Russia – Dec 20

December 20, 2007

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TIME Person of the Year 2007: Vladimir Putin

Richard Stengel, TIME Magazine
[In 2007] one nation that had fallen off our mental map, led by one steely and determined man, emerged as a critical linchpin of the 21st century.

Russia lives in history-and history lives in Russia. Throughout much of the 20th century, the Soviet Union cast an ominous shadow over the world. It was the U.S.’s dark twin. But after the fall of the Berlin Wall, Russia receded from the American consciousness as we became mired in our own polarized politics. And it lost its place in the great game of geopolitics, its significance dwarfed not just by the U.S. but also by the rising giants of China and India. That view was always naive.

Russia is central to our world-and the new world that is being born. It is the largest country on earth; it shares a 2,600-mile (4,200 km) border with China; it has a significant and restive Islamic population; it has the world’s largest stockpile of weapons of mass destruction and a lethal nuclear arsenal; it is the world’s second largest oil producer after Saudi Arabia; and it is an indispensable player in whatever happens in the Middle East.

For all these reasons, if Russia fails, all bets are off for the 21st century. And if Russia succeeds as a nation-state in the family of nations, it will owe much of that success to one man, Vladimir Vladimirovich Putin.
(19 December 2007)
Related from TIME: A Tsar Is Born.

Steve LeVine at The Oil and the Glory agrees:

… The magazine notes as it usually does that this does not connote endorsement. The selection rather recognizes a person who Time’s editors believe had the greatest impact in one way or another in the world.

For reasons different from those Time lays out, I agree with the choice. The biggest is that Putin has forced the world to take Russia seriously. Just a few years ago, it would have been regarded as absurdist to suggest that Russia would have its current voice in global politics and business.

It’s irrelevant that he’s done so on the back of high oil prices, and that Russia’s influence no doubt will wane when those prices inevitably do.

UPDATE (Dec 20)
I think the big story about the 07 “Person of the Year” from TIME is that it shows a growing recognition in the U.S. of the importance of Russia, in large part because of Russia’s energy supplies. Ironically, the Russian media seem to be pleased with the selection, while some in the West are indignant.
Putin and TIME: The View From Russia
-BA


How Long Will Siberia’s Gas Last?

Christian Wüst, Der Spiegel (Germany)
Europe depends on Russia for its natural gas, but, as Gazprom begins production at the last major field, it is unclear how much gas is left in Siberia. Developed fields are almost exhausted, and tapping new reserves involves huge technical difficulties.

…Demand for energy is growing, both domestically and abroad, and Russian energy forecasters predict Siberia will satisfy that demand. Alexander Grizenko, an advisor to the board of directors of Russian energy giant Gazprom, expects production volume to increase until 2030 when, according to his predictions, a peak level of well over 800 billion cubic meters a year will have been reached. Grizenko also emphasizes that the country will be able to maintain a very high level of production for another 30 years after that.

But Jean Laherrere, chief statistician at the Swedish-based Association for the Study of Peak Oil and Gas, paints a completely different scenario. He believes that production will peak in only eight years and decline rapidly after that. According to Laherrere’s prognosis, in 2060 — when Russian visionaries predict that production levels will still be higher than they are today — it will in fact be close to zero.

Who is right? The answer to this question will be critical to energy supply in Europe, which already buys close to half of its natural gas from Russia today — a share that is expected to increase now that the North Sea gas fields are almost exhausted.
(18 December 2007)


Europe refiners look to Russia as N.Sea oil fades

Ikuko Kao, Reuters
Europe will buy more Russian crude as North Sea oil output drops, prompting heavier investment in high tech refineries that can turn the higher sulphur content crude into greener, ultra-low sulphur fuels, analysts say.

That may also make Russia’s Urals crude more expensive for European buyers.

North Sea oil output, mostly from Britain and Norway, will fall from 4.88 million barrels per day in 2007 to 3.66 million bpd in 2012, according to the International Energy Agency.

Damian Kennaby, analyst with energy consultancy Purvin and Gertz, forecasts North Sea production will have fallen even further to about 2.7 million bpd by 2020.

“The main alternative crude sources in Northern Europe are Russian and African,” he said. “As North Sea production declines we expect that demand will be met by more Russian exports.”
(18 December 2007)
Jeffrey Brown (westexas) has a comment in the Dec 19 DrumBeat at The Oil Drum.


Bankers See Grim Outlook for Russian Oil

Kommersant (Russia)
UBS investment bank has followed Alfa Bank’s example and lowered its recommendation for the Russian oil industry. The bank says that oil production will become unprofitable for many companies because of high taxes, capital investments and exhausted deposits.

The pessimistic long-term prognosis was published on Friday. Recommendations for all Russian oil companies except Rosneft were lowered by at least one position. The bank notes that Rosneft had good indicators even without YUKOS assets. . . .

. . . Not all investment banks agree with the UBS assessment. JP Morgan published a rosy appraisal of industry health at the end of last month, and Troika Dialog recommends buying Gazprom Neft. Renaissance Capital predicts that LUKOIL will benefit from tax policy changes by the new government next year.
(17 December 2007)
Recommended by Jeffrey Brown (westexas).


Putin Lays Out Russia’s Future: The Gazprom-KGB State

Steve LeVine, The Oil and the Glory
For years, scholars, think tank commentators and journalists have been fond of a cute phrase to describe Russia: The KGB State. That’s because of Vladimir Putin’s KGB past, and the men who generally surround him.

But Putin’s clever choice today of successor shows how he sees his country, and that’s a hybrid — what one might call the Gazprom-KGB State.

The levers of power will be distributed like this: Dmitri Medvedev keeps the money that’s fueled Russia’s roar back onto the world stage rolling in; and Putin keeps his hand in decision-making through his power base — the FSB, the successor agency to the Soviet-era KGB.

Medvedev, who unless someone mightier than Putin intervenes will be Russia’s next president come March, is chairman of the Russian natural gas giant. He’s also of course Putin’s deputy prime minister, but it’s the Gazprom title that has demonstrated Putin’s confidence in his 42-year-old protege.

Gazprom is the spearpoint of Russia’s foreign policy. Through its control of natural gas pipelines, Gazprom is the instrument of Russian influence in its former colonies in Central Asia, the Caucasus, the Slavic states of Belarus and Ukraine, and even in the Baltics. And Gazprom is also Russia’s lever of influence in Europe, where the company supplies 30% of the natural gas. That influence is likely to grow with the construction of new pipelines from Russia to Europe.

But what Medvedev doesn’t have is links to the FSB, or any of the other security services. That means he’s absolutely no threat to Putin’s aspirations of holding on to power. If Putin had selected Medvedev’s main rival, former KGB officer Sergei Ivanov, it would have sent a different message.

Last week, Putin proved that he’s the country’s most popular political figure in a massive sweep of parliamentary elections. Now he’s moved to consolidate his position with the appointment of a milquetoast successor who seems likely to gladly stay on the economic side of power, and leave the rest to his patron.

We all assume that Putin plans not just to exert continued influence, but paramount power. Expect to hear more on that front.
(10 December 2007)
Steve LeVine, an author and journalist, is posting regularly on oil-related developments in the Former Soviet Union (FSU). Other recent posts:
Fence-Sitting on the Caspian
Is America’s Dethroned King of Kazakhstan on his Way Back?


Tags: Fossil Fuels, Geopolitics & Military, Oil