Russia: An Energy Superpower?

If the United States (US) hopes to maintain stability of the world’s energy producers, it must quickly and decisively use its influence as the leading energy consumer to reign in Russia’s imperialistic energy policies. Over the past decade the US has turned a blind eye on Russia’s growing use of energy as a geopolitical tool. As a result, Russia has gone unchecked when using its hold on vital energy supplies to influence the internal politics of the Baltics and former Soviet States; a political use of energy which it is also poised to use against the US and European Union (EU). In an effort to strengthen influence over its neighbors, Russia has raced to position itself as an “Energy Superpower”; a position many believe is unsustainable. With the former Soviet and Baltic States already dependent on it for energy and the EU not far behind, collapse of the Russian energy infrastructure could lead to instability in other energy producing nations and eventual collapse of the world economy.

Russia has been racing to position itself as an “Energy Superpower” since Vladimir Putin took office on December 31, 1999. As early as the summer of 2005, J. Robinson West was warning of Putin’s alarming vision for the Russian energy sector in his National Interest article, “The Future of Russian Energy”:

Vladimir Putin has grand designs for the Russian oil and gas industry. In the post-Cold War era, the design should be based on the huge hydrocarbon reserves that could return Russia to its past glory. Russia’s energy sector could be a source of power and prestige, to replace its once great military, now a shadow of its former glory.

Under Putin, the Kremlin has already purchased majority stake in many private energy companies, effectively nationalizing the Russian energy industry. The Kremlin has also begun pushing out international corporate concerns via a combination of contract renegotiations and environmental sanctions (Rodriguez, 2007a). According to Vladis Lumans, professor of history and politics at the University of South Carolina Aiken, energy is Russia’s only real strength:

Energy is probably the most important card Russia has in its international and domestic power deck; internally it determines who will run Russia. It is Russia’s main economic asset. ... In foreign policies Russia is using energy resources to establish its importance in Western Europe and in former Soviet republics (Lumans, personal interview, 2007).

In a move reminiscent of the Soviet Era, the Kremlin has promoted the state run energy giant Gazprom to the position of “National Energy Champion,” in an apparent effort to consolidate and centralize national power in the Russian energy sector. Gazprom has the lead in most international energy deals and is the primary developer, refiner, transporter and exporter of Russian energy supplies.

Recently having taken control of a portion of the Arctic the size of Western Europe, the Russians have gone on to lay out plans for establishing a permanent military presence in the Mediterranean; something not seen since the end of the Cold War (Winik, 2007). Both actions appear to be obvious moves designed to wrest control of additional energy resources and protect vital energy shipping lanes. Scientific teams directed by the Kremlin are taking the lead in gaining formal control of the additional 10 billion tons of oil and natural gas found in this new Arctic territory. Addition of these huge reserves would ensure Russia’s place in the world as second only to Saudi Arabia in energy production and first in overall energy reserves. Highlighting a lack of US efforts in Russian containment, this huge addition in Russian energy reserves is largely made possible by the United States’ refusal to ratify the UN’s Law of the Sea Treaty. This treaty, which the US alone has refused to sign for the past 13 years, defines the rights of nation states to previously unclaimed stretches of undersea real estate. By refusing to sign, the US will be unable to sit in on negotiations aimed at internationalizing these newly accessible reserves, allowing the recent Russian annexation of Arctic territory to go unchallenged by the US (Rodriguez, 2007b).

Since the fall of the former Soviet Union, the United States and its Western allies have largely discounted Russian global and regional influence. By doing so, they have allowed Russia to pursue imperialistic geopolitical policies which are both a detriment and danger to its regional neighbors and the world at large. In her 2007 article, “Containing Russia,” former Ukrainian Prime Minister Yuliya Tymoshenko, makes the argument that the West has lost its chance for leverage with an enfeebled Russia desperate for help from abroad. Due to the current rise in oil and energy markets, Russia has found itself newly imbibed with cash and no longer in need of outside assistance. In fact, the opposite is true. Russia has under taken policies to extend its own influence on Western interests by exerting political influence over the Baltics and former Soviet States, and increasingly, Western Europe (Tymoshenko, 2007).

Chief among these policies is Russia’s use of energy supplies to influence its neighbors. What might be called petro-politics have hit the Ukraine particularly hard. In the past two years, it has seen its economy battered, Westernization efforts stifled, and its government toppled; according to many observers, all as a direct result of Russian influence. In fact, repercussions from the gas deal which ended a Russian-Ukrainian energy stand-off, resulting from Gazprom’s temporary cutoff of vital gas supplies during the cold of New Year’s 2006, are still being felt. Mychailo Wynnyckyi, professor of sociology at the University of Kiev-Mohyla, directly relates former Prime Minister Yushchenko’s defeat in the 2006 Ukrainian elections to the gas deal (Myers & Kramer, 2006).

Other Baltic states have also felt the sting of Russian energy politics. Poland has seen energy supply transit fees dry up; this coming suspiciously close on the heels of Poland’s support for Ukraine’s Westernization efforts and its own movements for membership in the EU and North Atlantic Treaty Organization (NATO). Russian construction of a pipeline under the Baltic Sea to replace that now running to Germany via Poland, has effectively cut Poland out of the Russian-European energy market, severely hampering an already struggling Polish economy.

Aside from Ukraine and Poland, most of the former Soviet republics embracing pro-Western ideals, have seen similar spikes in cost and cuts in supply. Former Soviet states pursuing more pro-Russian policies have seen continuation of their favorable Soviet Era energy pricing and supply deals.

More alarming than reestablishment of its influence over the former Eastern Bloc is Russia’s movement toward similar control in the West European and American markets. Europe already imports as much as 50 percent of its gas supply from Russia. This is set to increase dramatically with the completion of the Baltic Sea pipeline directly into Germany. In addition to gas supplies, Europe also imports 30 percent of its oil from Russia (Cohen, 2007). Even the United States, previously a stalwart of Russia containment, has inked preliminary deals to begin importing liquefied natural gas (LNG) from a Gazprom controlled project in the Barents Sea by 2010 (Weir, 2005).

However, all is not well in Putin’s Kremlin push to become an energy age superpower. Some believe any energy superpower status attained by Russia to be unsustainable. One such critic, Vladimir Milov, of the independent Russian Federation Institute of Energy Policy, exposes glaring faults in the Kremlin’s policies throughout a March 2007 article in the journal Social Sciences. Milov states that recent findings by the Institute directly contradict assertions by Putin and the Kremlin that hydrocarbon exports alone can act as the foundation for large scale infrastructure modernization and social projects. His research clearly finds that, “... in order to achieve this goal, it would be necessary to export no less than 40-50 tons of oil-equivalent per capita annum.” Russia currently exports only 3 tons per capita annum. Even a full doubling of oil and gas production would result in only 10 tons per capita annum, far less than the 40-50 required to sustain current efforts (Milov, 2007).

Further aggravating Kremlin efforts are the stifling inefficiency and management issues plaguing its “National Energy Champion”. Having forcibly ended foreign investment and development in the energy sector, the Kremlin has caused vital international resource exploration and infrastructure assistance to vanish, leaving Gazprom to its own Soviet era vices.

The inefficiencies and environmental unsustainability of the lingering Soviet past have left infrastructure expansion and repair projects running far behind schedule. To make matters even worse, Gazprom has been actively investing throughout the economy, yet ignoring investment in its own core sector, energy. The company has recently invested in entertainment, media and other non-industry areas, while at the same time putting little, if any, new investment in infrastructure or exploration. The ongoing failures by Gazprom have left the Russian energy infrastructure in poor repair.

Despite glaring problems with Kremlin polices, energy accounted for 25 percent of Russian Gross Domestic Product (GDP) as early as 2005 due to the ever increasing prices of the energy trade markets (Beehner, 2005). Oil and gas revenues and taxes accounted for as much as 50 percent of total federal Russian revenue during this same period (West, 2005). All indications are these figures have continually increased since, funding vital increases in state supported programs. These programs are responsible for much of the economic and social growth Russian citizens have come to depend on since the fall of the Soviet state. Sustainability of the modern Russian Federation state, its people, economy, society and military are, for better or worse, inextricably linked to stability in the global energy economy. Any major drop in energy prices would starve Russian society of vital capital sending it into a tailspin from which it may have no means of recovery.

Russia, it seems, may be pushing itself further and further into a corner. Continued modernization efforts require increasing energy export levels, which in turn mandate continued increases in infrastructure capacity and modernization. When one realizes that the modern Russian economy, military, government and society at large, all depend solely on revenue from energy exports, the fragility of the Russian Federation becomes apparent. A major drop, for any reason, in world energy prices would mean nearly immediate failure of modern Russia as a viable state. How would Putin and the Kremlin oligarchy react in such a situation? As funds from energy exports began drying up, would the Kremlin continue pumping ever scarcer resources into maintaining the infrastructure required for supplying its customers with energy? Would it restrict exports in an attempt to stop a deadly hemorrhage of resources and force price concessions? With their own economies at stake and their people freezing in the cold of winter, how would the world’s nations react as the life blood of vital energy supplies were forcibly withheld by an increasingly isolated and belligerent Russia?

Alarmingly, other anti-Western energy producing nations, an informal “Axis of Oil”, have begun patterning themselves after Russia; funding necessary state programs and development with funds derived solely from state sale of energy reserves (Leverett & Noel, 2006). Any failure of the energy markets would affect them just as acutely. Such failures could cause an internal collapse in key regional powers and energy producers around the world; with Venezuela and Iran, swaths of Africa, and others, suddenly experiencing social upheaval and economic collapse. With China, India, the EU and US, all largely dependent on these anti-Western nations for vital energy supplies, disruptions could cause further economic and political instability, leading to general worldwide economic collapse.

Russia’s infiltration of global energy markets and control of vast untapped reserves make it vital to world stability. Any shift in internal politics or collapse of infrastructure would lead to an immediate and acute energy crisis for the world. As long as the US continues to allow Russia to expand its influence ever deeper into Europe, Asia and the US itself, the threat of any problems with Russian energy delivery grows more critical. Washington must use its influence to moderate Moscow’s policies and to demand more transparency and access to Russian markets for international companies. Only through the stability of international cooperative exploration of Russia’s vast energy reserves, can the world hope to safely depend on her into the coming century.

References

Beehner, L. (2005, October 28). Is Russia’s economy running out of energy? Council on Foreign Relations Backgrounder. Retrieved December 7, 2007, from http://www.cfr.org/publication/9119/is_russias_economy_running_out_of_energy.html

Cohen, A. (2007, November 5). Europe’s strategic dependence on Russian energy. Backgrounder, 2083. Retrieved November 27, 2007, from http://www.heritage.org/Research/Europe/upload/bg_2083.pdf

Leverett, F., & Noel, P. (2006). The new axis of oil. National Interest, 84, 62-70. Retrieved November 6, 2007, from http://sks.sirs.com/cgi-bin/hst-article-display?id=SMYDISCUS-0-5779&artno=0000249940&type=ART&shfilter=U&key=&res=Y&ren=N&gov=N&lnk=N&ic=N

Milov, V. (2007). Can Russia Become an Energy Superpower? Social Sciences, 38(1), 23-32. Retrieved November 6, 2007, from http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=24532821&site=ehost-live

Myers, L., & Kramer, A. (2006, March 30). Gas deal roils Ukraine and may have cut leader's vote. New York Times, A.3. Retrieved October 21, 2007, from http://proquest.umi.com/pqdweb?did=1012042331&Fmt=7&clientId=67495&RQT=309&VName=PQD

Rodriguez, A. (2007, January 13). Russia pursues policy to control its own energy resources. Chicago Tribune, n.p. Retrieved October 21, 2007, from http://sks.sirs.com/cgi-bin/hst-article-display?id=SMYDISCUS-0-5779&artno=0000258124&type=ART&shfilter=U&key=&res=Y&ren=N&gov=N&lnk=N&ic=N

Rodriguez, A. (2007, June 9). Russia aggressively pursues claim to vast, unowned Arctic deposits. Chicago Tribune, n.p. Retrieved October 21, 2007, from http://sks.sirs.com/cgi-bin/hst-article-display?id=SMYDISCUS-0-5779&artno=0000262373&type=ART&shfilter=U&key=&res=Y&ren=N&gov=N&lnk=N&ic=N

Tymoshenko, Y. (2007). Containing Russia. Foreign Affairs, 86(3), 69-82. Retrieved November 6, 2007, from http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=24764722&site=ehost-live

Weir, F. (2005, Dec 28). Kremlin reasserts control of oil, gas; Russia, the world's second-largest oil producer, sees energy as a key foreign policy tool. The Christian Science Monitor, 01. Retrieved October 21, 2007, from http://proquest.umi.com/pqdweb?did=948566931&Fmt=7&clientId=67495&RQT=309&VName=PQD

West, J. (2005). The future of Russian energy. National Interest, Summer 2005(80), 125-127. Retrieved October 21, 2007, from http://sks.sirs.com/cgi-bin/hst-article-display?id=SMYDISCUS-0-5779&artno=0000217845&type=ART&shfilter=U&key=&res=Y&ren=N&gov=N&lnk=N&ic=N