Russia and geopolitics – Aug 24

August 24, 2008

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Russia shuts out West’s supermajors

Deborah Yedlin, Calgary Herald
… In the 1970s, the supermajors based in the West controlled more than half of the world’s production. Today that number has dwindled to about 13 per cent.

The reason is largely due to geopolitics and, to a lesser degree, technological limitations. It’s certainly not because the world is running out of oil. A more accurate way of defining the current situation is that the world is dealing with geopolitical peak oil, not absolute peak oil.

In this context, one of the spotlights must be cast squarely on Russia and its vast natural resources. Russia is sitting on the world’s largest natural gas reserves, is second largest in terms of coal and sits in eighth position in terms of its oil reserves.

It’s no wonder many a western energy company has eyed Russia as a place to meaningfully add to reserves and production.

But with the way events have unfolded in recent years with Royal Dutch Shell and more recently BP, it’s clear that whatever welcome mat existed for western companies to operate in Russia has been yanked back inside.
(23 August 2008)


Russia and Iran: crisis of the west, rise of the rest

Paul Rogers, openDemocracy
Moscow’s war in Georgia and Tehran’s nuclear challenge highlight the failings of United States and European security policy

The military and political leaders of the United States and Europe could be forgiven in August 2008 for recalling the English phrase “it never rains, but it pours”. For they are currently faced by a series of security problems in relation to Russia, Afghanistan and Iran, each of which is testing in its own right but which together strain their resources (and perhaps nerves) to the limit. These are only part of a chain of problems for strategists of the “west” (a category that analysts are notably feeling more and more obliged to qualify or clarify) that is highlighted in this period alone by events in Algeria, Iraq, Pakistan, and Poland.

The most high-profile security issue of the month has been the Russia-Georgia war of 8-12 August, whose unsettled and violent aftermath includes the continuing presence of Russian troops on the territory of what analysts are starting to call “Georgia proper” – that is, excluding the territories of Abkhazia and South Ossetia.

… But to assess the thinking behind the combative American line that Russia’s military campaign in Georgia is evidence of its revived aggressive intent, it is necessary also to look in more detail at its actual military performance in South Ossetia/Georgia and the resources it has mobilised in the short, brutal war and lingering occupation.

… But it is in more than the military sphere that the image of a resurgent and powerful Russia is less grounded in reality than its projectors often allow. Russia’s economic performance is crucially (and dysfunctionally in the longer run) dependent on its energy resources, and there is a critical need for heavy investment in the oil-and-gas sector if current revenues are even to be maintained. The country also has great social problems (which are felt inside the military and have the potential to damage its standards and performance): among them a declining and aging population, rampant alcoholism, and low male life-expectancy for men (see Rebecca Kay, “‘Being a man’ in contemporary Russia”, 7 March 2008). These factors must be part of an overall judgment of the true face of Russian power today; and taken together they suggest that Russia has far less capacity to undertake a unilateral drive to restore its great-power status than it might appear.
(21 August 2008)


Kazakhstan considers to divert oil export route from BTC to Russia

Hurriyet (Turkey)
Kazakhstan is considering pumping its oil through Russia as an alternative to the Baku-Tbilisi-Ceyhan (BTC) pipeline due to increased security concerns over the clashes in the Caucasus, a Turkish daily reported on Thursday.

A high level Kazakh official told Turkish business daily Referans that question marks now hang over the security of the BTC pipeline. “We could reconsider our decisions on sending Kazak oil to the world market. Changing the (export) route is in our agenda now,” the official was quoted as saying by Referans.

The export of Kazakh oil through BTC had started in May and efforts are underway to supply the line from the larger Kashagan fields. Kazakh oil is seen as the key in plans to expand the BTC.
(22 August 2008)


Russia Values Oil More Than War

Pavel K. Baev, Moscow Times
One counterintuitive feature of the five-day war between Russia and Georgia is its minimal impact on the energy flows from the Caspian to world markets. There is always a legion of experts who would confidently assert that “It’s all about oil,” and no amount of hard evidence would shake this petro-geopolitical article of faith. There were indeed reports about airstrikes on the Baku-Tbilisi-Ceyhan, or BTC, pipeline, eagerly circulated by The Wall Street Journal, but those turned out to be just products of the desperate Georgian war propaganda. Traffic involving small tankers from Poti and Supsa was interrupted, but these ports have never had any strategic significance on the European energy map since the supertankers carrying Caspian oil to Europe are loaded in the deepwater terminal in Ceyhan. The fact that Russia did not try to completely shut down the South Caucasus energy corridor invites a re-evaluation of risks and longer-term consequences.

Moscow obviously did not want to cause any additional anxiety among European consumers. Nor did it want to deal Tbilisi any unnecessary trump cards for its blame game. From what is possible to deduce from scarce information provided by official sources, Russia’s restraint in targeting Georgia’s highly vulnerable energy infrastructure was confirmed…

Pavel K. Baev is a research professor at the International Peace Research Institute in Oslo.
(22 August 2008)


Gazprom Falls as Analysts `Shocked’ by Spending Plan

William Mauldin and Greg Walters, Bloomberg
OAO Gazprom, the world’s biggest natural-gas producer, fell in Moscow trading after analysts said they were “shocked” by the company’s plans to raise its investment budget to more than $40 billion this year.

… Russia’s natural-gas exporter may raise its investment budget for 2008 by about 25 percent, Interfax reported yesterday, citing Deputy Chief Executive Officer Valery Golubev. Gazprom last month already increased the budget for 2008 by 16 percent to a record 822 billion rubles ($33.8 billion).
(22 August 2008)


Tags: Fossil Fuels, Geopolitics & Military, Natural Gas, Oil