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talkpoliticsGood day, my fave bunch of bickering name-callers Saturday cyber cowboys who are craving for something different from the usual "No, U!" discourse. Here's some non-US-centric stuff which might distract you from the ordinary backs and forths that any typical political forum might be having over vast periods of time. The Russian minister of Energy, Sergei Shmatko, one of Medvedev's closest aides and Putin's main hitman, is now in Bulgaria to re-negotiate the gas prices with the new government (okay, not so new any more). The timing is no coincidence - the moment has come for the EU (the end consumer of the Russian gas) to make up their mind about which option for a gas pipe route they should choose. There are huge interests clashing here, and as always Bulgaria is in the middle of it all, being cursed to stand at the crossroads of most of these routes.
For most of you all this might sound too alien, but make no mistake about it. Russia is still a big factor in the region. Has always been. The dependence of all Eastern and Central European countries on Russian gas and oil is practically absolute. We all saw how Europe froze when Russia stopped the gas in the last two winters due to some rows with Ukraine. All of this is causing concerns that the energy dependence could become political dependence. In a way, it has already become. Were Russia a normal democratic country, there wouldn't be such concerns and on the contrary - having such a neighbor would've been like a huge bonus for EU, which lacks the energy resources it needs but meanwhile is trying to preach democracy to the rest of the world.
Unfortunately, Russia is very far from being a democracy, and what is worse, it uses the energy card as a political tool for blackmailing both tiny and medium sized countries. During Putin's 10 year reign, his primary objective was to make Gazprom and LukOil state controlled entities, and he succeeded - the Russian state owns 51% of their shares now, and through them it dictates all energy policies in the northern half of Eurasia. This way Putin turned these two companies into his main tool for achieving Russia's geopolitical goals. Business has always been of secondary significance for these state corporations, although it surely is an important component of their activity.
It's beyond any doubt that gas and oil are by far the two most important sources of income for the Russian budget, allowing them to pay their pensioners, to provide social services to their citizens, to modernize their economy and to re-arm their military. But still, it is Russia's geopolitical aspirations that Kremlin regards as their primary priority - not the internal affairs and the needs of the Russian citizens. A short glimpse at the data about their living standard would instantly confirm this. The glamorous exterior of Moscow, the most expensive city in the world, shouldn't be fooling you. Russia is not Arbat Street.
Russia has declared repeatedly that it remains Europe's most reliable supplier of energy resources, but meanwhile they've used energy as a political tool more than once in the recent years. It wasn't because of technical problems that Mazeikiu Nafta wasn't receiving raw petrol from Russia along the pipeline for a long period; it wasn't technical problems that caused the decrease of gas supplies to the Czech Republic in the middle of winter, coincidentally, soon after the country signed a treaty with the US for placing that infamous anti-missile shield on their territory... And there were no technical problems when the pro-western Victor Yushchenko came to power in Ukraine (now he's out of the equation, and his place as a flag-bearer for the orange opposition has been taken over by Yulia Tymoshenko, whose nickname is "the Gas Princess" for a reason; funny how things have returned to square one for Ukraine).
It's a dirty game where no-one is the good guys, and we the small and insignificant countries are put in the middle of it, as always, and no-one is asking us about anything. Be it the US Ambassador in Sofia who basically lobbies for GMO legislation in BG on behalf of Monsanto, thus giving a loud slap across the face of all EU legislation; or the CIA director meeting tete-a-tete with our PM Boiko Borisov, and the PM changing some internal policies and stances the day after; or now the Russian energy "Tzar" visiting and waving a finger at us - it's all the same, just different sides of the same coin. And we must be suddenly feeling very significant, since such important figures are flocking into our village-like capital to give us "good advice". I wonder why I'm not feeling significant. But I digress.
But anyway, I'm focusing on Russia here. Russia's behavior could be explained with their outdated thinking. They're still about the "spheres of influence" from the Cold War times. Putin (and hence, his puppy Medvedev) thinks that the Russian sphere of influence spreads across the entire former USSR "space", and into the neighboring countries as well. But meanwhile, Russia doesn't mind spreading influence into Western Europe and other regions in the world, moreover a number of countries still naively believe that the supply of energy resources is merely a business issue for Russia and nothing more.
The most powerful weapon used by Russia in her pursuing of her geopolitical goals is Gazprom. Forbes put it in the top 20 of the list of the biggest corporations in the world for 2010. This juggernaut was once chaired by none else but Dmitry Medvedev himself, the current president of Russia. Gazprom is not just about delivering gas. It controls a large portion of the mainstream Russian media. We know what Putin does to journalists out of the mainstream. Gazprom is also trying to diversify its activities into the petrol business as well.
So let's see how Russia carries out its energy Crusade across Europe. First let's look at the map.
These policies can be most clearly seen in their gas supplies. In Northern Europe, the "Nord Stream" pipeline is being built along the bottom of the Baltic Sea. It goes around and bypasses unfriendly Poland and the Baltic countries (Lithuania, Latvia, Estonia), and goes directly to Germany and Sweden, the end consumers. Russia solves geopolitical problems with this route, not logistical problems.
And when we look closer at this project, things are starting to reek even more. Enter Gerhard Schroeder, the former German chancellor before Merkel. He's a close friend of Putin's from the times they ruled the two biggest countries in Europe. Germany has been a major strategic geopolitical ally to Russia, but more subtly and unpronouncedly than, say, the German-French partnership in the EU. With this slight difference - Schroeder and Putin worked against the EU interests in pushing the Nord Stream, particularly against the interests of its newer members in Eastern and Central Europe, and they didn't care at all that the project was approved and the contract was signed bilaterally without taking the position of all those countries into consideration at all. Some called it the Ribbentrop-Molotov pact of the 21st century. A bit exaggerated, but you get the drift. This controversial decision strongly contradicts the so-called "solidarity" principle which is one of the main tenets of EU, or at least that's what the powdered Brussels poodles want us to believe. What's more, hardly a week had passed after Schroeder ceased being Germany's chancellor, and he instantly found a comfortable position within the corporation which was about to build the "Nord Stream"! This act was so scandalous that I could hardly find the words to comment it.
Here in South-Eastern Europe, Gazprom is very active. Mainly because the EU is preparing for the construction of "Nabucco", a pipeline which is supposed to bypass Russia. That's one of the reasons why Russia is urgently trying to restore its influence in Caucasia - and hence, we got the problem in South Ossetia and the attempts to destabilize Georgia (notice how Russia draws the borderlines in Caucasus on this map explaining the next project that I'm going to mention below).
And there's of course the "South Stream" project, where the pipeline should go along the bottom of the Black Sea, from Russia to Bulgaria (it'll enter Bulgaria at Bourgas), then it'd reach Serbia and Hungary, and then Austria and again Germany, who are the end consumers. This project is supposed to be fully operational in 2015. This pipeline would transport gas not only from Russia but also from the Central Asian countries - Kazakhstan, Uzbekistan and Turkmenistan are very rich in energy resources. Russia has already secured good bargains with them and Gazprom is buying gas at ridiculous prices while re-selling it to the West at world-class prices, regardless of its varying qualities.
Kremlin is not very excited with the aspirations declared by some Central Asian countries to build their own pipelines to deliver gas for China without any intermediaries (namely: Gazprom). China is the most promising energy market, it has a huge economic potential and it conveniently lacks the amount of energy resources it needs to keep its economy going. Gazprom has its own plans regarding China, and it surely doesn't need naughty competitors in the area, especially ones who possess vast gas deposits of their own. That's why Russia is messing into their internal politics as much as the other big player, the US does.
It's too early to say for sure which of these projects would be finished first, and thus gain the upper hand - "Nabucco" or "South Stream". The Russian politicians suspect that after the completion of "South Stream", "Nabucco" wouldn't be economically relevant any more. Most western investors, like the Italian company Eni, tend to agree with this.
The reason is that the present geopolitical situation is such that "Nabucco" could supply gas only from Azerbaijan for the time being. It's hardly possible that the pipeline would pass along the bottom of the Caspian Sea because Russia would definitely be against it, and you can't build anything in the Caspian Sea without Russia. So, including Cenral Asia in the project is out of question and that makes it economically useless. "Nabucco" could possibly be of some value only in case the situation in Iran changes (i.e. if another US-friendly Shah is installed which I don't see coming any time soon), and more importantly, in case the situation in Iraq stabilizes (which, well... you know). That's some bad news for the US geopolitical game in the region, because it means the US is lagging behind Russia in the scramble for the Central Asian resources. It's bad news for EU too, because EU simply lacks the political will and determination to do anything about the project. And Turkey's recently re-shaped strategy in the region (Erdogan trying to make them a major active factor which defines its own policies without waving its tale at the US) is another variable which makes the equation even more complicated. That's why the "South Stream" is looking ever more popular as the time passes, and that's why Sergei Shmatko was so eager to meet with the Bulgarian PM and make him change his mind. When he came to power, Borisov initially played the populist card by saying he would scrap all Russian projects in BG altogether, but now he's playing a different tune. Because, like I said, nothing really depends on him and he's not making the decisions, no matter how macho he looks and behaves, and regardless of the ever piling number of Chuck Norris parallels our humorists make about him.
At the moment it seems like Russia's gradual and silent energy Crusade cannot be stopped. But there are some new factors emerging which could force Gazprom to seriously rethink its plans in Europe, and they could even pull Russia's main weapon out of her hands if the Putin/Medvedev hydra doesn't play their cards smartly. At the moment Russia may be stepping with its boot on many necks through the use of brute geopolitical force and energy blackmailing, but on the other hand this is limiting their options for geopolitical maneuvering only to the narrow frame of the energy issue - and one serious downside of a resource-dependent business is that it's vulnerable to the changes in demand. What I'm hinting is that with the advent of a number of alternative energy sources, Russia is risking being isolated again and becoming even more irrelevant, if it doesn't keep up the pace, and if it doesn't invent something else to be important about. In other words, being a one-trick pony puts you in the unfavorable position in the long run. And with their current manner of doing world politics, it wouldn't be surprising if many of their customers feel relieved to say "More of your gas? No, thanks", eventually. What happens next and how Russia reacts, I dare not to forecast.
For most of you all this might sound too alien, but make no mistake about it. Russia is still a big factor in the region. Has always been. The dependence of all Eastern and Central European countries on Russian gas and oil is practically absolute. We all saw how Europe froze when Russia stopped the gas in the last two winters due to some rows with Ukraine. All of this is causing concerns that the energy dependence could become political dependence. In a way, it has already become. Were Russia a normal democratic country, there wouldn't be such concerns and on the contrary - having such a neighbor would've been like a huge bonus for EU, which lacks the energy resources it needs but meanwhile is trying to preach democracy to the rest of the world.
Unfortunately, Russia is very far from being a democracy, and what is worse, it uses the energy card as a political tool for blackmailing both tiny and medium sized countries. During Putin's 10 year reign, his primary objective was to make Gazprom and LukOil state controlled entities, and he succeeded - the Russian state owns 51% of their shares now, and through them it dictates all energy policies in the northern half of Eurasia. This way Putin turned these two companies into his main tool for achieving Russia's geopolitical goals. Business has always been of secondary significance for these state corporations, although it surely is an important component of their activity.
It's beyond any doubt that gas and oil are by far the two most important sources of income for the Russian budget, allowing them to pay their pensioners, to provide social services to their citizens, to modernize their economy and to re-arm their military. But still, it is Russia's geopolitical aspirations that Kremlin regards as their primary priority - not the internal affairs and the needs of the Russian citizens. A short glimpse at the data about their living standard would instantly confirm this. The glamorous exterior of Moscow, the most expensive city in the world, shouldn't be fooling you. Russia is not Arbat Street.
Russia has declared repeatedly that it remains Europe's most reliable supplier of energy resources, but meanwhile they've used energy as a political tool more than once in the recent years. It wasn't because of technical problems that Mazeikiu Nafta wasn't receiving raw petrol from Russia along the pipeline for a long period; it wasn't technical problems that caused the decrease of gas supplies to the Czech Republic in the middle of winter, coincidentally, soon after the country signed a treaty with the US for placing that infamous anti-missile shield on their territory... And there were no technical problems when the pro-western Victor Yushchenko came to power in Ukraine (now he's out of the equation, and his place as a flag-bearer for the orange opposition has been taken over by Yulia Tymoshenko, whose nickname is "the Gas Princess" for a reason; funny how things have returned to square one for Ukraine).
It's a dirty game where no-one is the good guys, and we the small and insignificant countries are put in the middle of it, as always, and no-one is asking us about anything. Be it the US Ambassador in Sofia who basically lobbies for GMO legislation in BG on behalf of Monsanto, thus giving a loud slap across the face of all EU legislation; or the CIA director meeting tete-a-tete with our PM Boiko Borisov, and the PM changing some internal policies and stances the day after; or now the Russian energy "Tzar" visiting and waving a finger at us - it's all the same, just different sides of the same coin. And we must be suddenly feeling very significant, since such important figures are flocking into our village-like capital to give us "good advice". I wonder why I'm not feeling significant. But I digress.
But anyway, I'm focusing on Russia here. Russia's behavior could be explained with their outdated thinking. They're still about the "spheres of influence" from the Cold War times. Putin (and hence, his puppy Medvedev) thinks that the Russian sphere of influence spreads across the entire former USSR "space", and into the neighboring countries as well. But meanwhile, Russia doesn't mind spreading influence into Western Europe and other regions in the world, moreover a number of countries still naively believe that the supply of energy resources is merely a business issue for Russia and nothing more.
The most powerful weapon used by Russia in her pursuing of her geopolitical goals is Gazprom. Forbes put it in the top 20 of the list of the biggest corporations in the world for 2010. This juggernaut was once chaired by none else but Dmitry Medvedev himself, the current president of Russia. Gazprom is not just about delivering gas. It controls a large portion of the mainstream Russian media. We know what Putin does to journalists out of the mainstream. Gazprom is also trying to diversify its activities into the petrol business as well.
So let's see how Russia carries out its energy Crusade across Europe. First let's look at the map.
These policies can be most clearly seen in their gas supplies. In Northern Europe, the "Nord Stream" pipeline is being built along the bottom of the Baltic Sea. It goes around and bypasses unfriendly Poland and the Baltic countries (Lithuania, Latvia, Estonia), and goes directly to Germany and Sweden, the end consumers. Russia solves geopolitical problems with this route, not logistical problems.
And when we look closer at this project, things are starting to reek even more. Enter Gerhard Schroeder, the former German chancellor before Merkel. He's a close friend of Putin's from the times they ruled the two biggest countries in Europe. Germany has been a major strategic geopolitical ally to Russia, but more subtly and unpronouncedly than, say, the German-French partnership in the EU. With this slight difference - Schroeder and Putin worked against the EU interests in pushing the Nord Stream, particularly against the interests of its newer members in Eastern and Central Europe, and they didn't care at all that the project was approved and the contract was signed bilaterally without taking the position of all those countries into consideration at all. Some called it the Ribbentrop-Molotov pact of the 21st century. A bit exaggerated, but you get the drift. This controversial decision strongly contradicts the so-called "solidarity" principle which is one of the main tenets of EU, or at least that's what the powdered Brussels poodles want us to believe. What's more, hardly a week had passed after Schroeder ceased being Germany's chancellor, and he instantly found a comfortable position within the corporation which was about to build the "Nord Stream"! This act was so scandalous that I could hardly find the words to comment it.
Here in South-Eastern Europe, Gazprom is very active. Mainly because the EU is preparing for the construction of "Nabucco", a pipeline which is supposed to bypass Russia. That's one of the reasons why Russia is urgently trying to restore its influence in Caucasia - and hence, we got the problem in South Ossetia and the attempts to destabilize Georgia (notice how Russia draws the borderlines in Caucasus on this map explaining the next project that I'm going to mention below).
And there's of course the "South Stream" project, where the pipeline should go along the bottom of the Black Sea, from Russia to Bulgaria (it'll enter Bulgaria at Bourgas), then it'd reach Serbia and Hungary, and then Austria and again Germany, who are the end consumers. This project is supposed to be fully operational in 2015. This pipeline would transport gas not only from Russia but also from the Central Asian countries - Kazakhstan, Uzbekistan and Turkmenistan are very rich in energy resources. Russia has already secured good bargains with them and Gazprom is buying gas at ridiculous prices while re-selling it to the West at world-class prices, regardless of its varying qualities.
Kremlin is not very excited with the aspirations declared by some Central Asian countries to build their own pipelines to deliver gas for China without any intermediaries (namely: Gazprom). China is the most promising energy market, it has a huge economic potential and it conveniently lacks the amount of energy resources it needs to keep its economy going. Gazprom has its own plans regarding China, and it surely doesn't need naughty competitors in the area, especially ones who possess vast gas deposits of their own. That's why Russia is messing into their internal politics as much as the other big player, the US does.
It's too early to say for sure which of these projects would be finished first, and thus gain the upper hand - "Nabucco" or "South Stream". The Russian politicians suspect that after the completion of "South Stream", "Nabucco" wouldn't be economically relevant any more. Most western investors, like the Italian company Eni, tend to agree with this.
The reason is that the present geopolitical situation is such that "Nabucco" could supply gas only from Azerbaijan for the time being. It's hardly possible that the pipeline would pass along the bottom of the Caspian Sea because Russia would definitely be against it, and you can't build anything in the Caspian Sea without Russia. So, including Cenral Asia in the project is out of question and that makes it economically useless. "Nabucco" could possibly be of some value only in case the situation in Iran changes (i.e. if another US-friendly Shah is installed which I don't see coming any time soon), and more importantly, in case the situation in Iraq stabilizes (which, well... you know). That's some bad news for the US geopolitical game in the region, because it means the US is lagging behind Russia in the scramble for the Central Asian resources. It's bad news for EU too, because EU simply lacks the political will and determination to do anything about the project. And Turkey's recently re-shaped strategy in the region (Erdogan trying to make them a major active factor which defines its own policies without waving its tale at the US) is another variable which makes the equation even more complicated. That's why the "South Stream" is looking ever more popular as the time passes, and that's why Sergei Shmatko was so eager to meet with the Bulgarian PM and make him change his mind. When he came to power, Borisov initially played the populist card by saying he would scrap all Russian projects in BG altogether, but now he's playing a different tune. Because, like I said, nothing really depends on him and he's not making the decisions, no matter how macho he looks and behaves, and regardless of the ever piling number of Chuck Norris parallels our humorists make about him.
At the moment it seems like Russia's gradual and silent energy Crusade cannot be stopped. But there are some new factors emerging which could force Gazprom to seriously rethink its plans in Europe, and they could even pull Russia's main weapon out of her hands if the Putin/Medvedev hydra doesn't play their cards smartly. At the moment Russia may be stepping with its boot on many necks through the use of brute geopolitical force and energy blackmailing, but on the other hand this is limiting their options for geopolitical maneuvering only to the narrow frame of the energy issue - and one serious downside of a resource-dependent business is that it's vulnerable to the changes in demand. What I'm hinting is that with the advent of a number of alternative energy sources, Russia is risking being isolated again and becoming even more irrelevant, if it doesn't keep up the pace, and if it doesn't invent something else to be important about. In other words, being a one-trick pony puts you in the unfavorable position in the long run. And with their current manner of doing world politics, it wouldn't be surprising if many of their customers feel relieved to say "More of your gas? No, thanks", eventually. What happens next and how Russia reacts, I dare not to forecast.
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Date: 17/7/10 15:32 (UTC)(no subject)
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Date: 17/7/10 16:28 (UTC)(no subject)
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Date: 17/7/10 16:38 (UTC)My question is how the international(meaning Americanski) community should handle this?
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Date: 17/7/10 17:43 (UTC)(no subject)
Date: 17/7/10 20:38 (UTC)That said, IMO the way out of the dead circle of bickering between the big fish in the gas business is the creation of a homogeneous network of supply lines plus uniform price levels where the origin of the gas matters very little. Something similar to the oil prices worldwide. Otherwise there's no guarantee that Azerbaijan or Algeria wouldn't decide to hit you on the head at some point just like Russia is doing now. I'm aware of the risks for monopoly, OPEC-style, but things are going into that direction in most other businesses anyway, and I admit I'm not seeing a better alternative.
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Date: 18/7/10 01:53 (UTC)(no subject)
Date: 18/7/10 19:49 (UTC)In the short and medium term, though, theirs could be seen as the rational position. From their point of view, it would behoove them to leverage their position as Europe's fuel pump, and use their influence to create a political climate that will benefit them once this period ends. They can also use the resources accumulated while they were the top-dog of the petroleum economy to ease their transition into the post-petroleum economy.
Of course, they will do neither of these. Mankind favors the grasshopper over the ant. Everything will end up in a bloody mess, and Malthus will gloat from the grave. How was your Sunday? Mine's going great!
(no subject)
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Date: 20/7/10 11:05 (UTC)It doesn't sound so different from American politics.