Beyond Crimea: The New Russian Empire

This raises the question why Moscow would opt for potentially more costly and challenging militarized and territorially acquisitive neo-imperialism, when its own energy levers have enabled it to maintain an economic imperial project in neighboring countries. The answer here probably lies in the fact that Europe and even some former Soviet states have been increasingly pursuing strategies of energy diversification. Since 2009, EU regulation has constrained Russia’s gas monopoly in member states through its Third Energy Package, which has already resulted in splitting up some of Gazprom’s European assets. In 2015, after a three-year investigation, the European Commission released its antitrust charges against Gazprom’s practices. The Baltic States and Ukraine among others are looking to liquefied natural gas (LNG) terminals to gain access to alternative sources of gas, while Central Asian and Caucasus states have seen some success in leveraging their own energy resources and exporting them via non–Russian-controlled pipelines to China and Europe. Meanwhile, in North America, the U.S. shale boom has made the United States into a leading global producer of oil and gas in the 2010s. American LNG export and import technologies will make it possible for countries to import gas from almost anywhere in the world, which in the future could reduce dependence on old Russian-controlled gas pipelines. Finally, while Moscow has still been able to maintain the loyalty of some post-Soviet regimes with sweetened energy or economic deals struck with the elites and Kremlin-friendly interest groups, today the publics of a number of post-Soviet states are increasingly (though not always consistently) calling for transparency, reforms, and change. In some regards, Putin’s regime has less leverage over the post-Soviet space than that of Yeltsin, but rather than peacefully withdrawing, it raises the specter of further aggression via the remaining lever of Russian compatriots.

Moscow’s efforts at imperial revival will certainly incur economic costs. While Russia’s ongoing energy stranglehold has somewhat curtailed the West’s ability to impose biting economic sanctions following Crimea’s annexation in 2014, even moderate sanctions made a significant impact in less than a year. Throughout 2014, Russia’s economic and fiscal numbers took a beating with the ruble trading at record lows, while inflation soared and the Central Bank raised interest rates. In 2014 official capital flight from Russia totaled more than $130 billion, but unofficial estimates were much higher.⁵⁰ Collapsing global oil prices of 2014 brought more woes, since oil and gas revenues are the backbone of Russia’s economy, contributing to more than half of its revenues. The year closed with global oil prices trading at a five-year low of $60 per barrel, in strong contrast to the Russo-Georgian war when in July 2008 oil was trading at its record peak of $147 per barrel. According to the Russian Finance Ministry in 2014, Russia is poised to lose some $140 billion a year due to declining oil prices and Western sanctions.⁵¹ Indeed, the re-imperialization trajectory is easier for Moscow to implement when oil prices are high and Europe is energy vulnerable, but as the case of Crimea demonstrates, economic costs do not deter aggression.