There is something gaseous about the alarm of some of the current energy commentators in the media. The familiar echo chamber is filled with the voices of industry spectators, speaking over the accurate nuanced perspectives of authoritative, objective industry experts.
The unrelated changes in governments in the UK, Italy, and Israel, along with a closer contest in France, get thrown into such discussions. Of course, that is a canard, as those government changes are over unique internal political matters.
Sure, it is fun to throw bean bags at the Biden administration’s energy policies–but the alarmist image that business media narratives have relentlessly promoted is not supported by the facts. In fact, quite the opposite is happening under the surface, even if it has been little trumpeted.
Genuine energy experts have pointed out that there is no coherent brilliant economic strategy underlying Putin’s energy reactive machinations, especially as the Russian economy implodes and Russia’s status as an energy exporter deteriorates significantly.
As energy scholar Dan Yergin wrote, “in just a few weeks, Putin has destroyed the internationalized economy he has been building for more than 20 years, as well as the reputation Russia has cultivated as a reliable supplier….what he has done is to undermine and debase Russia’s most important source of economic power.” In short, Putin made “an enormous miscalculation”, or as experts Jason Bordoff and Megan O’Sullivan put it, the entire exercise has been “self-defeating for Putin economically”.
Indeed, from a purely economic perspective, Putin needs European markets far more than the world needs Russian energy supplies. Last year, Europe imported 46% of its energy from Russia–but Russia exported 83% of its energy to Europe!
Despite Putin’s much-hyped “pivot to the East” to replace the lost, erstwhile primary market in Europe, Asian countries are driving a $35 discount with overflowing excess Russian oil. At the same time, Russia can hardly re-direct piped natural gas away from Europe considering 90% of its existing pipeline infrastructure flows to Europe, not Asia. There is only one operational gas pipeline from Russia to China or India, reflected by the 16.5 bcm of gas sent to China in 2021 compared to 170 bcm sent to Europe.
As our new, original economic analysis reveals, Putin’s new ploys such as withholding gas from Europe actually hurt the Russian economy many times more than it hurts Europe–and the loss of oil and gas revenue is nothing short of catastrophic for Russia given record government spending, a budget deficit equivalent to two percent of GDP, and dwindling rainy-day funds.
As we proved in the number-one ranked scholarly paper in the online journal SSRN, Putin’s decaying energy position is just one dimension of a systematic collapse of the Russian economy. Clearly, there is no economic genius or market savvy driving Putin’s disruptive energy hijinks.
Rather, the Russian president’s strategy appears to be a classic tactic of divide and conquer–the timeless tool of insecure autocrats dealing from a position of weakness. He aims to sow as much chaos and panic and drive as many wedges as possible in the face of unified opposition.
The bet that Putin appears to be making is that by forcing difficult economic trade-offs, price pressures, and transitory supply disruptions on anxious electorates and by pitting countries against each other, resolve amongst Western democracies may weaken and ultimately break. It seems to be based on a cynical, transparent gambit that the authoritarian regime in Russia is better positioned to withstand crippling economic pain which is already many times worse than anything experienced by the West.
Unfortunately for Putin, besides the Cassandra-like handwringing of some misguided media commentators, there remains little evidence that his efforts to lever energy as the wedge to divide civil society are paying any concrete dividends.
Far from being passive and hostile spectators, policymakers on both sides of the Atlantic largely recognize the pressing energy challenges and are taking decisive collective action accordingly.
According to oil hedge fund manager Pierre Andurand, the Russian invasion of Ukraine has paradoxically brought more oil to the global market, not less. Strategic reserves around the world have released an unprecedented 240 million barrels–a figure that exceeds lost Russian production by a healthy margin.
In the U.S., the energy spigots have hardly been turned off with 3,557 permits for oil and gas drilling on public lands in its first year, far outpacing the Trump Administration’s first year total of 2,658. To the ire of environmentalists, the Biden Administration just this month reversed course in opening up oil and gas drilling leases in the federal waters off the coast of Alaska and in the Gulf of Mexico.
The U.S. is now running with record levels of natural gas and LNG production, and near-record highs of oil production at 12 million barrels per day. According to Energy Special Envoy Amos Hochstein, more supply is coming on the market from domestic producers and OPEC+ as a result of improved public-private partnership domestically and diplomatic overtures internationally after what many thought were initially turbulent starts on both fronts. Indeed, while prices are always influenced by a confluence of factors, domestic oil and gas prices are now below where they were at the start of the invasion in February.
In Europe, where the specter of natural gas rationing imposes more dramatic challenges, it is important to note that EU policymakers uniformly recognize the importance of solidarity with Ukraine, even as they work through specific esoteric areas of dispute. They are rising to the moment. Western media would be wise to acknowledge such resolve as the price of freedom instead of hyping-up threats that play into Putin’s mythmaking.
During WWII, FDR ignored the isolationist voices of appeasement as he took on another murderous imperialist bully. The five tiers of gas rationing in the U.S. from 1941 to 1945 led to a 32% reduction in usage–and somehow the republic did not collapse. While we may not be as great as “the Great Generation”, surely we can learn from them that freedom requires some investment.
These convictions appear to be very widely held. A recent survey by Morning Consult found that 85% of Americans support continued support for Ukraine against Russia, with comparable levels of support across political parties–and confirmed little has changed since the start of the invasion. Similar surveys have shown comparable levels of support across much of Europe, even in the face of difficult gas rationing challenges.
As National Security Advisor Jake Sullivan confided at the Aspen Security Forum last week, “there is still upward pressure on governments to do more, to go further with respect to sanctions. At the same time, all the headlines are saying there is flagging interest in Russia-Ukraine”.
The only way to stand up to an authoritarian bully of Putin’s type is by remaining united in collective opposition.
Despite the riveting doomsday coverage designed for TV audiences and the fact-free cynical skepticism, the facts suggest that when it comes to energy challenges, it is Putin who is running out of gas while the West has been busy refueling elsewhere, even if the path in getting here has been, and continues to be, noisy and far from linear.
Jeffrey Sonnenfeld is the Lester Crown Professor in Management Practice and Senior Associate Dean at Yale School of Management. Steven Tian is the director of research at the Yale Chief Executive Leadership Institute.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.
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