russia, usa-eu and geopolitics of energy

8/11/2019 Russia, USA-EU and Geopolitics of Energy

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Russia, USA-EU andGeopolitics of Energy

Francesco Legname

September 2014

1RUSSIA, USA-EU AND GEOPOLITICS OF ENERGY


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Russia, USA-EU & Geopoliticsof Energy

Russias dominant position in the European energy market solidifies Moscow as an

integral part of the Wests future, forcing Washington and its allies to engage with

their eastern rival. Moreover, it is this precisely this necessary engagement that

grows Russias influence both in Europe and around the world influence which

necessitates the continued Russophobic propaganda in Western media and popular

culture.

Russia holds the worlds largest gas reserves and, even though it is currently the

worlds second gas producer after the United States (which recently outstripped

Russia because of the shale revolution), it still preserves its status as the largest gas

exporter in the world, leaving Qatar and Norway far behind (see Figure 1). This

position will most likely be kept in the future, since Russia produces 10% and

Figure 1. Russian Gas Exports


Source: BP Statistical Review of World Energy 2013


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consumes 5% of the planets energy resources, with an output of about 1300

thousand tons of oil equivalent (mtoe) (42% of which is provided by gas), allowing

the country to export 600 mtoe12% of the worlds energy trade (see Figures 2

and 3).

Figure 2. Russian Primary Energy Production

Figure 3. Russian Primary Energy Consumption


Source: IEA statistics, September 2013

Source: IEA statistics, September 2013


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Moreover, with roughly one third of European oil and gas imports, Russia has

secured its current position as the single most significant provider of oil and gas to

Europe, growing steadily its energy exports since the early years of post-Soviet

period. This has been leading to a mutual dependency between the two countries

since Europe is heavily dependent on Russia to fuel its manufacturing and

consumer base, while Russia relies on oil and gas revenue from Europe to finance

its continued economic development and diversification.

This relationship has flourished over the last decade, despite political resistance

from the United States and many in Europe. The Nord Stream project fits neatly

within Russias strategy to consolidate its position in the EU. In 2005, Gazprom

signed an in-principle agreement to develop the Nord Stream pipeline. The other

signatories were the two German companies Wintershall and EON Ruhrgas, later

joined by the Dutch gas company Gasunie. The development of Russias Nord

Stream pipeline, officially inaugurated in 2011, further established Russia as a

principal energy supplier to Northern Europe, particularly the industrial power of

Germany. A twin pipeline, the Nord Stream carries roughly 55 billion cubic meters

of gas per year under the Baltic Sea and into Germany and the rest of Europe (see

Figure 4).

Figure 4. Nord Stream Pipeline



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Claims of EU officials that Nord Stream will improve EU energy security by

precluding the possibility of interruptions in transit countries miss this point. Nord

Stream would after all not make a difference for the EU in terms of supplier

diversification. A completely different claim was made by the Polish minister of

Foreign Affairs Radek Sikorski in 2009. He argued that the Nord Stream pipeline

deal was comparable to the 1939 Molotov-Ribbentrop Pact. With this agreement,

Germany and Russia intended among other things to create two spheres of

influence in Central Europe and Eastern Europe.

The Nord Stream, seen by many as a necessary move by Russia to diversify its

energy delivery infrastructure away from total reliance on Ukraine, has increased

Russias leverage when it comes to relations with Europe. Moreover, it establishes a

reliable revenue stream for Moscow, which has, since 2000, vowed to use energy

export revenue to diversify the Russian economy away from a purely petro-

economy.

Russia is currently constructing a complementary pipeline, known as the South

Stream pipeline, which is another result of Russias gas strategy towards the EU. In

2008, Gazprom signed an agreement with Italian energy company ENI for the

development of second new pipeline to EU, coined South Stream. This pipeline

would transport gas from Russia through the seabed of the Black Sea to Bulgaria.

From there, the gas would continue in two directions: to Austria, crossing Serbia

and Hungary, and to Italy, crossing Greece and the seabed of the Adriatic Sea. In

May 2009, Russia signed an agreement to conduct South Stream feasibility studies

with the governments of four involved countries, Italy, Bulgaria, Greece and

Serbia. The pipeline is expected to cost USD 25Bn and to be completed by 2015.

Officially scheduled to come online next year, the South Stream will make Russia a

dominant player in terms of exports to the Mediterranean and Central Europe.

The South Stream is expected to carry 63 billion cubic meters of gas per year,

making it one of the largest pipelines in the world in terms of volume (see Figure

5).



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Figure 5. South Stream Pipeline

Many analysts claim that South Stream is a deliberate attempt of Russia to prevent

the building of the Nabucco pipeline. This pipeline would run from Turkey across

Bulgaria, Romania and Hungary to Austria (see Figure 6). Its estimated

development costs are less than half of those of the South Stream pipeline and the

planned completion year is 2013.

The Nabucco project is part of EU efforts to find opportunities to import gas

without Russian interference. However, the long-term prospects of the Nabucco

project, and thus of the EUs ambition to become less dependent on Russia for its

gas imports, were further clouded by Gazproms acquisition in 2008 of a 50%

share in the large gas transmission centre at Baumgarten in Austria. With this

transaction, Gazprom created an influential position towards the Nabucco pipeline,

as the EU had designated the centre as the final destination of the Nabucco

pipeline. Officials of the Austrian government and the Nabucco project have

recently suggested using the Nabucco pipeline to transport Russian gas as well or to

merge its European (non-Turkish) route with that of the South Stream pipeline .

These suggestions make clear that the initial rationale behind the Nabucco



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pipeline, excluding Russia from part of the gas flows to the EU, seems nothing but

a pipe dream.

Figure 6. South Stream and Nabucco Routes

In addition to this, the project has also been troubled by financial problems, a lack

of consensus among the involved countries and the supply of sufficient gas totransport through the pipeline. Suggested options to secure gas flows include

connections between pipelines in eastern Turkey and those in either Azerbaijan or

Iraq. While the second option is not possible for the time being due to political

problems in Iraq, the first one is attractive as Azerbaijan, Kazakhstan,

Turkmenistan and Uzbekistan have earlier expressed interest in delivering gas to

the EU without interference of Russia. But so far, the countries concerned have

however only guaranteed 20% of the required gas flows, making it highly unlikely

that eventually sufficient gas will be available for the Nabucco pipeline. The abilityof Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan to deliver gas to the EU

through the Nabucco pipeline is compromised by committed gas sales to Russia,

export opportunities to China and strong domestic demand.

Anyway, these two pipelines are not the only critical European energy

infrastructure controlled by Russia. Currently, Russia still provides a great deal of



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gas to the continent through its restive partner Ukraine, whose network of pipelines

dates back to the Soviet era. The spider-web of Ukrainian pipelines (which Russia

has sought to acquire to no avail for years), coupled with Russias ownership of the

Belarusian pipeline operator Beltransgaz, means that Moscow has cemented a

dominant position for itself vis--vis the European market over land and under the

sea.

Of course the West, the United States in particular, views this mutually beneficial

relationship between the EU and Russia as threatening Washingtons geopolitical

hegemony in Europe. For this reason, a number of steps have been taken by

Western governments and corporations to undercut Russias energy dominance.

Every geopolitical conflict between Russia and the West has an energy dimension

to it. The current conflict in Ukraine can be understood, at least in part, as a

struggle for control of the critical gas delivery infrastructure.

Over the past decade, Ukrainian pipelines accounted for nearly 80% of all gas

deliveries from Russia to Europe. The Russia-Ukraine gas dispute of 2009 brought

into stark relief just how significant gas is to the bilateral relations between the two

countries and, perhaps even more significantly, how critical Ukraine was to Russias

overall export revenue. This conflict, and others that preceded it, was one of the

principal motivators for Russias construction of the Nord Stream and South

Stream.

In December 2013, Ukraine's now-deposed, president Viktor Yanukovich

abandoned a trade deal with the European Union in favour of closer ties with

Russia. One of the sweeteners in the $20bn support package that helped persuade

him was a steep discount around 30% on the price that Russia's gas giant,

Gazprom, was then charging Ukraine for the natural gas on which it relies.

The EU partnership agreement that Ukrainian President Yanukovich rejected was

specifically designed to be an exclusive deal that would force Ukraine to choose

either to side with Russia or with Europe, forcing the government into an untenable

position. The unfolding crisis in that country is a direct result of such provocative

economic measures.



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The war in Syria, and the subsequent diplomatic standoff between Russia and the

West, is also partially the result of energy-related issues. In the apt expression of F.

William Engdahl, Natural gas is the flammable ingredient that is fueling this

insane scramble for energy in the region. A battle is raging over whether pipelines

will go toward Europe from east to west, from Iran and Iraq to the Mediterranean

coast of Syria, or take a more northbound route from Qatar and Saudi Arabia via

Syria and Turkey. Having realized that the stalled Nabucco pipeline, and indeed

the entire Southern Corridor, are backed up only by Azerbaijans reserves and can

never equal Russian supplies to Europe or thwart the construction of the South

Stream, the West is in a hurry to replace them with resources from the Persian

Gulf. Syria ends up being a key link in this chain, and it leans in favor of Iran and

Russia; thus it was decided in the Western capitals that its regime needs to change.

The fight for democracy is a false flag thrown out to cover up totally different

aims.

It is not difficult to realize that the rebellion in Syria began to grow almost at the

same time as the signing of a memorandum in Bushehr on June 25, 2011 regarding

the construction of to the so-called Islamic Pipeline, a new Iran-Iraq-Syria gas

pipeline (see Figure 7). It is to stretch 1500 km from Asaluyeh on the largest gas

field in the world, North Dome/South Pars (shared between Qatar and Iran) to

Damascus. The length of pipeline on the territory of Iran will be 225 km, in Iraq

500 km, and in Syria 500-700 km. Later it may be extended along the bottom of

the Mediterranean Sea to Greece. The possibility of supplying liquefied gas to

Europe via Syrias Mediterranean ports is also under consideration. Investments in

this project equal 10 billion dollars.



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Figure 7. Iran-Iraq-Syria Islamic Pipeline

Naturally, such a development would have been a direct assault on the gas

hegemony of Qatar, and the gulf monarchies more generally.

Seen in this way, the continued financing and arming by Qatar and Saudi Arabia

of terror groups in Syria represents an attempt by those monarchies to prevent any

infringement upon their European gas revenue. Of course Russia, whose Europeanmarket access is secure via the aforementioned Nord Stream and South Stream,

came to the aid of Damascus, its final remaining ally in the Middle East, in an

attempt to block what can only be seen as an attempt to destroy the nation of Syria

itself.



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Other recent developments in the energy sector complicate these issues even

further. The recent discoveries of gas reserves off the Israeli coast in the Eastern

Mediterranean provide further motivation for the US-NATO powers to destabilize

Russian interests and wrest control of key Russian allies away from Moscow.

In early 2012, Noble Energy, the US partner of the major Israeli energy

companies, announced a new find of 1.2 to 1.3 trillion cubic feet of gas in the

Tamar prospect. Noble is confident that there may be up to a dozen more such gas

discoveries to be made in the Tamar field. Yet the Tamar and Dalit offshore Israeli

gas fields are just the beginning. Others are showing signs of significant quantities

of gas, including the Aphrodite 2 field, 100 miles from Haifa. But the enormous

Leviathan gas field overshadows them all. Leviathan is estimated to have twice the

amount of gas of Tamar and should come online between 2016 and 2018. But

Leviathan and Tamar also hold out the further tantalizing prospect of significant

amounts of oil (see Figures 8 and 9). Rumors of a possible Israel-Turkey pipeline

would be understood as yet another attempt at undermining Russian gas

dominance.

Figure 8 and 9. Israeli and Easter Mediterranean Oil & Gas Discoveries



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Of course, also the much touted Shale Revolution and hydraulic fracturing

(known as fracking), has led all players in the last few years, including Russia, toreassess their strategic energy plans and examine all possible options for the near

and medium term future.

Russias rebound from the dark days of the early 1990s has largely taken place on

the back of its energy exports. Its continued economic development, and

consequent political and military development, represents a threat to US-NATO

hegemony in Europe and throughout the world, severely weakening the Wests

strategic position. It is this threat that the Western powers are attempting to meetwith various forms of hard and soft power. The infamous missile shield in

Eastern Europe, the war in Syria, the crisis in Ukraine, and many other issues all

factor in to this greater competition.



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Additionally, Western media continues to wage a ceaseless propaganda war to

demonize Russia. Ostensibly, the Russophobic character of these attacks is

shrouded in the rhetoric of human rights and freedom. However, these premises

are mere cover for a well orchestrated attempt to manipulate public opinion to

believe that, like during the Cold War, Russia is the enemy, and US-NATO

represent the forces of good. As usual, the corporate media serves as the dutiful

servant of US-NATO foreign policy.


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