The recent dispute between Russia and Ukraine over the price of oil highlights the Kremlin’s desire to increase its control over its former satellite states. But many observers contend that Russia has broader ambitions and is trying to use its energy resources as a way to re-claim superpower status.
Beneath the Baltic Sea, a pipeline is being built between Russia and Germany. Slated for completion by 2012, the 1,200 kilometer Northern European Pipeline is a $5 billion project that will pump billions of cubic meters of natural gas from Western Siberia to Germany and the rest of Europe. The project has come to symbolize Europe’s growing reliance on Moscow for its energy needs.
The European Union buys 25 percent of its gas and 30 percent of its oil from Russia. Several E.U. members, including Slovakia and Finland, are totally dependent on Russian oil. The E.U. estimates that by 2020, three-quarters of its natural gas will be imported. The bulk will come from Russia, which has the biggest natural gas reserves in the world and a pipeline network enabling it to supply both the Far East and the West. Russia is also the world’s second-largest oil producer.
The Kremlin wants to build Russia’s economic and political future around its energy. Through its Gazprom, Transneft and Rosneft oil and gas state-controlled monopolies and pipeline operators, Russia already commands nearly all of Central Asia’s energy exports.
Zeyno Baran, Director of International Security and Energy at The Nixon Center in Washington, argues that Russia’s recent gas dispute with Ukraine demonstrates that Moscow is ready to use rough tactics to resist further Western and NATO encroachment on former Soviet-space.
“It basically said, ‘We are going to create a liberal empire by using our ability to control the energy networks.’ And one by one, they started to take over assets and infrastructure initially in places where Europe was not paying attention, like in Central Asia or the Southern Caucuses. Now that it’s coming closer home, to Ukraine or Lithuania, all of a sudden people are waking up. But this didn’t happen overnight. This has been a strategy run by the Kremlin as a foreign and security policy of the Russian government," says Zeyno Baran.
Siberia: Energy Hub for Asia and the Pacific
Moscow has been carefully studying the energy landscape far beyond Europe and Central Asia. Russia views eastern Siberia, with an estimated 6.6 trillion cubic meters in natural gas reserves, as a future energy hub for the Asia-Pacific region.
According to Ilan Berman of the American Foreign Policy Council in Washington, Moscow plans to build a multi-billion dollar pipeline that would bring natural gas to China and other East Asian markets and the United States.
He says Russia does not want to be a sole supplier to China. “They know that if they run a pipeline into Eastern Asian waters they can also supply countries like Japan and South Korea. And you see Russia having very serious discussions with India about energy cooperation; talking with the United States about supplying as much as ten percent of total U-S daily imports by the end of the decade. So Russia is really positioning itself as an important source of non-OPEC energy for the world.”
Most analysts say this ambitious goal, which places Russia in sharp competition with Saudi Arabia and the other OPEC producers, could reorder the rules of the geo-politics of energy.
Leverage, Not Dominance
Hugh Barnes, Director of the Russia Program at the Foreign Policy Center in London, warns regardless of Russia’s vast energy resources and the leverage they afford, the Kremlin is unlikely to regain its superpower influence.
“In no sense will Russia have the opportunity to wield that kind of power militarily any longer,” contends analyst Hugh Barnes. “Having said that, it may well be that the dependency, which the European Union and other parts of the globe have seen in terms of their need for Russian gas will give the powers in Moscow more leverage economically because of their energy wealth than they had in the old days of the Cold War stand-off between the United States and the former Soviet Union.”
Obsolete Energy Infrastructure
Hugh Barnes warns that economic powers are never based on energy resources alone. He adds that Russia has yet to introduce full free market structural reforms and level the business playing field. Russia’s economy is dominated by oligarchs who have taken over large state-owned companies and ushered in a new way of doing business, often relying on corruption, bribery and violence.
Many analysts point to other holes in Moscow’s plan to dominate world energy markets. Russian companies have not invested enough in the country’s obsolete energy infrastructure or exploration and oil production is beginning to decline. In order to compete, says analyst Zayno Baran of The Nixon Center, Russia needs the West.
She adds, “They need to develop their own oil and gas fields, which they have not really done a great job of developing because they have been able to buy cheap gas from Central Asia and sell at hugely profitable prices to European markets. They haven’t invested in technology. They haven’t brought in Western companies or Western technology to develop the much more complex oil and gas fields. So maybe Russia is becoming over ambitious for what it is able to deliver.”
In June, at the summit of the Group of Eight industrialized nations, or G-8, Russia is expected to raise the issue of global energy security. But as most observers note, its G-8 partners will probably be more concerned about Russia’s plans to leverage its energy wealth in pursuit of its global political ambitions.
This story was first broadcast on the English news program,VOA News Now. For other Focus reports click here.