When the leaders of the world’s most powerful industrialized nations got together in the beautiful settings of the marble ballroom of St. Petersburg’s Constantine Palace last Saturday, despite indeed the immediate and urgent geo politcal issues — bombs raining on Beirut and Gaza, suicide bombings in Baghdad, North Korea adamant at generating ripples, pipelines exploding in Nigeria and Iran shaking its fist at the West — energy security remained a major subject of deliberation.
A report prepared by the United Nations for the Group of Eight summit concluded that global security risks have “increased sharply because of steeply rising oil import demand in developing countries.”
And there were reasons too. Crude was already touching new heights — almost ready to flirt with $80 mark. Analysts now predict prices of $80 to $85 a barrel over the next couple of months, barring any new major events and $90 to $100 if things escalate. With any thing lurking around the corner, even a bad hurricane disruption, the eventuality of crude touching the $100 mark could not be ruled out at this stage.
G8 leaders therefore addressed the issue of “high and volatile” prices by endorsing policies aimed at encouraging oil field investment and still higher production. The final statement called for “investment in all stages of energy supply” and “transparency and good governance in the energy sector but suggested no requirements on countries to make that happen.” A Kremlin spokesman, Dmitri S. Peskov, conceded that the language seemed directed against Moscow’s consolidation of its oil and natural gas industry under state control. Still, all countries, including Russia, agreed to the statement.
On the eve of the high profile summit, a 19-nation opinion poll conducted for the BBC World Service shows that people around the world see grave threats from the way the world currently produces and uses energy. Interestingly, the number one energy concern of the common man in virtually every industrialized country turned out to be the impact of current energy usage on global environment and climate and not supply concerns. That was down on the concern list.
Other concerns included the destabilizing impact of (the higher oil prices) on the global economy, and indeed its role in sparking conflict and wars. With Russia in the presidency of G-8, energy security has been portrayed as a priority to the global leaders. This is despite the fact that many in the West are increasingly questioning Moscow’s role in ensuring the energy security for the West, especially in the backdrop of the Russians pulling off gas supplies to Europe early this year — which many believed was for political considerations.
Russia under Viladmir Putin is starkly different from that of Boris Yelstin or that of Mikhail Gorabchev. It is endeavoring to occupy the global center stage. Russia is using its energy might to rehabilitate its role and image as a super power on the world stage. That is unsettling for some.
In the 20th century, military might was the currency of world’s most powerful nations, but today the international balance of power is based on access to oil and gas, says Andrew Kuchins, Eurasia director at the Carnegie Endoment. Russia indeed has the assets to assert itself on the world stage. It has the world’s largest gas reserve and is only a close second to Saudi Arabia, as far as oil production is concerned.
There is a general agreement that the world will be consuming 105 million barrels of oil a day in 15 years, an increase of more than one fifth over the current consumption. Moscow’s oil and gas reserves between the Baltic and Paciifc could be its most important instrument in regaining the lost political glory of the former Soviet era, especially as fossil fuel become the new strategic weapon of the 21st century.
It was perhaps in this background that elederly statesman Henry Kissinger, often regarded as a connoisseur of realpolitik, said last month, “It would be wrong to treat Russia like an enemy.”
However, not every one is ready to put the egg in the Russian basket. As the Russian Parliament approved legislation granting Gazprom the exclusive right to export gas, some including George Soros are openly expressing doubts about Russia’s marriage to free market economics. The wonder boy of the capitalist world. Soros, said Europe’s energy supply was too dependent on Russia, “a country that does not hesitate to use its monoploy power in devious and arbitrary ways.” The EU needs a more cohesive energy policy to negotiate with Russia, he emphasized.
Although it was unclear if the president supported the bill granting Gazprom exclusive export rights, yet it was adopted despite Moscow’s pledge to the EU to gradually liberalize the markets and let others also get into the fray.
Gazprom is already the world’s largest natural gas producer and ther adoption of the legislation by the Russian Duma, is being seen more as part of Moscow’s growing resource nationalism, stipulating that gas must be considered a startegic material and therefore exported only by Gazprom or its export arm, Gazexport, to protect national interests. As the energy politics heats up, with Russia flexing its muscle more than ever, the prospects of growing amity between other energy producers and Russia could not be ruled out.
In a unipolar world, many would see this more of a balancing act, in real term, than any thing else. Afterall Realpolitik is all about ensuring national interests.
