Diplomacy is the art of achieving things which otherwise are not “doable.”
And in an environment getting tough day by day, this is what the energy diplomats are expected to deliver. In their success lies the prospect of growth for this hydrocarbon driven civilization of ours.
When the G8 ministers met in Moscow mid-March, Russia professed to make political focus on energy security a priority of its presidency of the group. It set itself the task of providing the (Western, industrialized) world with reliable energy resources on long-term basis.
But despite all this, a cold-war like rhetoric between the US, its Western allies and Russia seems to generate more confusion and haze. The Moscow meet once again underlined that Russia saw its energy sector as a national-security asset; while the US appeared lamenting that energy security had become the “albatross” of its national security. In addressing its threat perceptions, as enunciated in its National Security Concept of 2000 (dubbed by the West as the “Putin” doctrine) Russia sees energy as a trump card of great potential, if astutely played.
Some in Western capitals felt Kremlin was not willing to loosen its grip on Russia’s oil-and-gas industry and the European Union thus called on Russia to liberalize access to its gas-pipeline network (calling on Russia to ratify the Energy Charter, which aims at setting ground rules and treaty obligations regarding third-party pipeline access and transit obligations).
The EU and the US apparently are viewing energy security in terms of guaranteed supplies of energy through vicissitudes of politics, while Russia maintains that the paradigm of energy security also includes ensuring “security of demand”, which means allowing its oil and gas companies to invest in the vast distribution networks in Europe and the US at the wholesale and retail marketing levels as well and in acquiring properties in the energy sector.
A defining moment in Russian strategy came last September, when Russia concluded a $5.7 billion deal with Germany in laying a 1,200-kilometer gas pipeline with an annual capacity of 55 billion cubic meters connecting Russia’s Black Sea coast, through international waters offshore Poland and the Baltic states, with Greifswald on Germany’s coast.
The pipeline indeed has the potential to alter Europe’s political landscape. In the words of a leading research fellow at the Economics Institute of the Russian Academy of Sciences, Igor Tomberg, “Stable supply of energy to Europe in the next few decades will depend on relations with Russia.”
In September, again, Russia’s Gazprom short listed five oil majors for the development of the huge Shtokman natural-gas field in the Barents Sea, with an estimated reserve of 3.2053 trillion cubic meters of natural gas and 30.98 million tons of gas condensate. The shortlisted firms include Chevron and ConocoPhilips from the US, Hydro and Statoil from Norway, and Total from France.
The US would like progress on the $15 billion Shtokman project. Twenty-five percent of the liquefied natural gas (LNG) produced at Shtokman may be exported to the US and the rest to Europe. But Russia is taking its own time deciding, and may accord priority to the European market, for lack of reciprocity in the lucrative US markets.
Another bone of contention on the horizon appeared as Russia began further consolidating its monopoly on the transit routes to consumer countries from the Caspian and Central Asian region.
In the meantime, the Kashgan oil field in Kazakhstan, which is the biggest offshore discovery anywhere in the past 30 years, is due on-stream by the end of the decade. The export routes for Kashgan are to be determined soon. There are two choices. One will be to reinforce Russia’s monopoly further, while the second is to use the US-favored Baku-Ceyhan pipeline. The US is trying to persuade Kazakhstan to opt for the Baku-Ceyhan, which runs from the capital of Azerbaijan, Baku, to the Turkish Mediterranean port of Ceyhan, passing through Georgia.
And while Russia seemed to be working on improving investment laws and climate, it clearly did not intend to remain the United States’ energy appendage. As President Putin stressed in a recent article in the Wall Street Journal, “energy egotism is a road to nowhere”.
China and India also seem to be increasingly courting Moscow, with an eye on its energy riches. Energy is definitely at the top of Sino — Russian agenda and this could be unsettling to Washington in some ways.
Putin’s recent visit to Hungary and the Czech Republic revolved around energy politics. Russia has made some forays in Eastern Europe by purchasing assets, such as oil refineries in Bulgaria and Romania, and a fairly large network of fuel retail outlets in the Balkans, as well as in holding shares in Slovakia’s gas-pipeline company. It is currently negotiating more acquisitions in Romania, Bulgaria, Serbia, Macedonia and Bosnia-Herzogovina.
And as this energy politics heats up, new issues are coming to fore. Secretary General of the Riyadh based International Energy Forum Ambassador Arne Walther during his presentation at the G-8 summit highlighted the enormity of the task ahead. “The challenge of global energy security is complex and truly multi-dimensional.
It goes to the core of national interests. There is no quick and lasting fix. The cluster of issues related to energy security lends itself to on-going dialogue and co-operation not only among nations at your political level, bilaterally, regionally and globally, but also to dialogue and partnerships between governments and industry.” No one can deny it. Energy diplomats have a major and a complex assignment in hand.