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Politics & economics - May 14

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The Russian bear is back - and this time it's gas-powered

Ian Traynor, Nick Paton Walsh and Ewen MacAskill, The Guardian
· Petrodollars give Putin weight on world stage
· America is 'nervous and angry', say observers
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...After 20 years of decline combined with the festival of liberty ushered in by Mikhail Gorbachev's revolution in 1985, the bear is back. Helped by a tide of petrodollars, his "national champion" gas and oil titans projecting Russia's power abroad, and his authority unassailable at home in contrast to Bush, Blair and Chirac, Mr Putin is walking tall on the global stage.

The climax comes in July in his hometown, the old imperial capital of St Petersburg, when Mr Putin hosts the leaders of the world's richest seven countries.

...As well as Mr Putin's quiet and methodical consolidation of control over the past five years, the fundamental reasons for the balance of power tilting Mr Putin's way is money, derived from colossal mineral wealth when oil is selling at more than $70 a barrel and when the state corporation Gazprom has a monopoly on supplying a third of Europe's gas supplies.

He has paid off much of Russia's foreign debt and built a $62bn (£33bn) "stabilisation fund" from the windfall. Russia now has some of the world's biggest financial reserves; Gazprom recently overtook BP as the world's second-biggest energy firm by market value, and Mr Putin has eliminated all important rival centres of power in Russia while enjoying consistent popularity ratings of more than 70%.

The outcome, analysts predict, is that if he stands down after two terms as scheduled in 2008, Mr Putin may be gone but "Putinism" will remain. "The transition will be smooth - he will handpick his successor," predicts Mr Rahr in Berlin. "Putin will be like a Russian Deng Xiaoping, still there behind the scenes."

But these strengths are also weaknesses. Russia's new wealth is utterly dependent on the markets and the price of oil, which can fall as well as rise. And Gazprom's power is umbilically linked to Europe, which provides two-thirds of its revenue. "They need Europe as much as Europe needs Russia," said Chris Weafer, chief strategist at Alfa Bank in Moscow.
(13 May 2006)


Chavez preaches socialism to European summit

Stephen Castle, The Independent
The Venezuelan leader, Hugo Chavez, yesterday paved the way for a politically-explosive visit to London this weekend as lambasted Tony Blair's brand of free market economics and said Europe should note the rise of socialism in Latin America.

Mr Chavez's rhetoric put him centre stage at a summit in Vienna as he claimed that "neoliberalism has begun its decline and has come to an end" and that "a new era has begun in Latin America."

The comments raised the temperature following the decision by Bolivia's new President Evo Morales - who is an ally of Mr Chavez - to nationalise his county's oil and gas. Venezuela is increasing taxes on foreign investors in its massive energy sector.

At an EU-Latin America summit attended by Mr Blair, the Venezuelan president argued: "There is a big ideological confrontation in the region, some defend the big project of Washington that has smashed our people. We want a profound change, a new socialism and we are going to debate: do we want socialist or capitalism? We say socialism."

He said Mr Morales was a descendent of the Incas, "oppressed people who are rising", adding: "They are rising with peace not weapons. Europe should listen to that".

Mr Blair responded by urging the two Latin American nations not to act irresponsibly. He argued: "What countries do in their energy policy when they are energy producers like Bolivia and Venezuela matters enormously to all of us. My only plea is that people exercise the power they have got in this regard responsibly for the whole of the international community."
(13 May 2006)
Related:
Latin America's oil rebels rebuff EU (Guardian)
Chávez is a threat because he offers the alternative of a decent society (John Pilger)


The Pipes Carry Clout With the Oil

Jad Mouawad, NY Times
AS energy-rich countries feel empowered by high oil prices, they are increasingly using a blunt instrument to make their influence felt. Call it the power of the pipeline.

New, superlong pipelines are planned for South America, the Middle East, Russia and Africa, and oil-producing countries are using them to forge political alliances, punish foes and extract concessions from customers.

"Pipelines mean political leverage," said Frank A. Verrastro, the director of the energy program at the Center for Strategic and International Studies in Washington.

On a recent visit to Lithuania, Vice President Dick Cheney lambasted Russia for using oil and natural gas as "tools of intimidation and blackmail." Later, on a stopover in Kazakhstan, he urged energy-rich Central Asian nations to bypass Russia altogether when considering pipeline routes to the West.

President Vladimir V. Putin himself made energy security a theme this year in talks with other industrialized nations. But on the day it took over the presidency of the Group of Eight, Russia cut off natural gas supplies to Ukraine over a price dispute, freezing out both its independent-minded neighbor as well as the European Union in the dead of winter.

In the end, a compromise was reached and Ukraine agreed to pay more for its gas, until then subsidized by Russia. But Russia's neighbors also learned a shocking new reality: whoever controls the taps also holds the upper hand.
(14 May 2006)


The Real Story Of Pricey Oil

Fareed Zakaria, Newsweek
...I don't know if the world is running out of oil, a subject of heated debate. Even oil experts really are just guessing. But what's clear is that supply is low because few producers are spending big chunks of money to find and develop new oilfields. Without massive long-term investments, supply cannot keep up with demand. Another Goldman analyst, Jeffrey Currie, estimates that it would take $3.5 trillion dollars (yes, trillion) in the next decade to keep up with rising demand. Actual investments are going to be a fraction of this number.

...If the president and Congress were to propose a powerful package of measures—higher gas taxes, fuel-efficiency standards starting at 30 and rising to 40 miles per gallon, tax credits for new technologies—it would begin to wean the United States off its addiction to oil. And, it would signal to the market that demand for oil in the United States was likely to slow and stabilize.
(22 May 2006)
It would seem to be very important for analysts like Zakaria to become more aware of oil depletion analysis. As anyone who has followed peak oil knows, oil experts are doing much more than "just guessing."


More Silliness on the Hill

Donald Kennedy, Science Magazine (editorial)
...Now the challenge is to produce national policies that will provide incentives for Americans to cure the addiction. Stringent fuel-efficiency standards on a national basis will be essential, and reduced speed limits would add to the savings. California has shown that it can hold per-capita energy consumption flat while it has risen elsewhere, and some lessons learned there can be applied nationally. A cap-and-trade system for greenhouse gas emissions, of the general kind contained in last year's McCain-Lieberman bill, should be supported by an administration that has so far shown no appetite for emissions mitigation. Carbon-free nuclear energy is stalled because it is thought to be politically dead, but there is now every reason to weigh its risks thoughtfully against the potentially even larger ones associated with global climate change. To support more imaginative research on biofuels and other alternatives to carbon, why rule out a gas tax? After all, even at $4 per gallon, Americans would still be getting a bargain compared to the Europeans.

There's one good thing about these gas prices. They may jolt us and our political leadership out of this coma, yielding some realistic solutions once this brain-dead conversation in Washington ends.
(12 May 2006)

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