As Yogi Berra aptly put it, It's deja vu all over again.
The Soviet gulag state is coming back and this time it could wreak havoc on the world's energy markets.
I began my energy career in Russia. Back then it was part of a sprawling Soviet Union. For the past 23 years there have been 15 independent countries in its place.
But these days it sure feels like the Beatles song from the late 1960s, "Back in the USSR."
You see, many governments aren't able to work out how to plot the global energy sector because it becomes too wrapped up in local political machinations.
And the bigger the energy producer, the bigger the impact is on the global picture.
Now the specter of repression is again moving across the Russian landscape – a huge energy producer – in a way not seen since the events I witnessed over there more than 30 years ago.
What's more, the political developments unfolding in Moscow are about to hit the energy markets. And the impact will be significant.
One People, One Voice
First, what's taking place inside Russia has all the earmarks of a Soviet-era consolidation of power. Vladimir Putin has been biding his time when it comes to political dissidents and opponents. But the increasingly heavy-handed moves to silence them are apparent.
The latest victim is somebody I happen to know personally. Sergei Guriyev is a well-known, articulate, and respected economist, director of the New Economic School in Moscow, an advisor to now Prime Minister (and past President) Dmitri Medvedev, and a frequent commentator in the foreign media.
Recently, Sergei was interrogated for several hours, had his office ransacked, and is now "vacationing" with his family in France. His crime was to provide an expert opinion for the defense in the ongoing persecution of Mikhail Khodorkovsky.
In 2004, Khodorkovsky – then the head of YUKOS, Russia's largest oil company – was the richest man in the country and among the 20 wealthiest in the world.
By May 2005, he had been sentenced to nine years on tax charges. Subsequent charges filed by the state while he was in prison have extended that prison term until 2017.
There now seems little doubt that the Kremlin is orchestrating yet another series of charges against Khodorkovsky. And that put Sergei's testimony, claiming that the initial trials were politically motivated, squarely in the crosshairs of the siloviki, Putin's comrades from the old KGB. They're intelligence service veterans who have been solidifying the president's administrative control ever since his reelection.
Meanwhile, YUKOS was also gutted, declared bankrupt and dismembered. Most of its assets ended up as part of Rosneft (OTC: RNFTF), now the dominant oil major in the country. Rosneft conducted an IPO on the London Stock Exchange several years ago, and about 25% of its shares now are in free trade.
But don't be misled. Despite now being the world's largest publicly-traded company, Rosneft is a state-controlled behemoth, and it guards the entrance to Russian oil projects like Cerberus guards the gates to Hades. Gazprom (OTC: OGZPY), also trading in the markets — but firmly under state majority control — serves the same function in natural gas.
New Money in Russian Energy Patch
And that brings us back to what will occupy much of my time beginning next week.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.