Russian bullying over oil is 'a wake-up call'

[techs]

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/12/24/noil24.xml

Russian bullying over oil is 'a wake-up call'
Melissa Kite and Nicholas Holdsworth in Moscow, Sunday Telegraph

Russia's use of energy supplies as a political weapon should be a wake-up call to Britain and the West to deal urgently with the threat, senior Conservatives said last night.

Liam Fox, the shadow defence secretary, stepped up Tory calls for a Nato-style "energy pact" after Gazprom, Russia's state-controlled energy giant, forced the pro-Western former Soviet republic of Georgia to accept a doubling of gas prices.

"While the West has been focused on the Middle East, we have seen the resurgence of Russian nationalism and a willingness to use natural resources as a political weapon," he said. "Given the nature of Russia's political leadership, this is hardly surprising. Following events in Ukraine, and now Georgia, it is high time for a wake-up call to western politicians. We have been warned."

Georgia declared the price increase "unacceptable" and "politically motivated" but was forced to accept when Russia threatened to cut off supplies. Last night the president of Azerbaijan, another former Soviet republic that is being asked to pay twice the price for its gas, accused the Russian company of "ugly" behaviour and said his country would not be bullied into accepting. President Ilham Aliev said that if Moscow insisted on doubling the price of gas to $230 (£117) per thousand cubic metres, Azerbaijan would be forced to "change the balance of power" and rely on its own oil reserves instead. That might mean restricting Azerbaijan's oil exports, which pass through Russia, in order to fuel domestic power stations, he said.

Although Azerbaijan produces only half the natural gas it needs, Mr Aliev told a Russian radio station, it would not give in to Moscow. "To take advantage of this deficiency is ugly," he said.

advertisementIn the first sign of a regional backlash, he attacked Russia's use of energy as a tool of foreign policy, although he was careful not to name or criticise President Vladimir Putin personally. The price of oil and gas should "be a commercial matter", immune from attempts to "politicise it", Mr Aliev said.

The move by the Russian company is being portrayed by the Kremlin as merely bringing the price paid by former Soviet neighbours nearer to the market price paid in western Europe ? up to $300 per 1,000 cubic metres. But it has used its clout as a supplier of cut-price energy to try to force its neighbours into line on foreign and economic affairs.

European Union officials are alarmed at the heavy-handed tactics used by Moscow, which dramatically cut supplies and doubled the price of gas to out-of-favour Ukraine at the beginning of the year.

Gazprom already owns 25 per cent of the European gas market and bought Pennine Natural Gas in Britain this year. There are suggestions that it wants to take over Centrica, the owner of British Gas. It waged a campaign of bureaucratic harassment against Royal Dutch Shell until the company agreed to hand over control of a lucrative new project, Sakhalin-2, in north-east Russia last week.

Dr Fox said that the West had been ignoring the threat posed by Russia to energy security for too long. He has called on both Nato and the EU to "come together as a consortium of energy consumers to bring their collective weight to bear".

Alexander Medvedev, head of exports at Gazprom, said: "Despite the rhetoric of some politicians that Gazprom's price request is politically motivated, economic sense has prevailed and commercial companies have signed contracts.


Every day it is more and more apparent that power amongst nations is now far more economic than military. With Russia and China, totatlitarian states, waging economic war against the West, all the West does is proclaim its belief in "free markets'.
I really think we in the West are focusing far to much on military might, while ignoring the threat of totalitarian regimes fighting an economic war for power against us.
Its time to end "free trade" with totalitarian regimes like Russia and China.

 

[ntdz]

If we are fighting an economic war, the West is slaughtering the rest of the world. The United States effectively has an economic empire that stretches into every country in the world.

Edit: I do agree with you that we should end free trade with China however, as they don't practice free trade themselves.

 

[HombrePequeno]

How is China waging economic war on us?

 

[Colt45]

Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

 

[ntdz]

Originally posted by: Colt45
Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

And where are they supposed to get it from? Their only source is Russia, it's not like natural gas can be shipped in or anything.

 

[Strk]

Originally posted by: ntdz

Originally posted by: Colt45
Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

And where are they supposed to get it from? Their only source is Russia, it's not like natural gas can be shipped in or anything.

Well, over time, they will get it from other former Soviet states. You have countries like Kazakhstan, Azerbaijan and Turkmenistan that want to get away from Russia and have considerable reserves being developed. I mean, as far as oil is concerned, Kazakhstan intends to become one of the top five producers within a few years.

 

[HombrePequeno]

Originally posted by: ntdz

Originally posted by: Colt45
Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

And where are they supposed to get it from? Their only source is Russia, it's not like natural gas can be shipped in or anything.

They really shouldn't have relied on subsidized energy. Russia should probably ease up the price of energy slowly as opposed to doubling it but they are bringing it closer in line with world prices.

 

[Steeplerot]

Originally posted by: ntdz

Originally posted by: Colt45
Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

And where are they supposed to get it from? Their only source is Russia, it's not like natural gas can be shipped in or anything.

Ahem

Map of Georgia

 

[Strk]

Originally posted by: HombrePequeno

Originally posted by: ntdz

Originally posted by: Colt45
Russia is in the process of increasing prices of gas delivered to belarus as well, and they are aligned. So take that as you want.

Also, Georgia is free to find gas somewhere else if they'd like.

And where are they supposed to get it from? Their only source is Russia, it's not like natural gas can be shipped in or anything.

They really shouldn't have relied on subsidized energy. Russia should probably ease up the price of energy slowly as opposed to doubling it but they are bringing it closer in line with world prices.

Indeed. It's hard to feel that badly about Russia having them pay market prices. The rest of us have to, so why shouldn't they?

 

[Zebo]

So wait Russiia is supposed to return to it's communist/central planning ways and subsidize Goergia/belarus adn europes oil and gas? All that's happening here is they are being sold at market rates and neo-cons are whining like the crazies they are tyring to find another enemy now tha muzzies have kicked thier asses.

 

[senseamp]

Cry me a river. Azerbajan wants Russia to sell it subsidized gas, so that it can save its own oil for exports instead of burning it for heat. Are they going to offer their oil to Russia for half price? Didn't think so. Georgia needs to get with the program. It wants to be a European country and join EU and NATO, but it doesn't want to pay the same gas prices that EU countries pay. Well, tough sh!t. They aren't entitled to any Russian gas. Noone is. Anyone getting Russian gas has to negotiate a price and pay for it. And if the price is too high, then find another supplier. Your problem, not Russia's. Russia is not there to supply your country with cheap gas.
As far as this European energy consortium, I am sure Russians would love nothing more than to have a single European entity to negotiate with instead of having to go through all these immature Ukrainian, Polish, Georgian, etc politicians trying to make a name for themselves by bashing Russia, refighting the cold war, and/or expecting Russia to act in their countries, and not its own interest.
The one who really needs a wake up call is Russia. Those countries in Europe are not it's "friends" they are socialist leeches. They are smearing Russia to extract economic benefits or subsidies for themselves. Russia needs to build a gas pipeline to China. Then these Eurowheenies will get the message, that if they don't like Russian gas prices, there is another buyer for it. If they think gas prices are high now, wait till they have to compete with a growing China for it.

 

[Mill]

Originally posted by: Zebo
So wait Russiia is supposed to return to it's communist/central planning ways and subsidize Goergia/belarus adn europes oil and gas? All that's happening here is they are being sold at market rates and neo-cons are whining like the crazies they are tyring to find another enemy now tha muzzies have kicked thier asses.

No, Russia's oil bullying is a very troubling and terrifying prospect. I suggest you read this:

http://www.economist.com/opinion/displayStory.cfm?Story_ID=E1_RQTPDQR

FOR over a decade Royal Dutch Shell, along with its Japanese partners, Mitsui and Mitsubishi, has been struggling to coax oil and gas out of the frozen seas off Sakhalin Island, in Russia's far east. Over the years the scheme has run into environmental protests, its projected cost has doubled to $20 billion and its completion date has receded. But it is now nearly finished. With oil and gas prices high and a flood of revenue imminent, it is an odd time for the three owners to reduce their shareholding. Yet that is exactly what they offered to do this week, by selling a majority stake in the project to Gazprom, Russia's state-owned gas giant (see article).

Gazprom's masters in the Kremlin have made no bones of their desire to keep big energy projects in the family, so to speak. Russian officials had been making life difficult for the Sakhalin project by threatening dire consequences for minor environmental lapses. The shareholders, perhaps mindful of the fate of Yukos, a big Russian oil firm bankrupted by over-zealous tax inspectors, presumably concluded that Gazprom was making them an offer they could not refuse.



Neighbourhood bully
When it comes to energy, Vladimir Putin's Russia seems prone to loutish behaviour?despite constant claims that Russia is a reliable partner. In addition to mugging Yukos, it has often intimidated its neighbours with threats to cut off their oil or gas supplies. Earlier this year, when Lithuania had the temerity to sell an oil refinery to a Polish firm instead of a Russian one, the pipeline that supplies the refinery with Russian oil suddenly succumbed to a mysterious technical fault. Last winter Gazprom appeared to blackmail Ukraine's new pro-Western government by cutting off the country's gas amid a dispute over prices. The episode sent a chill throughout Europe, which relies on Gazprom for about a quarter of its gas. Japan, the future recipient of most of the gas from Sakhalin, will now also find itself at Gazprom's mercy.

Russia's government, of course, is not the only one to try to grab a bigger share of the takings as oil and gas prices go up. Britain recently raised taxes on production from the North Sea. And Russia has a strong incentive to rewrite the rules, since it agreed to generous terms for projects like Sakhalin back in the 1990s, when it had no money to develop its resources itself and was desperate to attract foreign investment. But its brutish behaviour will probably backfire. The next time the oil price falls or money runs short, it might end up having to offer even more munificent terms to lure the oilmen back. Russia risks scaring off investors of all stripes, as well as potential customers for its oil and gas.

Moreover, Russia still needs the expertise of foreign firms. Gazprom and its state-controlled counterpart in the oil business, Rosneft, are hopeless at increasing their output?except by buying up other firms' assets on the cheap. So the Russian state's insistence on developing its oil and gas by itself is not just bad news for the shareholders of Shell, Mitsubishi and Mitsui. It is also bad news for ordinary Russians, who will not see as much oil wealth as they otherwise might.

What explains these self-defeating tactics? Mainly Mr Putin's belief that energy is a weapon with which to restore the lost greatness of the Soviet Union. No longer need Russia go to the West cap-in-hand for money, as it did in Boris Yeltsin's day. Now it can stand tall once more, not least in the neighbouring ex-Soviet countries that many in Moscow have never reconciled themselves to losing. Whenever these places seem to look to the West, still more aspire to join such Western clubs as NATO or the European Union, the Russians have reacted petulantly, as they did earlier this year by imposing trade embargoes on Georgia and Moldova.



From Russia with polonium
Mr Putin's use of energy as a weapon is only one instance of a Russian assertiveness that nowadays seems to border on gangsterism. Perhaps the most spectacular recent example is the murder in London of a former Russian agent, Alexander Litvinenko. Though it is not clear whether the Kremlin ordered the killing, that this even seems possible says something about the internal state of Russia (see article). With the parliament largely emasculated, television under state control, the press muzzled and once-autonomous regions shackled, the presidency has acquired enormous clout. It is increasingly the Kremlin that decides who runs Russian business and finance. Although an election is due in March 2008, Mr Putin will in practice choose his own successor.

Such authoritarianism, like the muscular use of energy, is driven partly by weakness. Russia's army is chaotic, its population is shrinking and its economy is dangerously dependent on natural resources. That is why Mr Putin is so keen to keep a firm grip on power at home; it is also why he is so anxious to keep Russia's seat at the top table, not just in the UN Security Council but also the G8 club of rich countries.

If Russia continues on this course?and especially if Mr Putin meddles with the constitution to grab a third term?it does not deserve to stay in the G8. But it is also worth noting that Russians, Russia's put-upon neighbours and the shareholders in the Sakhalin project are not the only people who stand to suffer as a result of the Russian economy and political system being mismanaged this way. The Russian state's insistence on developing its oil and gas by itself is bad news for almost anyone in the world who consumes power or fuel.

In the early part of the decade new production from the former Soviet Union accounted for most of the growth in the world's supply of oil and gas. But when Mr Putin began his campaign to take control of Russia's resources, that growth stalled, just as China's demand for energy was taking off. The present high prices for oil and gas are the result. With exploration prospects drying up in much of the Western world, and with the countries of the Organisation of the Petroleum Exporting Countries unwilling to open the taps, Russia is one of the few countries that could produce more oil?if only Mr Putin changed his thuggish ways.

 

[brandonbull]

Fighting over resources is nothing new.

The US had the perfect chance to take the world lead in alternatives to oil. The money the US is dumping into Iraq should have been better spent in reducing consumption and developing new sources fuel sources besides fossil fuels.

As long as oil companies and defense contractors can maintain a big influence over Washington, the US will be doomed to fight the "last war".

China and India will pass the West in the number of skilled laborers due to those two countries having 2+ billion people. The West needs to look for a new competitive advantage over them because skilled workers will become a commodity in the future.