A pipeline runs through it.

• Author: Haslam, Jonathan
• Position: Rising & Resurgent Powers - Essay

IN THE early 18th century, the great Enlightenment philosopher Baron de Montesquieu pointed out that producers of manufactured goods possess a distinct trade advantage over producers of raw materials. The oil crisis of 1973, however, showed that this is not always true. Recent events underline that fact, the political consequences of which have yet to be fully considered.

Eight years ago the price of oil dropped to $14 a barrel. This turned out to be the best time to buy. A bull market in commodities was under way, and Russia was--and remains--a leading beneficiary. As a resurgent power, Russia may wield its newest and powerful weapon--a growing natural resource monopoly.

An unexpected windfall has descended on states dependent for the greater part of their income on exporting raw materials, including hydrocarbons. The reasons are many and clear. They can be found in China's burgeoning economy, rising global demand (not least in the Middle East and Africa), failure to sustain investment in further exploration and extraction (due to low prices) and the drying up of long-established wells (the last major find was in 1976 at Cantarell in the Gulf of Mexico, and the Kashagan field in the Caspian Sea has yet to yield an ounce of oil).

In 2006, and for the third consecutive year, global oil reserves have failed to compensate for depletion. Demand continues to outpace supply. A draft report, "Facing the Hard Truths About Energy", prepared by the National Petroleum Council for the U.S. energy secretary argues that "the global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50% to 60% growth in demand over the next 25 years." This is a notable event: the first open admission from the petroleum industry that reserves will not meet consumption.

The former Soviet Union has thus found itself a major beneficiary of the emerging boom, coming immediately after the humiliating devaluation of the ruble in August 1998 and Russia's subsequent default on over $150 billion in external debt. Oil and gas had long formed the overwhelming source of Russia's foreign-currency receipts. The windfall from higher energy prices rapidly transformed the country from a doubtful debtor into a potential creditor, and Moscow rushed in to take full advantage of the opportunity. In 2006, Russia became the largest oil exporter in the world. This year the total will amount to some 240 million tons, nearly double the peak of Soviet oil exports for any one year. Of these, 80 percent of the oil revenues and 60 percent of the gas consumption have come from Europe, which relies on Russia for half its entire gas supply.

The dramatic rise in prices--peaking at $78 a barrel in 2006 and again this August--was bound to have a significant impact on the Kremlin's view of its own potential. The bear market in commodities through the greater part of the previous two decades had played its role in debilitating Soviet economic power, hastening a decline in Russia's influence on a global scale. Worse, there was the additional unwelcome side effect of bringing NATO and the EU to Russia's doorstep, as well as the added humiliation of charitable foundations arriving from the United States to teach Russian citizens how to be good democrats. But now the trend is reversing itself.

The Resurgence of Russian Ambitions

IN THE wake of the Clinton Administration, the United States struck out on a unilateralist path for a Pax Americana. Those from both the Left and Right advocated the extension of U.S. influence through the Caucasus into Central Asia, slicing away at Russia's traditional spheres of control and the territories of the former Soviet empire. The defeat of Serbia--hitherto viewed sympathetically by even the most liberal of Russians, despite its acts of genocide--and the indignity suffered through the UN's control over Kosovo only served to underscore Kremlin impotence.

The sudden deflation of Russian power, and the indifference with which Moscow was viewed, exacerbated post-imperial sensitivities and aroused a spirit of revenge amongst a key section of the elite that came to be epitomized in Vladimir Putin. No longer would Russia be ignored or pushed around. Just as the puny young Putin had trained in judo to protect himself at school from the eternal bully, so too would vulnerable Russia, shorn of its overwhelming military might--except for nuclear weapons--now arm itself with techniques designed to set the adversary off balance and, if necessary, deliver grievous blows at vulnerable pressure points.

In the absence of much else, Russia could use its superabundance of raw materials, notably hydrocarbons, as a crucial form of...