A new Great Game has indeed begun!
“Oilpolitik” — the, ruthless exploitation of Russia’s oil and gas assets — aimed at restoring the lost glory of the former Soviet empire seems at work — over time. With the former KGB boss at helm in Moscow, Gazprom — Ukraine row has once again forced the issue of energy security up the geo-political agenda — reminiscing in some ways the turbulent era of early to mid-70s. Politics and energy issues are indeed intertwined — virtually inseparable!
The almost universal assumption that Russia has ceased to be a superpower when the Berlin Wall fell, and would never vie for world supremacy was proven wrong, when just around Christmas, Russia closed the taps on the pipes carrying gas across Ukraine to Europe. The decision sent tremors around the continent and indeed beyond.
And in the midst of all of this, all of a sudden, the reliability of Russia as a responsible energy supplier was put to question more than ever. This question came to fore at a time when Russia was about to take over the reins of G-8 and according to analysts wanted to portray the image of a reliable partner to the industrialized world. Putin’s vowed intention has been to cast Russia as a responsible energy supplier in a world ever more dependent on fossil fuels. Indeed if one puts aside its decaying nuclear stockpile, oil and gas are all Moscow has to justify a place at the G-8 table, some in the industrialized world argue.
The recent row with Ukraine, though resolved now, and the similar episode two years ago when supplies to Belarus were reduced in a fit of Kremlin pique, have apparently undermined Moscow’s reputation for reliability and casts it in a disturbingly different mould. In sharp contrast to it, over the last few decades the oil producing OPEC has very much conceded that their vast energy resources are indeed sought after commodities to be traded in the global markets. It is thus detrimental to their long-term goals, they now openly admit, if these are used as political tools to black mail the consumers.
Russia, however, seems very much ready to treat its vast oil and gas reserves as the bluntest instrument of foreign policy. No one denies that Russia had a right to increase the price of the commodity, as per the market dictates, yet the manner in which Putin sought to impose an immediate fourfold increase, it appeared more to be settling a score with the Westward-leaning Yushchenko than to any financial considerations.
The “orange revolution” was definitely a powerful blow to Moscow’s prestige as well as to its perceived interests in Russia’s near-abroad. There are indeed some who say that Putin, the ex-KGB boss knew precisely what he was doing and wanted to send a very clear warning to Western Europe about its dependence on Russian energy supplies. He knows the alternatives are relatively few and unattractive and hence even at the cost of undoing the image of a reliable partner he wanted to build all these years, he just went ahead with his plans.
With its vast energy resources, Russia enjoys considerable sway over Europe. It is already in a strong position to influence Germany’s European policy. And when one looks at the global map, one can see that Russia’s distribution system, either built or planned, stretched from Western Europe right across to Japan and China. Europe relies on Russia for a quarter of its gas imports. Russia plans to increase its gas exports to Europe by a third to 200 billion cubic meters by 2020. And now it is clearly evident that Russians are ready to use this leverage to their maximum political advantage. One has to remember Putin is keenly interested in politics too!
And as the row was resolved for the time being — in an ambiguous manner — many in Europe heaved a sigh of relief. For, they could not have afforded a gas blackout in times with freezing weather all around.
According to the German magazine Der Spiegel, a complex solution was agreed upon. In future, a trading company by the name of Rosukrenergo will do business with Naftogas. This company fits somewhere in the Byzantine corporate structure of Gazprom and belongs in part to the Austrian Raiffeisen Investment AG gehört. Rosukrenergo will buy natural gas from Gazprom for the demanded $230 per 1,000 cubic meters, while at the same time buying gas from Turkmenistan at $50, reducing the percentage of expensive Russian gas from 23 to 17 billion cubic meters, and reselling the mixed bag to Ukraine for $95. If Gazprom will sell Russian gas to Turkmenistan at $45 with the intent of having Turkmenistan resell gas to Rosukrenergo is not clear at this stage. Indeed no side could have appeared to be blinking first and through the deal, both can indeed claim of not blinking first.
Has Putin benefited from this row, only time could tell? Indeed when the OPEC decided to use its black gold as a political tool, there were voices within saying the policy was detrimental to the long-term objectives of the producers. And within the next few years, the lesson was very much received. And hence despite several temptations since then and the call by some to that effect, saner elements have always prevailed.
Russia now seems to be treading the same path. How soon will it learn the lesson, is difficult to say at this stage. At this time however, from the ashes of the Russia — Ukraine row — another cold war seems very much to be emerging.