Keith Lieberthal
In Russia over the past three years, President Vladimir Putin has orchestrated targeted prosecutions, selective environmental enforcement and rigged auctions to effectively renationalize Yukos Oil and wrest control of Royal Dutch Shell's coveted Sakhalin-2 field in Siberia.
Other producer nations have been slammed by violent instability over this period. In Iraq last month, car bombings ravaged Baghdad's markets and insurgents killed more than 100 U.S. soldiers, while the national government sat impotent, hobbled by threats of defections. In Nigeria, the long-awaited presidential election was discredited by widespread voter intimidation and fraud, leaving a leadership once again preoccupied with protecting oil spoils, not governance. And in Ethiopia, separatist rebels executed more than 70 people working at a Chinese-run oil field as a bloody warning to foreign oil companies. This instability is affecting world oil markets, but not in the way one might first imagine.Overestimating and Underestimating
Despite Cassandra warnings that nationalization and violent instability in oil producing states could cripple current supply, production levels have remained steadily flat. This is, of course, the product of many factors, including the premium placed on securing critical production components and recent OPEC supply discipline. But it also reflects a simple truth: people fight to control oil, not to destroy it. Although hostile groups may occasionally disrupt supply for political advantage -- as in Nigeria, where rebels have currently shut down a quarter of production -- most recognize that political victory achieved at the expense of oil revenues is hollow. Likewise, while Chávez and Iranian President Mahmoud Ahmadinejad may bluster about cutting off supplies for strategic advantage, the fact is that they need imported money as much as we need imported oil.
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