Oil and the making of a president
Having occupied the highest government position in Russia for the third time recently led observers to comment that Russian President Vladimir Putin is indeed both clever and competent. Throughout his career, he’s had luck sprung from good timing.
Regard for Russian leaders and its economy are highly influenced by current crude oil prices. It is noteworthy to mention that more than 70 percent of the country’s exports are from oil and gas, while 50 percent of state earnings are also traced to these commodities.
While Putin served as President for his first two tenures, world oil prices have grown three-fold. Russia’s earnings from oil and gas swung upwards and government deficits were offset by excess earnings. His reign was marked by a thriving Russian economy and this has remained in the conscience of many Russian voters who seem to have supported him throughout his career. His approval rating was a good 85 percent.
However, the country’s economic prosperity due to the surge in oil prices per barrel was marred by a waning democracy. According to reports, press freedom was curtailed and legislative and local governments were merely rubber stamps.
Similarly, in countries like Iran, Angola, and Venezuela, crude oil seems to have historically fended off democracy as dictators tightly held on to power during those long years of high crude prices. Soaring current crude oil prices, partly due to Middle East conflicts, redounded to inflow of more funds into Russia’s economy, boosting Putin’s popularity once again.
Two years ago, Putin reportedly prohibited the publication of data related to Russia’s oil revenues. Sources say that this lack of transparency gave the leader the opportunity to finance pre-election campaigns.
These non-disclosure tactics involving oil funds were reportedly in practice way back 2000 by leaders of countries like Venezuela and Iran.
Even in the U.S., transparency of this nature was also a concern. Section 1504 of the Dodd-Frank Wall Street reform and Consumer Protection Act requires U.S. oil firms to report oil remittances to governments worldwide. The American Petroleum Institute, which is the country’s premier oil industry trade association, seems to oppose this new law, while the SEC has failed to make a decision despite a lapsed deadline.
Big oil companies including Chevron and Exxon must push for the approval of this new law taking cues from EU-based oil firms which support similar laws.
Putin’s presidency should raise some awareness that the nation’s citizenry (and not its leaders) will stand to gain from its rich oil resources – if only transparency and disclosure measures are widely embraced by the oil sector and more so implemented.