It is difficult to understand Putin's organization without understanding its reliance on oil. In the 1980's, the Soviet Union was the world's largest producer of crude, ahead of Saudi Arabia. The bulk of the 12 million barrels produced each day fueled the Soviet economy and its anemic satellites in Eastern Europe, Cuba and North Korea. Yet there was enough left over -- about two million barrels a day -- for customers outside the Soviet bloc who would pay hard currency. This was an Achilles' heel for the Soviets. According to ''Reagan's War,'' a book by Peter Schweizer, ''C.I.A. analysts had concluded that for every one-dollar drop in the price of a barrel of oil, Moscow would lose between $500million and $1 billion per year in critical hard currency.''
The Soviet empire was not extortionary, in the sense of providing a bounty of riches to the imperial center, as India and other colonial holdings had done for Britain in the 19th and 20th centuries; instead, it was a drain on Moscow. Without oil, the heirs of Lenin would have had great difficulty subsidizing their needy allies, their globe-spanning navy, their 45,000 nuclear weapons, their four-million-man army, their record-setting Olympians and their space stations. Oil was, in many ways, more crucial to the Kremlin than ideology.
Russian production dropped by nearly half following the Soviet collapse in 1991. The industry's recovery has been a key goal of Putin's government; just as the Soviet Union needed oil to finance its empire, Putin needs oil for his more modest task, to get Russia back on its feet. Since 1999, production has risen by 50 percent, thanks to an influx of investment and the incentive of rising oil prices. Russia is now the second-largest exporter of oil after Saudi Arabia. According to a World Bank report this year, energy revenues account for 20 percent of Russia's economy and the bulk of its exports. In other words, Russia has become something of an oil state.
full: http://www.nytimes.com/2004/08/01/magazine/01RUSSIAN.html
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