OPINION: Russia's jailing of opposition figure Alexei Navalny, and its crackdown on protesters in dozens of cities and towns, have exposed political and economic changes that are designed to enforce President Vladimir Putin's grip on power.
Russian oil and gas companies – together with their international partners – have unintentionally assisted Putin by filling government coffers while Russia has doubled the number of its law enforcement officers since 2002, protecting him from popular discontent.
Early in Putin's tenure, Russia amended its tax system to confiscate the bulk of earnings that come from oil and gas producers when oil prices rise.
Russia's government has received trillions of dollars from the oil and gas sector in the last 20 years. Moscow-based Stolypin Institute has estimated that they made up at least 40% of total budget income each year from 2008 to 2019.
Meanwhile, the number of law enforcement officers in the country rose to about 1.8 million people in 2019 as the government enjoyed uncontrolled access to budget spending, according to a Russian investigative portal Proyekt.
Proyekt has estimated that, since 2014, more than 30% of the Russian budget has been spent each year on law enforcement agencies, military forces and the maintenance of courts and prosecutors.
Well-equipped police officers have been seen outnumbering protesters during recent anti-Putin street rallies in many cities and towns in the country.
More than 10,000 protesters have been detained since 23 January, when the rallies started, an unprecedented figure in modern Russia. Accounts of police officers using torture to interrogate Navalny’s backers have already surfaced on YouTube as detainees were released.
International investigative team Bellingcat alleges the Kremlin has also financed research into creating new versions of the Novichok military nerve agent.
Bellingcat has accused state security experts of poisoning Navalny – nearly killing him – and of murdering several opposition figures and journalists. The Organisation for the Prohibition of Chemical Weapons said after an inquiry that a previously unknown variant of Novichok was being used as a weapon against Navalny.
Russian corporations' role
Meanwhile, the Navalny-founded investigation watchdog FBK has alleged Russia's largest oil producer, Rosneft, and oil and products pipeline operator, Transneft, sent about $81 million between 2018 and 2020 to Russian firms that manage real estate properties and vineyards, which allegedly serve as a luxury retreat and entertainment spot for Putin.
Putin has installed his old friends to lead Rosneft and Transneft, FBK said.
Another finger is pointed at gas monopoly Gazprom, which has been managed by Putin's associate Alexei Miller since 2001. The gas giant has repeatedly reduced or suspended gas deliveries to Europe during seasons of peak consumption to achieve the Kremlin's political goals, according to Mikhail Krutikhin, a partner in Moscow-based consultancy RusEnergy.
Though the Kremlin denies allegations of funding pro-Russian separatists in eastern Ukraine, Gazprom has disclosed in financial filings on its website that it delivers billions of cubic metres of gas to break-away Donbass and Lugansk regions in Ukraine without payment.
Nord Stream 2 as extension of Kremlin plans
German government representatives describe the Gazprom-led Nord Stream 2 pipeline as a “purely economic project”, according to German governmental broadcaster Deutsche Welle.
However, Gazprom executives, including Miller, have said the pipeline will allow Gazprom to considerably reduce or halt the transit of Russian gas across Ukraine to Europe.
Germany and Nord Stream 2 supporters in Austria, and elsewhere in Europe, should be aware that Russian government revenues from this pipeline project may be used by the Kremlin to fund efforts to crack down on freedoms in Russia – and, potentially, to destabilise neighbouring countries.
UK supermajor BP and Norway’s Equinor should re-think their involvement in upstream projects with Rosneft, as FBK and other independent investigators have alleged the oil producer has acted as a wallet for Putin and his family.
Russia is no longer an ally to Europe, or a country with ongoing market reforms, as it was after the Soviet Union's collapse in 1991.
Events in Moscow have demonstrated that it has become a dangerous state, with an uncontrolled ruler, a government, prosecutors and courts bent on suppressing opposition – funded in part by revenues from the country's plentiful oil and gas supplies.
(This is an Upstream opinion article.)