Klimat: Russia in the Age of Climate Change by Thane Gustafson

A discerning analysis of the future effects of climate change on Russia, the major power most dependent on the fossil fuel economy. Russia will be one of the countries most affected by climate change. No major power is more economically dependent on the export of hydrocarbons; at the same time, two-thirds of Russia's territory lies in the arctic north, where melting permafrost is already imposing growing damage.

Climate change also brings drought and floods to Russia's south, threatening the country's agricultural exports. Thane Gustafson predicts that, over the next thirty years, climate change will leave a dramatic imprint on Russia. The decline of fossil fuel use is already underway, and restrictions on hydrocarbons will only tighten, cutting fuel prices and slashing Russia's export revenues.

Yet Russia has no substitutes for oil and gas revenues. The country is unprepared for the worldwide transition to renewable energy, as Russian leaders continue to invest the national wealth in oil and gas while dismissing the promise of post-carbon technologies. Nor has the state made efforts to offset the direct damage that climate change will do inside the country.

Optimists point to new opportunities – higher temperatures could increase agricultural yields, the melting of arctic ice may open year-round shipping lanes in the far north, and Russia could become a global nuclear-energy supplier. But the eventual post-Putin generation of Russian leaders will nonetheless face enormous handicaps, as their country finds itself weaker than at any time in the preceding century. Lucid and thought-provoking, Klimat shows how climate change is poised to alter the global order, potentially toppling even great powers from their perches.

FIVE MINUTES WITH Thane Gustafson

INTERVIEW FOR PUSHKIN HOUSE BY ANDREW JACK (@AJACK)

Why did you decide to write Klimat?

The idea was to try a thought experiment around the question, What if peak oil demand turns out to be real? What would be the consequences for Russia? Arguably, on the eve of the invasion, the Russian hydrocarbon model still had a good decade or more to run before the energy transition set in. But then if ‘peak oil’ came along in early 2030s, this would open a second period when oil export revenues would begin to decline sharply.

What did you conclude?

The big question in the book is, What then? I look successively at the various sectors that might replace hydrocarbons: civilian nuclear power, agriculture, renewables. But the alternatives simply don’t even come close. Agriculture has been a tremendous success story, yet it still only produces some $20bn a year in export revenues while in 2019 hydrocarbons brought in close to $250bn. There’s an order of magnitude difference. Civilian nuclear power is the same.

Was the administration at fault for how it managed oil and gas revenues?

The role hydrocarbon revenues play in the budget is the basis for the whole system. I don’t think you can criticise the Russian government for going with their comparative advantage, which is word for word the way Putin puts it to justify his period of rule. The question is what you do with the proceeds. That’s where the Putin era has very definitely missed the opportunity to take the fabulous flow of revenues and put it towards creating a whole new infrastructure. It has instead fed an enormous outward flow of capital in the hands of oligarchs and more broadly hundreds of Russian companies and their owners. At the same time, much of it has been recycled through the welfare system. That’s good – the government has managed to improve living standards. The worst of the damage of the Soviet collapse has been repaired. But a lot more could have be done to renew technology. Instead, the Putin system chose to rely almost exclusively on imported technology.

What about Russia’s contribution to climate change?

The irony is that even in the Soviet era, Russian climate scientists had been pioneers in warning of the harmful effects of climate change on Russia itself:  the effects on permafrost, drought, changing rain patterns and temperatures which will harm the Arctic, Russian territory and quite possibly agriculture. Soil science is very strongly developed and soil scientists have been sounding the alarm too, but official Russia had not paid attention until very recently. Even before the invasion, they did nothing – except to post green webpages – and of course nothing has happened since. Climate change has been pushed to the back of the stage.

Has the war in Ukraine changed your views?

It changes things dramatically. Before, you could argue the Russia had ten good years left on its hydrocarbon model, with high energy prices for oil and gas, and even coal would be very slow to die. That was all very good news for the Russian export market. The effect of the invasion is to drop a bomb on the gas part of that favourable outlook. Obviously I didn’t anticipate the great invasion. But in a sense that reinforces the picture. The idea of a two-period future still holds, but what Putin has done is to shorten that initial period of the last hurrah, probably by a good bit. He’s effectively put a bullet through the head of Gazprom and just about destroyed the Russian gas business in Europe, probably for good. 

What about the effect of sanctions on oil?

The consequences for oil are harder to track. With the increase in world oil prices, we are now in a period where Russian hydrocarbon revenues are at record levels. The oil industry is this huge bathtub in which you have hundreds of taps flowing in and hundreds of drains flowing out. In the middle, oil gets traded in every direction. What goes on inside that global bathtub is very hard to pin down. Despite the EU embargo, implementation is not obvious. The bath tub leaks and oil finds a way to market, as we know from Iran.

How far did energy play into Putin’s war plans?

Gas is part of it but only as an irritant. Putin has been obsessed with Ukraine from the very moment that he came to power. There has been a succession of attempts by him to gain control of the key assets in Ukraine, particularly the export pipeline system as he did in Belarus. The Ukrainians resisted. Putin has repeatedly attempted to make sweetheart deals with successive Ukrainian oligarchs and presidents, but each has failed and the prize has escaped his grasp. So one can imagine his state of mind, especially if one factors in that in his mind Ukraine is a place that doesn’t really exist. 

What is the future for Russia?

I was very careful not to over-dramatise that in the book. The story is dramatic enough as it is. All models of the coming “energy transition” see another decade of strong growth in global oil and gas demand, but reaching a peak sometime in the early 2030s, likely coinciding with end of the Putin period. Just as the peak oil narrative starts to hit home, a new generation of Russian business leaders and government officials will take over. It won’t be the 1990s all over again. History doesn’t repeat itself in that way. But after thirty-plus years of Putin’s rule, “Russia’s new generation will face a great reckoning.” That’s the closing line of the book.