emergent ink

While most of the world was looking the other way, Russia has put itself in position to control a large part of the oil and natural gas that the United States and the European Union depend on. Those of us who have been enjoying the collapse of the oil price “bubble” had better brace ourselves for rising prices and possible shortages, soon. Energy security is as important as national security and what has transpired in recent months has been disastrous. If this were a game of chess, I don’t know how we could avoid checkmate.

I urge you to follow these links and read the articles so you can see for yourself what is happening. In early July, Gazprom/Russia (the oil company is an extension of the government) offered to buy all of Libya’s spare oil and gas exports.

Bloomberg.com (July 11): Gazprom Libya Bid Imperils Moves to Curb Russia’s Energy Clout

Gazprom, the world’s largest natural gas producer, on July 9 offered to buy all of Libya’s spare oil and gas exports, after opening its first African office in Algeria a month earlier. It also is seeking to buy exploration licenses in Nigeria and to build a gas pipeline from there to Algeria, said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.

President Dmitry Medvedev “wants to use Russia’s largest conglomerates as a tool of foreign policy,” said Nick Day, chief executive officer of Diligence LLC, a business-intelligence firm focused on emerging markets. “What he’s looking to do is to buy oil, gas and mineral resources around the world,” he said by telephone from London…

Gazprom’s Libya bid may weigh on a U.S. strategy to weaken the Russian company’s grip over supplies of gas to Europe. The U.S. is trying to line up new gas supplies from friendly governments in Central Asia, such as Azerbaijan, and from Iraq for shipment to Europe via pipelines that skirt Russia.

The Russian government has also moved to end its partnership with BP on a large project in Siberia, which represents about a quarter of BP’s total worldwide oil production.

NY Times (March 22): BP Faces Environment Inquiry in Russia

In another bad sign for BP in Russia, the Parliament on Friday passed in a preliminary reading a bill restricting foreign investment in assets deemed strategic for the country’s economy or national security; most large oil fields fall into this category.

A spokeswoman for the ministry of natural resources characterized the inspection announced on Friday as routine and noted that it would cover other fields and other companies as well.

Still, in 2006, the same Russian environmental agency threatened Royal Dutch Shell with multibillion-dollar fines in a months-long campaign that led to Shell’s selling a controlling stake of its Sakhalin Island oil and gas development to Gazprom.

After Gazprom bought the stake, the agency dropped its environmental complaints and work continued.

See a pattern developing here? Russia is securing control through Gazprom of oil reserves in Russia and abroad, while getting rid of multinational companies that had been partners in development projects.

Asia Times (July 30): Russia takes control of Turkmen (world?) gas

The agreements with Turkmenistan further consolidate Russia’s control of Central Asia’s gas exports. Gazprom recently offered to buy all of Azerbaijan’s gas at European prices. (Medvedev visited Baku on July 3-4.) Baku will study with keen interest the agreements signed in Ashgabat on Friday. The overall implications of these Russian moves are very serious for the US and EU campaign to get the Nabucco gas pipeline project going.

Nabucco, which would run from Turkey to Austria via Bulgaria, Rumania and Hungary, was hoping to tap Turkmen gas by linking Turkmenistan and Azerbaijan via a pipeline across the Caspian Sea that would be connected to the pipeline networks through the Caucasus to Turkey already existing, such as the Baku-Tbilisi-Ceyhan pipeline.

But with access denied to Turkmen gas, Nabucco’s viability becomes doubtful. And, without Nabucco, the entire US strategy of reducing Europe’s dependence on Russian energy supplies makes no sense.

And what about that Baku-Tbilisi-Ceyhan pipeline? The one that was attacked by terrorists last week, and will now be shut for two weeks for repairs? The same one that runs through… Georgia?

The Times Online (August 9): How Georgia fell into its enemies’ trap

Moral grounds alone would be enough reason for supporting it against Russian aggression.

But on top of that is a vital Western interest. The biggest threat Russia poses to Europe is the Kremlin’s monopoly on energy export routes to the West from the former Soviet Union. The one breach in that is the oil and gas pipeline that leads from energy-rich Azerbaijan to Turkey, across Georgia. If Georgia falls, Europe’s hopes of energy independence from Russia fall too.

Yet the West is both divided and distracted. America will be furious if reports turn out to be true that Russian warplanes bombed an airfield where Pentagon military advisers are based. But a lame-duck president is not going to risk World War Three for Georgia.

All of these events are coordinated and planned. The situation is similar to what happened to Poland in 1939: a series of provocations that led Germany to “defend itself” are echoed in these current events. Georgia is a tiny country and it is unlikely that the United States, or any other European nation, is going to come to Georgia’s aid. But the ramifications of this are dire indeed. I do not see Putin (who is truly still leading Russia) passing up the opportunity to take total control of the supply of oil and natural gas to Europe or the United States. And I do not like to think about what he will do with that control once he has it.

From another article at The Times Online:

Putin flew directly from Beijing to North Ossetia, on the Russian side of the border. There he made it plain that Moscow’s armed confrontation with Georgia is not simply about South Ossetia but also about its switch of allegiance to America.

“Georgia’s aspiration to join Nato . . . is driven by its attempt to drag other nations and peoples into its bloody adventures,” Putin said during a meeting in Vladikavkaz, the North Ossetian capital.

Finally, I’ll refer you to one more link, something I wrote earlier this year: Reviving the Franchise.