Most of the oil produced after the country's 1998 financial collapse has come from drilling and re-drilling old Soviet oil fields with more advanced equipment — squeezing more black gold out of the same ground — and efforts to develop new fields have been slow or non-existent.Without the income from oil and gas, Russia's economy is not going to be able to afford the recently assertive military it has been fielding. Yet the oil and gas the Russian economy is based on comes from secondary recovery from old oil and gas fields. Without new fields, the secondary recovery effort will stop being effective quickly.
That strategy is potentially disastrous, said Valery Kryukov, who researches oil companies in western Siberia for a government-funded think tank.
"If the situation which exists now stays the same, oil production will start to decline seriously in two years," Kryukov said in a phone interview from his offices in the city of Novosibirsk.
The implications extend far beyond Russia's borders. Last year, Russia was the world's second-largest oil producer. If its output begins to decline or is hampered by inept or corrupt business practices, the price of oil could begin climbing again.
The concerns about Russia's oil industry also raise questions about the health of the nation's economy, which has enjoyed stratospheric growth thanks to high oil prices since the economic crisis a decade ago, according to interviews with a dozen economists and analysts. [Snip]
That's a serious matter for a country where, by some estimates, the oil sector funded about a third of the national budget last year, and where by all accounts industrial, technological and agricultural businesses lag far behind. Russia's other major revenue source is natural gas, in which Russia leads the world; oil and gas sales are mainly responsible for the country's $592 billion in gold and foreign exchange reserves.
The practice of reaping quick profits and ignoring long-term interests is reminiscent of the former Soviet Union's development policies, and it was embraced by post-Soviet billionaires, known as oligarchs, who propped up flimsy companies to strip Russia's natural resources for as many fast rubles as possible. It continued as the government took over many of those private companies, often by brutish means.
This will badly effect the Russian economy, and since much of Europe's Winter heating and electricity is produced from gas provided from Russia, Europe's economy will be hurt also. The new "Cold War" currently being discussed will then just be reduced to everyone, Russian and European alike, being very cold.
With both the US and Russia effectively out of oil and unable to supply a long range military forces without external help from oil suppliers, it is unlikely that there will be any combat between those two nations. Any military actions will occur between close neighbors. In that case the US will once again be protected by its ocean borders.
The possibility of Russia quickly running out of oil and gas to export puts a whole new spin on the possibility of a new Cold War between the US and Russia.