about the time that Putin would likely be on his way out, one way or another. Yet, regardless of who was at the helm of the Kremlin, these global systemic changes were going to shape and constrain the president’s decisions. Up to now, Putin has not been wholly bad for Russia’s energy economy. Despite presiding over the expansion and entrenchment of a kleptocratic system, Putin did appoint some fairly competent technocrats to key positions and allowed capable managers to handle the day-to-day running of some parts of the economy. Efficiency in agriculture, in particular, Gustafson notes, improved under Putin.
The problem is that these changes were small ruble compared to the scale of graft and inefficiencies. The greatest success in Putin’s fiscal management, arguably, was the creation of a massive rainy-day fund, which the Kremlin is now aggressively drawing down upon, in the wake of its economic isolation resulting from Ukraine.
When the paperback edition of “Klimat” comes out, it will almost certainly contain a very large foreword or afterword. The political and energy landscape has shifted remarkably since Russia’s invasion of Ukraine. Germany has frozen the Nord Stream 2 pipeline, and Berlin is actively considering bringing some coal plants back online as well as discussing re-starting some nuclear plants. The U.S. banned the import of Russian oil. The EU is aiming to cut its dependency on Russian gas by two-thirds this year, and ending it entirely by 2030. The list goes on and on about how the West is seeking to severe its energy ties with Russia, but it goes beyond the raw physical export and import of energy resources.
Nearly every oil and gas major including Shell and BP have announced that they are suspending or ending partnerships with Russian companies. Technology and industrial equipment sanctions will ensure that Russia lacks spare parts for its manufacturing and extractive industries. The critical advanced equipment and know-how needed to leap-frog outdated and inefficient technologies and lagging sectors outlined by Gustafson simply won’t be available for the foreseeable future. Moreover, the apparent brain drain and exodus of qualified people will further hobble Russia’s ability to recover from the Ukraine-related sanctions and economic downturn, let alone adapt to climate change.
Having read Gustafson’s book, and in light of the present crisis, one wonders whether the drivers of change “Klimat” outlines won’t be so much environmental as geopolitical. Indeed, Gustafson argues that the West’s transition to a green economy will be the long-term downfall of Russia’s economy, but the West’s decoupling of its energy needs and pursuit of energy independence may achieve the same effect, albeit faster. That is, however, provided the long-term policy priorities can outlast the short-term economic pain; pain that is occurring at a period of increased inflation.
Will Berlin be able to sustain the political consensus needed to roll back some of its energy commitments? Will Washington be able to secure alternative sources of natural gas for Europe in time to stave off punishing price rises? Will America’s political leadership be willing to re-start fracking in the face of environmental pressure to further Moscow’s isolation? Answers to these questions and more remain unclear.
The long-term trends outlined by Gustafson are, however, very clear and very challenging for Moscow. “Klimat”, perhaps better than any other book, demonstrates in real, practical terms just how interconnected the greening of the global economy will impact nation-state security and foreign policy, and the effects that will have, in turn, more broadly across both energy consumers and producers. Whether Russia is now, or will become again, a “great” power is almost certainly tied to its ability to weather not just this economic and political storm, but the looming climate crisis storm on the horizon.
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Russia's Energy Politics in an Age of Climactic Upheaval
Drilling a gas well in the Yamal tundra. Photo via Adobe Stock.
March 26, 2022
Even before Russia's invasion of Ukraine, the Russian economy was headed toward rough waters. Joshua Huminski reviews Thane Gustafson's "Klimat," which digs into climate change and its impacts on Russia's energy export-reliant economy.
T
he geopolitical upheaval resulting from Russia’s invasion of Ukraine continues to be felt around the globe. At the time of this review’s writing, Moscow’s advance has stalled in the face of stronger-than-anticipated Ukrainian resistance and worse-than-expected Russian military performance. Much can change in war—indeed it is the only constant, that and friction—but the global response to Moscow’s invasion has taken nearly everyone, including President Vladimir Putin, by surprise.
Looking at the geo-strategic stage on the eve of the invasion, one wondered what Putin stood to gain by launching his war. Europe was reluctantly tied to Moscow by its reliance on Russian fossil fuels. NATO and the European Union were internally cohesive, but certainly not politically unified amid NATO budget tensions and Brexit. Russia’s oligarchs enjoyed the best Europe had to offer. Moscow’s mobilization had secured the world’s attention, including potentially a tête-à-tête with President Joe Biden.
With just one decision – the Kremlin’s decision to invade Ukraine – the entire landscape of European security shifted tectonically. In the weeks since nearly three decades of economic integration with the West have been all but severed, perhaps irreparably. Moscow’s only firm allies at this point are pariah states, and it has tepid and uncertain support or acquiescence from India and China—how long this acquiescence lasts remains to be seen.
It was not as though Russia did not have its own set of problems that it could afford to look abroad for dragons to slay. Indeed, as Thane Gustafson shows in his illuminating book “Klimat”, the future of Russia’s economy, security, and politics were already unsettled, being intimately tied to climate change and energy.
Gustafson’s “Klimat” is a fairly wonky book, but it is deeply insightful about Russia’s energy politics – a topic which is largely ignored except when it is contentious e.g. Europe’s energy politics in a time of crisis. Gustafson breaks down Russia’s energy economy in exceptional detail and looks at how the age of climate change will affect Russia as a whole.
This is not a “the sky is falling” rising sea-levels book. It is much more measured and much more holistic than many of the climate-related books on the market today. To be sure, the effects of climate change within Russia’s territory—particularly its permafrost and southern agricultural regions—will eventually be real and severe. In the longer-term, climate change will exacerbate structural and systematic weaknesses within Russia, making it both harder to address endemic issues as well as the climate-driven challenges.
Gustafon’s focal point is the structural challenges that climate change will pose for Russia’s political economy. Russia’s fossil fuel export-driven economic model will come under increasing strain as the energy transition accelerates. Moscow has few ways to affect these trends, and its energy will be in declining demand. This in turn will mean a growing budget shortfall as Russia has no other exports to make up the percentage of its revenue that energy exports represent. As a result, Moscow will have fewer rubles to meet greater climate-based demands on its coffers. The government will also lose much of its ability to support economic inefficiencies, subsidize energy, and re-invest in infrastructure that was already beleaguered, but which will suffer still further because of climate change. A thawing permafrost will also complicate efforts to exploit Russia’s remaining energy reserves.
The downward spiral of Russia’s energy and economy looks to be self-reinforcing, and that was prior to the addition of political corruption and Putin’s personalist autocracy. Rents from energy resources that should have been reinvested into the economy or energy industry were instead directly or indirectly expropriated. The net outflows of Russia’s economy far surpassed any net inflows, save perhaps the three years prior to the 2008 financial crisis.
Politics and energy are fundamentally inseparable, and this is nowhere more true than when related to climate change. Gustafson wrote “Klimat” prior to Russia’s invasion of Ukraine, and he forecast that these changes would begin to manifest themselves around 2030, about the time that Putin would likely be on his way out, one way or another. Yet, regardless of who was at the helm of the Kremlin, these global systemic changes were going to shape and constrain the president’s decisions. Up to now, Putin has not been wholly bad for Russia’s energy economy. Despite presiding over the expansion and entrenchment of a kleptocratic system, Putin did appoint some fairly competent technocrats to key positions and allowed capable managers to handle the day-to-day running of some parts of the economy. Efficiency in agriculture, in particular, Gustafson notes, improved under Putin.
The problem is that these changes were small ruble compared to the scale of graft and inefficiencies. The greatest success in Putin’s fiscal management, arguably, was the creation of a massive rainy-day fund, which the Kremlin is now aggressively drawing down upon, in the wake of its economic isolation resulting from Ukraine.
When the paperback edition of “Klimat” comes out, it will almost certainly contain a very large foreword or afterword. The political and energy landscape has shifted remarkably since Russia’s invasion of Ukraine. Germany has frozen the Nord Stream 2 pipeline, and Berlin is actively considering bringing some coal plants back online as well as discussing re-starting some nuclear plants. The U.S. banned the import of Russian oil. The EU is aiming to cut its dependency on Russian gas by two-thirds this year, and ending it entirely by 2030. The list goes on and on about how the West is seeking to severe its energy ties with Russia, but it goes beyond the raw physical export and import of energy resources.
Nearly every oil and gas major including Shell and BP have announced that they are suspending or ending partnerships with Russian companies. Technology and industrial equipment sanctions will ensure that Russia lacks spare parts for its manufacturing and extractive industries. The critical advanced equipment and know-how needed to leap-frog outdated and inefficient technologies and lagging sectors outlined by Gustafson simply won’t be available for the foreseeable future. Moreover, the apparent brain drain and exodus of qualified people will further hobble Russia’s ability to recover from the Ukraine-related sanctions and economic downturn, let alone adapt to climate change.
Having read Gustafson’s book, and in light of the present crisis, one wonders whether the drivers of change “Klimat” outlines won’t be so much environmental as geopolitical. Indeed, Gustafson argues that the West’s transition to a green economy will be the long-term downfall of Russia’s economy, but the West’s decoupling of its energy needs and pursuit of energy independence may achieve the same effect, albeit faster. That is, however, provided the long-term policy priorities can outlast the short-term economic pain; pain that is occurring at a period of increased inflation.
Will Berlin be able to sustain the political consensus needed to roll back some of its energy commitments? Will Washington be able to secure alternative sources of natural gas for Europe in time to stave off punishing price rises? Will America’s political leadership be willing to re-start fracking in the face of environmental pressure to further Moscow’s isolation? Answers to these questions and more remain unclear.
The long-term trends outlined by Gustafson are, however, very clear and very challenging for Moscow. “Klimat”, perhaps better than any other book, demonstrates in real, practical terms just how interconnected the greening of the global economy will impact nation-state security and foreign policy, and the effects that will have, in turn, more broadly across both energy consumers and producers. Whether Russia is now, or will become again, a “great” power is almost certainly tied to its ability to weather not just this economic and political storm, but the looming climate crisis storm on the horizon.
