Far-Reaching Effects of the Libyan Revolution

In many aspects, the Arab revolutions will have a tremendous impact on Middle Eastern affairs. The fall of an American ally in Egypt will be a major change that the United States must deal with. Economically, however, the effects were not as immediate. While any turmoil in the region can make oil prices a little jittery, the initial turmoil was contained to the relatively oil-poor Tunisia and Egypt. Libya’s outburst of violence, however, holds much greater implications for the oil markets.  Unlike Egypt or Tunisia, Libya holds massive petroleum deposits. The United States Department of Energy estimated in 2007 that Libya’s proven oil reserves amount to 44 billion barrels, the largest of any African country. To compare, Egypt only holds around 3.7 million barrels.

Consequently, oil prices have skyrocketed to around $100 a barrel. For much of the world economy, this spike will likely damage a fragile recovery. However, while turmoil in the Middle East disrupts oil supply and perturbs world markets, Russia stands to gain from increased petroleum prices. Overtaking Saudi Arabia last year as the world’s largest oil producer, Russia’s economy now draws more strength from petroleum. While oil prices might not reach the heady peaks achieved in 2007, the Russian economy will certainly benefit from the increased oil largess. This upcoming prosperity at home will likely have great implications domestically and in the “near abroad” that surrounds Russia. High oil prices are very likely to boost the strength of Russia’s ruling party and lead to a resurgence of Russian power at the expense of its neighbors.
As petrodollars flow into the state coffers, the power of Dmitri Medvedev and Vladimir Putin internally will surely increase. Tax revenues, along with direct state control of some oil production, will mean an increase in government revenues. This boost to state finances seems to correlate with a boost to state shows of force. Anne Applebaum examined oil prices over the last 40 years in the Washington Post and found that spikes in oil prices correlated closely with increases in authoritarian power. Even in the 1970s, another source of Middle Eastern turmoil, the Arab oil embargo, gave the Soviet Union the economic strength to flex its muscles domestically. Leonid Brezhnev used a strong economic foundation to roll back on political freedoms and clamp down on the shoots of liberalization that appeared in the 1960s.
A major fear among Russian opposition is that the current Medvedev/Putin duo will repeat their predecessor. However, the ruling party is savvy enough to recognize that with upcoming elections, spreading the government largess might win over much of the population. With parliamentary elections coming up in December and presidential elections next year, at least one analyst predicts that social spending will increase in order to win over support with the people.
Russia’s neighbors are likewise not likely pleased to see a newly-robust Russian economy. Applebaum noted that during Brezhnev’s oil boom, Soviet rhetoric turned more aggressive, leading to the invasion of Afghanistan in 1979. Even in the last oil boom of 2007, the Russian government used oil either as a means to strengthen its political might or as a weapon itself against its neighbors. Russia’s invasion of Georgia came at the height of the commodities boom in 2008. In Belarus, Russia has needled the West by backing the almost-universally despised Alexander Lukashenko. Caitria highlighted the oppressive nature of Lukashenko’s regime in a recent HPR post. While there has been tension between Russia and Belarus, Medveded’s statement of support for Lukashenko in his widely denounced election stands as a stern rebuke to the West’s potential meddling in the Russian sphere.
Most famously, Russia has used fossil fuels themselves as a way to keep its neighbors in line. In 2006 and 2009, Russia notably shut off its gas exports to the rest of Europe. Given that “Russia supplies a quarter of Europe’s gas,” state-owned gas companies hold great clout over Russia’s neighbors through the control of gas flow. The two gas incidents map closely with the beginning and end of the last oil price peak. The 2009 dispute specifically came at a a nadir of relations between Russia and Europe, leading to fears of a new “Cold” War in a more literal sense. As the Independent points out, Ukraine’s shift towards the West during the period leading up to the gas cutoff was likely well in the minds of the Russians as they shut the valve.
Now that oil prices are rising steadily again, will Russia experience another round of state arm-flexing at home and abroad? Already, as Applebaum writes, the Russian government has rejected signs of liberalization by sentencing embattled oil tycoon Mikhail Khodorkovsky to even more years in prison. Most recently, the Moscow Times reports that Russia is seeking a more active role in the European missile defense system. This comes on the heels of a dispute over the new START treaty’s effect on “defensive weapons,” in which the Russians have made assertions that a preamble linking defensive weapons, i.e. missile defense, with reductions in offensive nuclear weapons. Buoyed by high oil prices, it seems likely that the West’s relations with Russia are not likely to improve anytime soon. At least in the short term, the economic boost from high oil prices will convince Medvedev and Putin that Russia is strong enough to forcefully assert her position in the world order.
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