The pumping heart of the boom is western Siberia's boggy oil fields, which produce around 70 percent of Russia's oil—some seven million barrels a day. For Khanty-Mansi, a territory nearly the size of France, the bonanza provides an unparalleled opportunity to create modern, even desirable living conditions in a region whose very name evokes a harsh, desolate place. Khanty-Mansi's regional capital, scene of the holiday revelries, is being rebuilt with oil-tax proceeds. The new structures include an airport terminal (once a wooden shack with an outhouse), an art museum featuring paintings by 19th-century Russian masters, and a pair of lavishly equipped boarding schools for children gifted in mathematics and the arts. Even the provincial town of Surgut, a backwater only a few decades ago, is laying out new suburbs and is plagued by traffic jams.
But the opportunity presented by oil could slip through the region's fingers. Despite the remarkable surge in oil prices, oil production in western Siberia has leveled off in recent years. Output barely rose from 2004 to 2007—a period when the rulers of the Kremlin, a cold-eyed and control-oriented crew, seized choice fields once held by private oil barons. The oligarchs, as they were known, were rapacious sorts who jousted among themselves for spoils. But they also heavily invested in the fields in order to maximize production and profits. The Kremlin, by contrast, aims to exploit oil not only as a source of national wealth, but also as a political tool for making Russia a great world power once again. Its heavy-handed tactics have made foreign investors wary and could undermine the boom—and with it Khanty-Mansi's chances for a brighter future.
WESTERN SIBERIA'S great oil deposits lie under lands that an exiled Marxist revolutionary, suffering in the gulag, once called the "waste places of the Earth." But to someone visiting by choice, oil country looks fetchingly wild and pristine. The terrain is dominated by taiga—dense forest of spindly birch, cedar, and pine—and boloto, peaty marsh that is frozen for most of the year and in spots bubbles with methane. There are no mountains and few hills, but there are numerous lakes, rivers, and streams.
Oil exploration began in earnest here in the mid-1960s. When geologists reported that large reserves of oil were waiting to be tapped, the Kremlin organized a frenzied military-style invasion of "pioneers" and bulldozers to ramp up production. Western Siberia, it turned out, had even more black gold than anyone had dreamed: More than 70 billion barrels have been pumped over the past 40 years.
In the early days "Siberia was all frontier," says Khanty-Mansi's governor, Alexander Filipenko. The governor appears older than his 58 years, with a shock of gray hair, watery eyes, and a mottled nose that has weathered its share of frost. Filipenko arrived in Khanty-Mansi in the early 1970s with orders to lay a bridge over the Ob River, which in the late 19th century was a route for squalid barges transporting prisoners to their final places of banishment. The bridge project took four years of toil under brutal conditions. Yet despite the hardships, the governor looks back at that time the way an old man might recall his first love for a beautiful young woman.
Filipenko is equally passionate about his latest project—the redevelopment of the provincial capital, Khanty-Mansiysk, a town of 60,000. He attends to every detail, and he has the funds to remake the capital to his liking. The province's oil industry generates 40 billion dollars in annual tax revenues, 4.5 billion dollars of which Khanty-Mansi gets to keep for its own use. The rest goes to Moscow.