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To be globally competitive Russia needs a viable energy strategy

posted by zaina19 on June, 2007 as Imperialism


From: MSN NicknameEagle_wng  (Original Message)    Sent: 5/13/2007 1:37 AM
A War of Pipelines
By Natalya Alyakrinskaya The Moscow News
To be globally competitive Russia needs a viable energy strategy
The issue of energy security continues to dominate Russia's agenda. In his annual address to parliament, President Putin stressed this topic, too. While highlighting Russia's role as the world's largest oil producer in 2006, Putin lamented the sluggish pace of developing the nation's refining industry, which lags behind world leaders. Questioning Russia's ability to extract the maximum value out of its natural resources, Putin ordered the government to develop a set of measures intended to stimulate growth of the domestic refining sector.
 

ANTI-RUSSIAN ALLIANCES

Meanwhile, apart from the internal intrigue of energy security, there is also a great deal of external intrigue. Citing a gas crisis in Ukraine in early 2006 and the halt of Russian gas deliveries to Belarus in January, the European Union drafted its own energy strategy, which calls for construction of a network of transport pipelines that bypass Russia.

At about the same time, German Chancellor Angela Merkel suggested that the EU and the United States create a Transatlantic trade and economic alliance, with energy cooperation as one of its cornerstones. Although Washington is in no hurry to share Europe's oil and gas interests, it is inclined to accept the proposal - if only to stand up to Russia, which has been accused of dictating its energy policy to the rest of the world.

Moscow's reaction was quick. At a recent conference in Qatar gas exporters once again discussed the prospects of creating an alliance dubbed by the media as 'gas OPEC'. Ultimately, the cartel was not set up, but the meeting members decided to create a Russia-led coordination group to regulate gas pricing. It is evident that our country has found itself in the midst of a clash of different energy strategies. Yet calling Russia an energy superpower is an exaggeration. According to experts, the superpower has neither a coherent energy strategy, nor sufficient resources to implement one.

Meanwhile, "energy wars" has already become a set phrase. It is getting more and more difficult to understand exactly what kind of weapons are being used in new battles over hydrocarbons. Sergei Shishkaryov, deputy chairman of the State Duma Committee for Energy, Transport and Communications, believes that a new form of struggle is evolving today, combining political and economic instruments: "Our competitors are unhappy with Russia's independent position of the largest supplier and transit carrier of energy resources. The United States and the European Union are, in effect, blackmailing Russia, trying to make it sign the Energy Charter Treaty and its Transit Protocol."

Indeed, the Energy Charter was designed to suit the interests of European consumers in the first place. The charter's ratification would put Russia at a disadvantage, obliging it to provide gas buyers with access to its trunklines, and enabling them to use the pipeline grid for pumping non-Russian gas. This reduces the opportunities for exporting Russia's gas to Europe and creates more competition in the European market (for example, Turkmenistan or Kazakhstan).

At the same time, the EU does not intend to grant Gazprom access to end users in Europe.

The United States is acting along similar lines. Not so long ago, a U.S.Azerbaijani memorandum on energy security in the Caspian region was signed in Washington. Under the agreement, Washington shall provide funds for building energy transport facilities from Central Asia via Baku and Tbilisi to Turkey and further to Europe.

Moreover, the Baku - Tbilisi - Erzurum gas pipeline was put on stream, and it will serve as a starting point for the U.S.-controlled Nabucco gas pipeline. The $6.1 billion, 3,400-kilometer route, to run through Turkey, Bulgaria, Romania, Hungary and Austria, is an alternative to the Russian-Turkish Blue Stream project. This trunkline would carry Caspian gas to Europe bypassing Russia, and could also question the expediency of the Nord Stream pipeline to be built across the Baltic Sea to Germany. Such initiative may also prompt European gas importers to reconsider their stance on the Druzhba gas pipeline, linking Russia and Europe.

Finally, a Georgia - Ukraine - EU gas pipeline project, essentially following the Baku - Tbilisi - Erzurum route in the South Caucasus, was discussed in late March in Tbilisi, adds Shishkaryov. Meanwhile, according to the deputy, a number of U.S. and British pipeline companies have already created a consortium in New York.

While the West is scrambling to form a transit countries club that would pose an alternative to Russia, and establish control over hydrocarbon supply from Central Asia, how is Moscow supposed to react in the face of such open confrontation?

SUPERPOWER BURDEN

The creation of a gas cartel with Russia as the chief power broker looks like a fitting response to our opponents only at first glance. According to the International Energy Agency, by 2010 Russia's natural gas deliveries to Europe will be reduced by around 126 billion cubic meters per year. The main reason behind the reduction is the poor quality of the gas transport infrastructure. Furthermore, according to Pricewaterhouse-Coopers forecasts, by 2010 liquefied natural gas (LNG) will account for one-third of the global gas market. Meanwhile, Gazprom, which aspires to become a global energy company, is experiencing a serious shortage of LNG production and export capacities.

"Thus far Russia has not sold a single ton of liquefied natural gas," says Anatoly Dmitriyevsky, director of the Oil and Gas Institute at the Russian Academy of Sciences. "Therefore, it will gain nothing from creating a gas cartel. There is no point even talking about it until the LNG industry has developed, accounting for at least 30 percent of total gas supplies."

According to Yelena Telegina, director of the Russian Institute of Energy and Geopolitics, Russia is at least 10 years behind in the LNG market and will be unable to enter it before 2012-15. "We have a shortage of gas even in the domestic market," she says. "The main problem of the gas market is that Gazprom does not invest in developing new gas fields, claiming it requires more than it can afford."

TNK-BP Marketing Department director Alexander Beryozikov says that prior to seeking a leading role for Russia in the global gas market, order needs to be restored inside the country, primarily in gas production. He believes that "being a superpower" should not be demonstrated by "strangling everyone around, as was the case with Ukraine," but through investments in science, particularly in hydrogen technology, which will eventually replace traditional technology.

But to do all this, Russia needs a viable energy strategy. According to Mikhail Delyagin, director of the Institute for Globalization Problems, despite being a strategic supplier of hydrocarbons, Russia is unable to take advantage of its position because it does not have well-defined national interests or a coherent government strategy.

"If we're not able to handle Ukraine and Belarus, which were sincere in their intention to buy our gas, then we have an issue not with these two countries, but with ourselves. Ultimately it amounts to a question: What do we need to change in our attitude so we can solve these rather primitive tasks?" asks Delyagin.

It looks like the time has come for Russia to declare its energy interests, just as the EU did, at the level of government strategy. Certain steps in this regard have already been made. Shishkaryov says his committee has drafted a bill entitled "Energy Security", and it is planned to submit it to the government.

The deputy says that the bill will envisage the concept of Russia's energy security, introduce modern energy-saving technologies, increase the share of nuclear power and coal in the power generation mix, and build an effective system of government regulation in the fuel and energy sector, including important amendments to the tax, anti-monopoly and customs legislation.

This document shouldn't be just another declaration of intent. It needs to be remembered that the competitors would gladly take advantage of Russia's lost time, which would mean parting with the image of an energy superpower.
http://english.mn.ru/english/issue.php?2007-18-32


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