This is a collaborative article by Carlos Pascual, Matthew Sagers and Thane Gustafson.

Candidate Trump promised a sea change in US-Russian relations, but questions about Russian interference in the US elections and myriad Congressional and FBI investigations have dropped an Arctic chill over any possible warming. The broader security and commercial impacts of US-Russia relations are global, not least in the energy sector. Russia is an energy "superpower." It has long been among the world leaders in the production of oil, gas, coal, electric power and uranium. Russia's energy wealth is one of the cards that it holds, in addition to its nuclear weapons, to claim a role as a global power. Here are 10 points to watch over the course of 2017.

1. Lack of predictability in their presidents, mutual ability to block consensus in international institutions (e.g., the UN and OSCE), and indifference for treaties make 2017 the most dangerous year in US-Russian relations since the dissolution of the Soviet Union. There are few assured checks and balances. Distrust will spread until some understanding is reached on Russia's role in the US elections.

2. Russia and the United States would benefit from engaging on specific concrete issues - like energy development, or implementing the Intermediate Range Nuclear Forces Treaty - that, handled well by both sides, could demonstrate an alternative to confrontation. If cooperation is going to work, both sides have to have equal standing, and not be seen as conceding to the other.

3. Russia and the United States cannot avoid engaging on Syria and ISIS. The two conflicts are intertwined and together underpin the world's greatest international terrorist threat, aside from the ongoing humanitarian decimation. Russia is the only nation with lines to Tehran, Riyadh, Damascus, and Israel. Halting the humanitarian catastrophe in Syria is within reach, but do not expect a shared vision to emerge that can sustain peace in the region.

4. Russia and the US need to agree on whether they are committed to keeping Iran from gaining nuclear weapons. If they can show unity on this issue - and translate it into unflinching implementation of the Iran nuclear agreement - they could ease Sunni-Shia tensions that further destabilize the broader Middle East.

5. With President Putin running for re-election in 2018, expect him to seek domestic and international outcomes - such as the lifting of energy and financial sanctions related to Ukraine - that could generate populist appeal. Three years on, current US and EU sanctions against Russia have lost punch. Russian energy companies and banks have found workarounds and alternative sources of liquidity. Still, access to global capital markets would help Russia move beyond its anemic growth and help diversify its economy. Late 2017 could be the moment to test the political will of all parties on viable resolutions for Ukraine.

6. Russian oil is currently quite competitive internationally because of domestic tax policy and ruble devaluation, but Russia still needs international investment to develop its energy sector. Unlike most other upstream sectors globally, investment, drilling and production rose during 2014-16 in Russia. Over the long term, expect Russian oil to move progressively from its traditional onshore, conventional home to new provinces and resources: among them the Arctic shelf and tight oil. These resources, however, will require international technology and management to make them viable, no matter how fast-paced Russia's import substitution program might progress for key inputs. Russian oil's long-term future is really what is at stake for Russia in terms of sanctions.

7. Watch for the American Congress to pass legislation making US sanctions mandatory acts of law, instead of presidential executive orders as they are now. This will present the White House with a difficult dilemma-whether to veto or to sign. To veto is to invite a confrontation with Congress, while sending an unintended signal to Moscow about US intentions. On the other hand, to sign is to create the danger of a new "Jackson-Vanick"-perennial legislation that cannot be undone for years or decades. In both cases, the result is a loss of flexibility for US diplomacy at a delicate time.

8. In contrast to tensions with the United States, Russia is successfully pursuing a pragmatic course in its energy relations with Europe. The long-standing dispute between Gazprom and the EU Commission appears on the verge of resolution, after four years of standoff and negotiation. Gazprom is gradually adapting its export strategy to the requirements of EU gas and power directives, as the wave of marketization in Russian-European gas trade spreads into southern and eastern Europe. The EU Commission and European national governments appear to be putting environment and efficiency above security, as the share of Russian gas in European imports reaches record levels.

9. For the first time in its long history as a major oil exporter, Russia is cooperating with OPEC to limit production, rebalance global markets, and boost world oil prices. The decision revealed a significant split between the leadership of Rosneft (which opposed the cut) and the Ministry of Energy (which favored it), with Putin supporting the latter. Russia should come close to meeting its 300,000 b/d pledge. This new role has given Russia an unexpected source of influence and leverage: as the key interlocutor between Teheran and Riyadh on energy markets, adding to Russia's indispensable role on security, politics, and commerce in the Middle East. This has also made Russia a key decision-maker in global oil markets.

10. Russian energy's "pivot to the east," to diversify its exports from Europe, is making considerable progress toward the world's fastest growing energy markets. Already 22% of Russian crude oil exports go east, and expansion is underway on the main export route, ESPO, that will increase this even further. As a result of recent upstream acquisitions, Asian companies now account for 4.5% of Russian oil production. Both of Russia's two key gas export projects, Yamal LNG and Power of Siberia, are on schedule to deliver their first gas to Asian markets in 2018-19.

Tense as US-Russia relations may be, the issues at stake, the influence Russia has carved out in the Middle East, and its salience in energy markets call for engagement. Populist pressures on both sides will make it difficult to find outcomes that both can accept. That said, the world will be safer if both sides work on constructive outcomes rather than seek tactical wins in regional theaters of conflict and tension that produce few strategic and sustainable benefits.

Matthew Sagers is Managing Director for Russian and Capsian Energy at IHS Markit.

Thane Gustafson is Senior Director of Russian and Caspian Energy at IHS Markit.

Carlos Pascual is Senior Vice President for Global Energy and International Affairs at IHS Markit.

Posted 25 April 2017

Matthew Sagers, Managing Director for Russian and Caspian Energy, is a well-known expert on energy and transportation systems in the countries of the FSU, and is an authority on energy policy in that region. Dr. Sagers is the main contributor to the biannual long-term oil and gas forecasts for the region, that cover production, consumption, and export flows by route, known as the Eurasian Oil Export Outlook (EOEO) and Eurasian Gas Export Outlook (GEO).

Dr. Sagers holds a BS from Weber State University (magna cum laude), an MA from Ohio State University, and a PhD from Ohio State University.

Thane Gustafson, IHS Senior Director of Russian and Caspian Energy and Professor of Government at Georgetown University, is a widely recognized authority on Eurasia who has spent 40 years studying and traveling in Russia, Ukraine, and the rest of the Former Soviet Union.

Formerly a professor at Harvard University and a political analyst at the Rand Corporation, Dr. Gustafson holds a BS from the University of Illinois in political science and chemistry, and a PhD in government from Harvard University. He was a Fulbright Scholar in Russia and Ukraine, and a Peace Corps volunteer in West Africa.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.