Inside Putin's Plan to Dominate the World's Oil and Gas Markets


Vladmir Putin once called the collapse of the Soviet Union “the greatest geopolitical catastrophe of the century.” But in Central Asia and Eastern Europe, a new economic union, aimed at collecting the scattered pieces of the Russian Empire, is growing. Should Putin’s Eurasian Union succeed by incorporating all of Central Asia and Eastern Europe minus the Baltic States and Balkans, Russia will effectively hold sway over some of the largest concentrations of natural gas, oil, and uranium in the world.

Kazakhstan, Russia, and Belarus are the inaugural signatories to this union, which has been rolling out incrementally since 2010. The union aims to hold all the perks of European Union membership by 2015, complete with a Schengen-style arrangement for visas and close military cooperation. If executed well, the union has the opportunity to bolster struggling Central Asian states by attaching them to the rising Russian economy.

Central Asia has shrunken from the world spotlight since the disintegration of the famed Silk Road of antiquity, but remains well endowed in natural resources. Kazakhstan alone sits on the list of the world’s top 10 oil producers, and holds a whopping 15% of the world's uranium. It also packs a punch when it comes to iron, gold, zinc, and coal. Turkmenistan has the world’s fourth largest reserves of natural gas (Russia is #1), and Uzbekistan holds as much oil as Libya. And due to the "Stans"' prime location, they are conveniently placed where they can serve both the European and burgeoning Asian markets, a prospect that Russia has done its best to block.

The hitch: The founding trio consists of three countries with consolidated authoritarian regimes. President Nazarbayev has ruled Kazakhstan for 24 years and Belarus’ Lukashenko has held power for 19 years. With ever-fluctuating relations between Russia and the U.S. and the effective expulsion of foreign-funded NGOs by the Kremlin, progress in democratic development and human rights seems unlikely should the union come to fruition.

In exchange for significant financial aid, Russia receives privileged access to natural resources (Russia’s Gazprom recently purchased Kyrgyzstan’s entire gas network for $1) and significant political sway. Moscow has been courting the smaller, impoverished Central Asian states with debt forgiveness and military investments, leaving them little choice but to join. Last year, Russia forgave $500 million in Kyrgyz debt in exchange for the expulsion of the United States from the Manas air base.

However you perceive this new geopolitical body, it is unlikely to grow to encompass the entire region as Putin desires. Georgia, Uzbekistan, and Azerbaijan have stated that they will not join, and Ukraine is likely drifting towards European Union membership. The large populations and cultural strength of Uzbekistan and Ukraine, the largest countries in their respective regions, make these two prospective members the wild cards of the deck, determining the success of the union. Without them, the EAU is unlikely to be more than a small, isolationist club bullying states to join with the prospect of cheaper gas prices.

The Eurasian Union holds great promise, and could effectively transform the economic and political landscape of Western Asia. With a rotating center of power, the union could elevate the economies of impoverished developing states in Central Asia and better situate them to trade with the neighboring European Union, with each member retaining sovereignty. Alternatively, and far more likely, the intended supranational body will become an agent for one of many authoritarian leaders to throw their weight around, and democratization and human rights efforts will suffer.