Texas Tea, Anyone?

For a cold fish, Vladimir Putin is lately generating a lot of warmth. At their June summit in Slovenia, George W. Bush peered into the soul of the Russian president and declared him "trustworthy." Then, last week, Putin got a bearhug from Chinese leader Jiang Zemin, who had come to the Russian capital to sign a 20-year friendship treaty between Moscow and Beijing. When Putin headed off to meet Bush again a few days later at the Genoa G8 summit, he wore the look of a man who's on top of his game.

The name of that game: triangular diplomacy, in which China, Russia and the United States maneuver for position against one another. For some years Washington has thought Russia too weak to be more than a bit player in geopolitics. Economically, Russia is still wimp-sized, with a GDP about the same size as that of the Netherlands. And Putin knows he can do little to stop Bush from pushing through his plans to install a missile defense system if the American president feels like it.

But Putin has more leverage than he often gets credit for. It lies not only in his eroding stock of nuclear arms but in a resource Bush and Jiang both have passionate interest in: energy. After last week's Russian-Chinese summit in Moscow, American commentators parsed the two leaders' statements on missile defense. But Russian journalists took to calling it "the oil-and-gas summit." Putin persuaded the Chinese to let natural-gas monopoly Gazprom bid on a $6 billion pipeline project inside China. The leaders also inked a $1.7 billion deal for a pipeline that would carry 219 million barrels of Russian oil a year from Siberia to the Chinese interior. China's booming economy, Putin suggested, could soon be running on empty unless it finds new sources of supply.

Bush and Vice President Dick Cheney, of course, have been voicing similar worries about the U.S. economy. Cheney's energy strategy envisions the former Soviet republics--over which Putin still exercises economic influence--as important new sources for energy. And in Putin, Bush faces a national leader whose combined oil and gas resources, by one calculation, give Russia more hydrocarbons than Saudi Arabia.

The U.S.-Russia game is being played out around the oil-rich Caspian Sea. Washington has sought to bypass Russia by promoting a Baku-Ceyhan pipeline designed to bring oil and possibly gas from Kazakhstan and Azerbaijan to a terminal on the southern coast of Turkey. That would reduce those former Soviet republics' dependence on Moscow. But almost a decade after it was proposed, Baku-Ceyhan remains mostly on the drawing board, while Russia's competing project, the Caspian Pipeline Consortium (which includes U.S. firms but runs through Russia), is slated to go online in just a few weeks. Now Washington may have to go pleading to Moscow for Caspian oil. "The race to get oil from Central Asia to the Black Sea is over, and Russia has won," said a recent report from the think tank Stratfor.

Still, Putin has only so much control over his country's oil politics. As Russia's oil revenues soar, he has to accommodate his domestic industry lobby, much as Bush and Cheney do. That may help explain one recent mystery: why Russia, despite the new romance between Bush and Putin, did not support a U.S. plan to refashion sanctions against Iraq. NEWSWEEK has learned that the Russians made a commitment to the new sanctions regime in Slovenia but abruptly backed off. There were "explicit words, explicitly expressed," says a miffed senior U.S. official. "We felt we had agreement to move. Something happened between then and New York"--where Russia threatened to vote no in the U.N. Security Council. What likely happened, Russian analysts say, was that Russian oil companies pressured Putin to renege after Saddam Hussein threatened to withhold all oil-for-food contracts. Putin, it appears, is not the only one who can play the oil game.

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