Caught Between Russia and the U.S.

What a difference a year makes. Last summer, when Vladimir Putin hosted the G8's annual summit in St. Petersburg, the Russian president—supercharged by his country's oil-fueled economic boom—seemed the star attraction. He and the Bush administration hammered out a joint strategy on Iran, and Putin expansively welcomed his European neighbors into a new "energy partnership."

The tone at the G8 meeting this week in Heiligendamm, Germany, will be decidedly chillier. Putin has gone from genial host to scary guest. In the last 12 months he has been at the center of a series of ugly incidents, including rows with neighbors and the expropriation of foreign oil company assets in Russia. Moscow has also sold air-defense systems to Iran, jet fighters to Syria and a nuclear reactor to Burma. Inside Russia, meanwhile, Putin's opponents have started turning up dead, or have been jailed and beaten by the police.

The G8 is alarmed. U.S. senator and candidate John McCain has denounced Putin's recent rhetoric as "the most aggressive from a Russian leader since the end of the cold war." France's new president, Nicolas Sarkozy, swore on the campaign trail that he would not shrink from "denouncing human-rights violations" in Russia. And Germany's Chancellor Angela Merkel, according to a German diplomat who was not authorized to speak on the record, was "chilled" by the defiance Putin showed over human-rights complaints at a recent meeting. The British, meanwhile are perturbed by Russia's refusal to extradite the leading suspect in the fatal poisoning of Alexander Litvinenko, a Russian spy turned British citizen, who was killed last November in London.

The question now is, what will the West actually do to rein in Russia? America needs Moscow's cooperation in confronting even more troublesome states, and is likely to remain entangled in disputes with the Kremlin over issues from how to deal with Iran's nuclear program to whether to install a U.S. missile shield in Europe. But Europe's main interest in Russia is its oil and gas, and that gives it more freedom to maneuver.

Already, Russia's behavior has helped inspire an EU pledge to start producing 20 percent of its energy from renewable sources by 2015. Britain is working to raise its nuclear power output, in part to cut carbon emissions but also to "reduce dependence on unstable regions like Russia and the Middle East," as British Trade and Industry Minister Alastair Darling recently put it. Even Germany, which has long abhorred all things nuclear, is now talking about building atomic power plants.

In short, the Russia threat is helping to create a united European front dedicated to greater energy efficiency and independence. Among the measures now gaining political momentum are efforts to link national energy grids (which would reduce waste) and to provide tax incentives to squeeze more gas and oil from the North Sea. "Yes, we're dependent on Russia for energy," says British M.E.P. Daniel Hannan. "But the customer could have the upper hand if Europe organizes itself." For now, Europe remains beholden to Russia for just over 25 percent of its energy supply, but Russia looks to Europe for almost 65 percent of its oil and gas exports. And Putin is doing his level best to scare off his best customers.

With Stryker McGuire in London, Anna Nemtsova in Moscow, Tracy McNicoll in Paris, John Barry in Washington