Russia

Conspiracy theories abound around the oil price fall. A 25 per cent drop in less than three months is certainly exceptional and the assumption is that in a politically driven market a political decision by someone, somewhere must have forced prices down. The most popular conspiracy theory is that the US and the Saudis have combined to take money away from their major enemies – Russia and Iran. In both cases, [the argument goes], a shortage of revenue could help to bring President Vladimir Putin and the Supreme Leader, the ailing Ayatollah Ali Khamenei, to the negotiating table to sort out a deal on Ukraine and Iran’s nuclear ambitions.

In a complicated world anything could be true. I don’t happen to believe the conspiracy theory but I accept that it is a possibility. To me the interesting thing is what happens next, and that is down to the Saudis. The risk for the whole industry, and for many countries dependent on oil revenues, is that Saudi Arabia’s games have led them to lose control of the market. Prices could go a good deal lower with wide and mostly negative consequences, starting with more regional instability and a cutback in investment which can only feed the next cycle. 

Mikhail Khodorkovsky at a public meeting on April 27, 2014 in Donetsk, Ukraine

Mikhail Khodorkovsky at a public meeting on April 27, 2014 in Donetsk, Ukraine  © Brendan Hoffman/Getty Images

It might seem strange, even wishful thinking, to question how long Vladimir Putin will remain in power. Mr Putin, who is 61, seems to be in good health and apparently in complete control of every element of the power structure in Moscow – including, through Gazprom and Rosneft, the key levers of the energy sector. He has defied US and European pressure and sanctions over Ukraine, and has begun to restore Russia’s status in the world as a great power which can’t be ignored.

That is the story — but behind the facade the cracks appear. The Emperor has fewer clothes than he pretends. And now from the past comes Nemesis, in the form of one of the few Russians who has dared to challenge Mr Putin openly — Mikhail Khodorkovsky.

In his first public statement about Russia’s domestic politics since leaving prison in December 2013, Mr Khodorkovsky told Le Monde last week that he was relaunching his Open Russia project — not so much a new political party as a horizontal network of social groups seeking change and modernisation across Russia. He said he would not be “interested in the idea of becoming president of Russia at a time when the country would be developing normally… But if it appeared necessary to overcome the crisis and to carry out constitutional reform, the essence of which would be to redistribute presidential powers in favour of the judiciary, parliament and civil society, then I would be ready to take on this part of the task.” 

The Brent oil price has now fallen by 15 per cent in less than three months and is now below the psychologically important figure of $100 a barrel. Last week I wrote about the reaction in the industry. But the fall is beginning to have political consequences as well.

Brent Crude Oil Future three month chart

Across the world oil producing and exporting countries have come to rely on high, and ideally rising prices. Some countries save the revenue for a rainy day, but most, especially those with rising populations, tend to spend. Circumstances vary, as do the realistic options for adjustment, but the current concern is real and will shape political actions well beyond the oil sector itself. 

A pro-Kremlin rally in St Petersburg. OLGA MALTSEVA/AFP/Getty Images

The conventional wisdom is simple – business and politics are two separate worlds, which should not mix. Corporate leaders should not be involved in anything that smacks of political activity. Business exists to make money not policy.

That is the mantra – and it is wrong. In two weeks time the St Petersburg International Economic Forum is due to meet. Business leaders should be there and should have the nerve to tell Vladimir Putin what he doesn’t want to hear.

The St Petersburg forum is President Putin’s answer to Davos – a prestige event designed to show that Russia is a key part of the global economy. As the FT reported last Friday, the US government does not want business leaders to attend. Valerie Jarrett, Mr Obama’s adviser, has been calling CEOs telling them not to go, as part of the process of demonstrating that after what has happened in Ukraine, Russia is isolated and friendless. Many are taking her “advice”. In Europe the position is more ambivalent. European sanctions on Russia are soft and the rhetoric from Berlin and Brussels even softer. Many European leaders seem to regard Ukraine as Russia’s sphere of influence. There is little appetite for bringing the country into either the EU or Nato. In contrast to Russia, Ukraine cannot afford to employ the lobbying skills of Gerhard Schröder and his ilk. 

One of the greatest mistakes in the analysis of what is happening in Ukraine is the view of Russia as a one man dictatorship. That is clearly not the case. Moscow is a complex political society with numerous powerful figures. They, rather than Russia’s passive democracy, determine who is in charge. Vladimir Putin has been a strong leader but his power is not absolute. The eternal truth is that all leaders lose power in the end and very few go voluntarily.

After nearly 15 years in office as President or Prime Minister he has already exceeded the normal lifespan of leadership. Actuarially he is living on borrowed time and is dependent on continued success. In the current situation the line between success and failure is very narrow and energy issues are at the heart of the judgment.