THIS IS PUTIN'S MOMENT. HE'LL (PROBABLY) BLOW IT.
Europe's gas crisis could bring Russia in from the geopolitical cold. But the Kremlin is addicted to hostility.
Fate is smiling on Vladimir Putin these days. Its countenance is downright shining upon him. Stratospheric European gas prices are just capping the Russian president’s run of good luck.
First Joe Biden, who was supposed to be bent on revenge for Russia’s pro-Donald Trump shenanigans, signaled d’etente with Moscow instead to focus on cold war with China. Then he removed U.S. roadblocks to Putin’s Project of the Century, the Nord Stream 2 natural gas pipeline from Siberia to Germany.
In Germany itself, the big winner in recent elections was the most dovish candidate on Russia: Social Democratic leader Olaf Scholz. (The usual Byzantine wrangling remains to form an actual German government.) Putin’s Ukrainian nemesis, President Volodymyr Zelensky, was badly embarrassed by the so-called Pandora Papers, which revealed his rich web of undeclared offshore companies.
Now Europe is clamoring for more Russian natural gas to keep from freezing this winter. Putin has the best moment he’s likely to get to reset relations with the West and recast Russia from a menace to a friend in need. If Putin could just stop being Putin.
The prevailing ill will dates back to 2014, when Russia responded to a change of government in Ukraine by grabbing Crimea and effectively invading the Eastern flank of its Southern neighbor. This was the sole moment of panic in Putin’s long, deliberative, cautious career. The cost was writing Russia largely off the global investment and cultural map.
The effectiveness of one or another Western sanction on Moscow may be debated. The overall drift is clear. Foreign direct investment in Russia peaked at $69 billion in 2013. The average since then has been $21 billion annually. Ten years ago, half the poll respondents in France and U.K. had positive views of Russia, according to Pew Research. Today those numbers are 35% and 24%. China or Israel may have enough internal economic vibrancy to flourish whatever the rest of the world thinks. Russia doesn’t.
Putin has too much political capital sunk into his Ukrainian adventures to back down now. The beauty of the current moment, for him, is he might put those behind him without sacrificing his “gains” from 2014. Europeans, understandably, care more about staying warm at affordable rates than they do about a sovereign and intact Ukraine.
It’s actually not the case that Russia could flip a switch tomorrow and send tons more gas Westward. State monopoly Gazprom (OGZD. London) is pumping near capacity, and needs to fill up domestic storage before selling more abroad. Europe has mostly itself to blame for the current crunch. It over-relied on liquefied natural gas (which this year has been gobbled by Asia) and renewables, keeping new contracts with Gazprom at bay.
But perceptions matter a lot in a market that has quadrupled over the past year. A clear statement from Moscow that it has Europe’s back, and how much it might ship though Nord Stream 2 once Germany completes final approval, could soothe prices and incur gratitude.
Putin has plenty of other cards to play if he opted for a charm offensive. He could negotiate the exit of his vicious protege Alexander Lukashenko from power in Belarus. He could make Russia a key to the solution, not the problem, of cyber -warfare. He could move Dissident No. 1 Alexei Navalny to house arrest, if not freedom.
Putin’s Kremlin is not wired for charm, however. Its emergency gas diplomacy has ranged from portentously vague— expedited Nord Stream 2 approval could “somewhat cool off the current situation,” Deputy Prime Minister Alexander Novak said — to gratuitously insulting: Putin himself took a poke at “smart alecs” in the European Commission, allegedly sabotaging markets with their bureaucratic meddling.
Russia’s larger foreign policy remains fixated on somehow recreating a phantom Soviet Union under Moscow’s tutelage, and waiting for the West to be rent apart by internal divisions. Domestically, Putin is doubling down on the Chinese model of total repression, without China’s ability for breakneck material and technological progress.
It didn’t have to be this way. During the stand-in presidency of Putin acolyte Dmitry Medvedev (2008-2012), the Kremlin’s signature project was a global tech center at Skolkovo outside Moscow. MIT agreed to run a university there. The likes of Microsoft (MSFT), Intel (INTC) and Cisco (CSCO) were lining up to invest billions in research facilities. Moscow and St. Petersburg were abuzz with start-ups and venture capitalists on the prowl. Russia might have taken its rightful place as a 21st-century innovation nexus.
Ukraine 2014 ended all that, practically speaking. Putin chose the path of “restoring Russia’s power,” in his archaic understanding of that term, and securing his own indefinite power by smothering domestic opposition. If creativity and capital flows were smothered along the way, so be it.
A peculiar alignment of economic and political stars is handing Russia’s leader a chance to mitigate this historic blunder. Unfortunately, he and his coterie look too old to learn new tricks.