Russia, the West, and Energy Geopolitics in the CIS; A New Tournament of Shadows?

Stephanos S. Germenis

Contents
The Great Game / Tournament of Shadows The New Great Game / Tournament of Shadows Goals & Results: Russia & the West Analysis The New Great Game: Dj-vu? Sakhalin Conclusion

The Great Game / Tournament of Shadows

Kiplings Kim (1901) Russo-British struggle over Central Asia Security of supply Empire & spheres of influence Global importance
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The New Great Game / Tournament of Shadows

Dissolution of U.S.S.R. 3 stages of policy thinking:
Retreat / pro-West Regroup Rise of nationalism

Eurasianism
Emphasis on CIS 1996 Draft Doctrine on Energy Security
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The New Great Game / Tournament of Shadows contd.

New energy opportunities in NIS
Compatibility with the West? Security of supply?

Investment opportunities
Local need for capital PSAs

E.U.
Blue Stream & INOGATE

The New Great Game / Tournament of Shadows contd.

Russia:
1990s privatizations Yeltsin & the Oiligarchs

The West
1990s: need for capital & know-how 3 ways
Direct investment Joint venture Upstream investment
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Goals & Results: Russia

Sphere of influence
Yeltsin Doctrine & Secret Directive 386 Energy Strategy for the Period Until 2020 (May/August 2003) Economic coercion Putin era: appoint associates to key positions

Limit foreign presence in CIS

Controlled instability:
Azerbaijan, Georgia, Tajikistan

Issues:
Threat to infrastructure Military reform

Maintain assertive role in CIS

Military bases Boarder guards Peacekeepers
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Goals & Results: Russia contd.

Control of strategic resources & transportation network
Transneft Vs BTC CPC Gazprom

Control of the domestic energy sector

Gazprom Limit foreign presence

Relations with the U.S.

9/11 Tactical marriage of convenience?
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Goals & Results: Russia contd.

Private sector:
Close cooperation with the state
Vagit Alekperov: the state has a significant say in our company (LUKoil), and in return state protectionism and patronage enables us to obtain specific projects in other former Soviet republics

YuKOS Company strategies

Export maximization maximized unitary income Seek immediate liquidity Limited investment in exploration

State exercises control through:

Main transportation networks Tariffs Reserves Defining & dictating export volumes
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Goals & Results: the West

Need for foreign investment:
Expertise & know-how Capital

U.S.
State level
Caspian oil: a piece of the pie Military bases & aid Pro-Western projects (i.e. BTC)

Private level
Possibility of exporting LNG Sakhalin, Shtokman, St. Petersburg

E.U.
INOGATE & Blue Stream
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Analysis
The CIS as an oil and gas producer
Reliability Potential (oil V gas)

Potential output
Aims to export 160-170 million tons p.a. for the next 20 years Increase amount of extracted oil to 540 million tons p.a. until 2015 Significant drop in exploration Geographic & environmental restrictions

Export to China?
2004: 5.25 million tons exported to China Poor transportation infrastructure Security premium

Export to North America?

Sakhalin & LNG

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Analysis contd.
E.U. Vs the Far East
Far East:
Supply meets demand requirements in China Projects in Central Asia Japanese investment Potential projects:
Angarsk-Nakhodka/Daqing

E.U.
63% of its gas imported from Russia ( 70% by 2020) Oil: 150-160m tons p.a. by 2020 ($30/bbl)

Growing dependence
active role in ensuring security of supply
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Analysis contd.
Energy-dependent economy
$1/bbl change in oil prices $1.4 billion change in Russian government revenues World Bank: 25% of Russias GDP from oil & gas sector; but employing less than 1% of population Russian majors comfortable with $15-18/bbl, if not less Close ties between state and Russian private energy majors Revenue from energy sector: Putin Vs Yeltsin
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A New Tournament of Shadows / Great Game?

Long-term capabilities:
Oil: 20-25 years Gas: different story!
2005: 598 billion cubic meters produced; 21.6 of world total

Post-9/11
Notion of cooperation in CIS Re-integration Vs domination & exploitation
Shanghai-6, Central Asian Cooperation Org. Sphere of security Strategy of dependence shifted into the energy sector Mutually beneficial

U.S.-Russia relations
Rapprochement; recognition of mutual position & role

New players involved

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A New Tournament of Shadows / Great Game? contd.

Questions:
If U.S. military presence in Central Asia temporary, why has American aid to the region been so intense? How will presence be accounted for when Afghanistan & Iraq are deemed stabilized? Russias stance & reaction?

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Sakhalin
Ecological approval for Sakhalin II canceled by Russian Natural Resources Ministry
Shell: The project complies fully with Russian and international environmental standards and is introducing environmental best practice into Russia.

Political motive?
Gazprom & Zapolyarnoye-Neocomian

Wider effects
Russias position & image as supplier Foreign relations Bureaucracy & delays
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Conclusion
Issue in question is geographically regional, but global in importance and impact Prize of the New Great Game: untapped oil & gas reserves, pipeline networks, tanker roots, LNG export hubs, consortiums diversification & security of supply Changing role & position of players after 9/11 Game at end?

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Thank you

Stephanos S. Germenis
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