Russia, Georgia, Ukraine

As a follow-up to the initial post about Russia/Georgia by Becky, and the comments by clarita, Toby and combustible, I thought it might be useful to look at the sources of post-Soviet Russian foreign policy not just in the Caucasus but also in Ukraine. The August war in Georgia and the seemingly annual cutoff of Russian gas to Europe show the importance of these areas to energy, and thus national, security of the United States.

At the heart of Russian foreign policy after the dissolution of the Soviet Union is the attitude of Russia towards the former Soviet republics. To wit, the former Soviet republics are not thought of as foreign countries, but rather as areas comprising the 'Near Abroad' -- lands of non-Russians that have been under Russian control and domination since the Mongol hordes were booted out in medieval times and Russian tsars from Ivan the Terrible, Peter the Great and Catherine II steadily expanded the realm across 1/6 of the earth's area. To a typical Russian nationalist, of which Vladimir Putin and his associates are (along with wanting to restore the foreign and domestic might of the Soviet Union, but more on that below), Georgia is not a foreign country, but a lost province. Ukraine is not an independent country, but the origins of the Russian people (the Russian state and Orthodox Church began in Kiev, capital of Ukraine), so they have no natural ability to claim sovereignty over anything that belongs 'by rights' to Russia.

So after 1991, the Soviet Union fell apart, leaving behind the constituent republics to claim sovereignty over their own borders and largely to claim whatever (good, bad, ugly) Soviet infrastructure was in their territory. For the newly-independent countries around the Caspian Sea (particularly Azerbaijan and Kazakhstan), this was the golden opportunity to sell prospecting and drilling rights, leases and concessions to foreign oil companies for big money (the best book on this subject is probably The Oil and the Glory by Steve LeVine, who also runs a blog by the same name). Yet for Russia this was a period of great calamity as law and order broke down and insiders were able to exploit connections to claim much of public natural resource sectors as private prizes. Enter Vladimir Putin in 2000 who—very long story short—used   state coercion to consolidate his own position and bring the private owners of natural resources to heel; he did this by brokering a deal that allowed these 'oligarchs' to keep their assets so long as inter alia they helped the national gas company (Gazprom) and the national oil company (Lukoil) become the dominant companies in their respective commodity sectors.

As commodity prices rebounded at the beginning of this decade, Putin took a view towards revising the 1990s: at a time of weakness, outsiders (particularly the US and American oil companies) exploited Russia, while former Soviet republics took advantage of decades of Soviet infrastructure and investment without adequate compensation or including Russia in future plans. Specifically, constructing the Baku-Tbilisi-Ceyhan pipeline (as Becky rightfully pointed out) was an affront to Russia because it cut them out, and Ukraine charging Gazprom transit rates to move gas to Europe while still paying Soviet-era subsidized prices to purchase gas was totally ungrateful. And as these two countries had the temerity to move towards NATO membership, that was the final straw: Putin began moving to reverse the foreign policy losses of the 1990s and reassert control over oil and gas transit resources (as the main source of revenue).

In Georgia, Russia had been acting as a peacekeeping force in Abkhazia and South Ossetia to protect those areas against the Georgian central government, but had a stake in the outcome as they began issuing Russian citizenships in those areas. This allowed them to intercede in any conflict by claiming the defense of Russian citizens abroad. As for Ukraine, they claimed that cutting off gas in the middle of winter was the result of Ukrainian inability to compromise on the price of gas; the ‘commercial dispute’ leaving Eastern Europe shivering. This was a commercial dispute in the way that the Palestine/Israel issue is about property values in southern and central Israel. The intent of both actions was to destabilize the Georgian and Ukrainian governments and warn them away from doing anything further to displease Russia and its interests. The message to the rest of the world was that the BTC pipeline was not a safe bet for Caspian oil, and the Ukrainian gas network was also unreliable at best; Russia’s proposed North Stream pipeline (under the Baltic Sea to Germany) and South Stream pipeline (through the Balkans to Italy) were the only sure bets.

I respectfully disagree with Becky and her colleagues’ recommendation of a lower U.S. profile in the Caucasus region. U.S. foreign policy objectives regarding Russia and energy should be to support alternative pipelines (such as BTC and the proposed natural gas pipeline Nabucco) more openly and vigorously for the purpose of balancing Russia in the Caucasus region. These countries in the region (Central Asia, Caucasus, and southeastern Europe) have no other foreign policy levers to protect themselves against Russia. Russia will and has signed individual deals with these countries to their collective detriment. While the volumes of oil and gas reaching the United States is relatively low, the importance of this region is that its exports are critical to Russia, a prime strategic competitor to the U.S., and can provide enough capacity to reduce the bargaining power of OPEC. As combustible noted, this is the matter of US prestige and diplomatic capacity in the entire region.

The World is not "Ready for a Trans-Caspian Pipeline" Enough

"The World is Not Enough", starring Pierce Brosnan was action packed, full of excitement and when I first watched it a number of years ago, I never would have thought that I'd be looking back on it know with such interested retrospect for its plot. In case, all of you great Bond fans out there have forgotten, this movie centers its plot on a pipeline which runs from the Caspian, a pipeline that many of the heavy hitting Russian oil tycoons (in real life) are very much trying to forestall. Recalling this got me thinking about the topic and also searching a bit to really crack this nugget of what turned out to be a nearly a decade of political maneuvering.

The Trans-Caspian Gas Pipeline has long been touted by Russia and Iran as an environmental disaster and a economic folly. These two great powers have good reason to feel this way. The pipeline would be laid across the floor of the Caspian in a joint venture by the those nations who border the Caspian and would supply the U.S. and the greater world market with gas that would not be taxed by either Iran or Russia. This is important because the Caspian is arguable one of the most up and coming strategic oil rich regions in the world.

According to Wikipedia, the pipeline was suggested as early as 1996 and it was not until 2007 that Russia has seemed to have definitively blocked the future of the pipeline with an agreement among Kazakhstan, Turkmenistan, and itself that sets up a plan to pipe gas from interior Asia to Europe. The very interesting point for me though was reading all of the commentary and rhetoric among the Asia nations, many of them hoping to ensure Russian dominance and others hoping to pull closer to America with cheaper sales by avoiding heavy Russian taxation that would certainly be involved in any pipeline plans that routed through Russia.

I guess what is funny about this is the way that Russia's oil cartels are essentially bullied the Caspian countries into submission on this one. Does it all really come down to thug on the corner bullying and mafia style "protection payments" (heavy pipeline taxes on pipelines Russia insists be routed through their country)? At any rate, the Bond movie makes it all more dramatic and he (as always gets the girl), so go out and catch the flick. If you are at all like me, you might also enjoy the plot more now that you know a little more of the obscure backstory.

An Energy Eye on Russia: Week 4/ Russian Police Raid BP Venture (Reuters)

The theory is that Russia wants "to buy out the Russian billionaire shareholders in the venture [in TNK-BP, a venture of BP and some billionaire Russians] to become a partner of BP in a bid to further tighten the grip over energy resources."
For those of you who weren't paying attention, because it wasn't exactly news...

"Gazprom's chairman Dmitry Medvedev won Russia's presidential election by a landslide earlier this month and has promised to follow the policies of his mentor Vladimir Putin, the architect of renationalisation of the oil industry of the past year."

Apparently the Government gave two separate reasons for the search at different times, the first: a criminal investigation into an oil firm previously related to the Russian shareholders and not BP. The second: an investigation into TNK-BP's management.

Some similarities:

"Searches and document seizures became commonplace during a campaign against oil firms YUKOS, which was brought to its knees under a multi-billion dollar back tax claim, which led to its bankruptcy and asset sales at state-forced auctions."

"In February, police raided the headquarters of Slavneft, which TNK-BP co-owns with Gazprom, and also confiscated documents in a five-year-old tax evasion investigation."

BBC:

"The searches have renewed fears that the Russian government wants greater control of foreign-owned energy assets.
......
Last year, TNK-BP was forced to sell its stake in the Kovykta gas field at a discount price to Gazprom.
In 2006, Shell was forced to cede control of its Sakhalin gas field to Gazprom.
"We will co-operate with the authorities but we do not know what they were looking for or why they were there," a BP spokesman said."

Ah well. Good old Russia. Search and seizure. So much for Europe. Further emasculated.

Request: Would someone who knows realities please write about the effect on Energy Trade with Mexico and Canada should we change/end NAFTA?

An Energy Eye on Russia is taking the week off - because it's always the same thing. So now we move from Europe to North America:

I was watching Meet the Press this morning and ending NAFTA and its effect on our energy trade in North America came up - and using that against the Democratic nominee.

This article, "The Pipes that Bend", is about all I know.

"Canadian Trade Minister David Emerson mused this week that Ottawa might wield oil exports as a bargaining chip if NAFTA is reopened - as U.S. Democratic presidential hopefuls Barack Obama and Hillary Clinton apparently want. Veiled threats about Canada's energy riches have been used sporadically over the years in the face of U.S. protectionist threats."

The bargaining implications are kind of what I'm interested in. Personally, I don't think energy will be a problem - I would say, as I guess the article says, that business would just continue what they are doing outside of politics.

Renegotiating energy trade and strengthening Mexico's production policies under NAFTA seem to be an aim for the future. I read part of NAFTA Revisited: Achievements and Challenges Chapter 7 from the Institute for International Economics, which says:

"Although the United States and Canada have largely integrated their energy markets, the ultimate goal of a unified North American energy market is still a long way off. The United States and Canada should continue to deepend cooperation in the areas of infrastructure planning and regulation. They should encourage Mexico to pursue tax and energy policies that will generate domestic revenues that can fund expansion of oil and gas production and electricity generation. Such reforms are needed first and foremost to provide a strong foundation for Mexican economic growth. In so doing, Mexico would also contribute to North American energy security and thus to the long-term health of the North American economy -on which Mexico is so dependent."

I suppose that with the North American trade agreements and current energy abilities of all three countries, they kind of avoid the powerful position that Russia controls (with the gas pipelines) in the European Union. It's an interesting situation to contrast.

An Energy Eye on Russia: Week 4/Who cares about international relations when we have pirates?

So Russia and the U.S. are making Uranium deals and Russia is pledging to provide consistent energy supplies. Big Deal. There are PIRATES in Somalia! They stole a TUGBOAT!

The tugboat is part of a Gazprom led consortium including Shell and Mitsubishi that is building the Sakhalin oil and gas projects (1-4.) This tugboat is apparently part of Sakhalin II oil and gas project. What I have gleaned.. this means a large LNG Plant (that can supply 8% of the world's Natural Gas) and an Oil Export terminal. The problem is that the construction of these projects and their pipelines in the ocean habitat threatens to cause extinction of endangered gray whales and fishing areas. The World Wildlife Fund finds the project in breach of environmental regulations. So the environmental groups are in an uproar... which means..

Even Better.


Environmental Pirates Steal Tugboat!!

Well no, it's the "Ocean Salvation Corps - a group of 'Somali nationalists who took it upon themselves to protect the country's shores.'" Much less exciting. But apparently they take care of the crew and just want to stop destruction of habitats. YaY Vigilantes!

Let's hear some demands next time.

An Energy Eye on Russia: Week 3.5/U.S. Worried about Russia's Energy Power and the Ukraine wants to cut out the Middleman (Russia)

U.S. Worried About Russia's Balkan Energy Grab

The headline about says it all. The U.S. sees Russia's moves as "strategic", asking the Serbs.. Did you consider that MAYBE Russia is looking to gain "possible economic dependency and possibility of political control."?? Hmm???

The U.S. of course supports Energy Diversity through Nabucco (EU Pipeline), not South Stream (Russian Pipeline).

Interesting definitions of Energy Security here. Serbs said it was the deal with Russia (split 50-50) - EU and US say it's Nabucco.


Forbes: Energy Sector Round Up (Associated Press)

I'm not quite sure of the logistics of this? Does it mean Nabucco?

"Ukraine's prime minister says the country wants to buy natural gas supplies directly instead of going through an intermediary company partially owned by Russia."

"Nearly all of Ukraine's gas imports come through Russia from the energy-rich central Asian nation of Turkmenistan. The gas is imported through the Swiss-based trading company RosUkrEnergo, half of which is owned by Russian energy giant Gazprom and half by two Ukrainian businessmen."

In other news, did you hear that Turkmenistan is giving its citizens free energy? That's Energy Rich and People Poor.

An Energy Eye on Russia: Week 3/ Thanks to Russia, Iran's first nuclear power plant should be working at 50% capacity by Fall 2008

When asked why Iran would want to have a national enrichment program when they can buy enriched Uranium cheaply from Russia, nuclear negotiator Saeed Jalili responded that Iran is investing billions of dollars into 20 nuclear power plants over the next twenty years and needs to have an assured supply. (Aka, we don't trust the "international community" or.. we don't trust Russia?) Energy security, that's what it's all about nowadays. Russia and Iran had problems all last year March to December. Though it's seems ok now that the last shipment of nuclear fuel has arrived.

And with it... more sanctions...

Russia wants the Nuclear debate to be the concern of the Int'l Atomic Energy Agency, and not the Security Council. (LATIMES, 2008)

Sometimes I just like reading the different headlines.

Iran gets last batch of Russian atomic fuel: Russia and China are even more opposed to sanctions since U.S. Intelligence recently said that Iran halted it's Nuclear Programme in 2003. "Russia says the Bushehr power plant is being built under the control of the International Atomic Energy Agency, the U.N. nuclear watchdog." - Reuters India

Too Easy to Refuse: U.S. Friendship or Nuclear Fuel? Nuclear Fuel. Thnx. "We were surprised, and somewhat reassured, that America and Europe managed to get China and Russia to sign on to any resolution. All of the key players — except the United States — have strong economic reasons not to put the squeeze on Iran." - NYTIMES

Intl. Community Supports Iran’s Nuclear Program: Numbers as to how many states are in NAM vary. But I've seen 115 and 118. The link goes to the list of member states according to South Africa. "We think and we believe that the international community is supporting Iran’s position with regard to its peaceful nuclear activities and programs. More than 120 countries in the non-aligned movement supported Iran’s position and its peaceful program and its rights within its nuclear energy program. Just two or three countries consider themselves to be the international community, they consider themselves to be the entire international community. Even the U.S. national intelligence report acknowledged that Iran is following a peaceful nuclear program in the country." - Tehran Times

An Energy Eye on Russia: Week 2/Bulgaria 4 Days Ago, Today "Gazprom Takes Control of Serbian Oil"

So the date set by the BBC article I read on Friday quoted January 28th as the deadline for Serbia to decide on its deal with Gazprom. It seems that Dejan Stojadinovic is right, Serbia just cannot refuse the cashy "security of supply" from Gazprom. Though, I might once again reference the Ukraine in 2006 - which also affected Serbia. Serbia, according to the BBC, relies on Russia for 91% of its gas.

In fact, it seems I was misled by the BBC title "EU warns Serbs on Russia Gas Deal" as a Slovenian expert is quoted by the NYTIMES as saying “In all its negotiations with Serbia when dealing with the future status of Kosovo, the E.U. never brought up with Serbia the issue of energy security and how Serbia could play an important role for Europe.”

Serbia is offered the position as a gas hub, with the South Stream pipeline being directed through Serbia. Additionally, energy infrastructure improvements have also been promised.

Even more importantly, Russia has no intention of liberating Kosovo - exactly the opposite of the US and the EU. But then again.. the EU "hopes" this isn't the driving factor.

Is the EU upset about the energy deal? Or are they just concerned for Kosovo? Belgrade said the EU couldn't possible supply Serbia with the gas it needed. If I were the EU, I'd be upset about both. Now what?

This kind of reminds me of a game of Risk - except my friends would sometimes flip the board after enough deals went south.

An Energy Eye on Russia: Week 1/ Bulgaria-Russia Gas Pipeline

This is the first post for "An Energy Eye on Russia." Russian energy deals, policies, and plans for the future (something I don't currently follow, but want to learn.)

Not forgetting that Russia is the third largest oil producer and almost monopolizes the energy supply to Europe, the following article from back in October is what brought my attention to Russia.
A Killing in Siberia Injures Russia's Green Movement
which can be found in full here: http://www.pacificenvironment.org/article.php?id=2614
The article cites Russia's goal to be the Nuclear energy provider to countries without the capability, as well as environmental protest against Nuclear power and a little bit of political oppression and intrigue.

I have an interest in the debate over whether or not Nuclear is a renewable/clean energy or not. I am also intrigued by the reasoning behind and against protests that Nuclear Fusion research removes funding from other, more friendly (?) renewables (e.g. Solar Energy.) The cleanliness of Nuclear has already been approached this blogging week in Nuclear Power, Should we be using it? and Nuclear Power is Not Clean.

But today we turn to Russia's sealed deal with Bulgaria:
"The South Stream gas scheme, said to be worth 10bn euros ($14.66bn; £7.4bn), is being jointly developed by Gazprom and the Italian firm, ENI.

The ...pipeline is expected to take Russian gas under the Black Sea and overland across Bulgaria to markets in southern Europe. Russia has offered to site a major gas hub in Serbia, a traditional ally.

Bulgaria had also received an offer from the US and EU to join the rival Nabucco project.

Nabucco envisages bringing Central Asian gas through Bulgaria to Europe, in a move intended to reduce Europe's reliance on Russian resources."

Russia is most certainly an energy heavy weight flexing its muscles, and I'm interested to see how the EU and US respond in order to avoid Russia's Energy Power (haha) from increasing. Particularly in the old USSR. Will it come down to old friendships and grudges? Future security? Or plain old price? Russia did use its power to persuade the Ukraine by cutting off gas exports in 2006.

The deal also included plans for a Nuclear plant in Bulgaria,

The article has a map of both the Russian South Stream pipeline - connecting Russia and Italy, and the Nabucco pipeline - going through Turkey to Central Asia. However, the article cites the largest block to the EU and US aim to challenge Russia's energy prowess by transporting gas from Turkmenistan. However, Turkmenistan just sold its supplies to Russia. Turkmenistan using the unofficial (after all, worst case scenario, the two pipelines will be "complementary") contest as leverage.

Next time: I hope to get more into the recent events (Serbian sale to Gazprom and EU membership) of Russian energy deals and the influence of former Soviet Union politics. Supposed to be signed by the 28th. (See last week's BBC article)