AN OUTLINE OF RUSSIAN INITIATIVES IN THE ENERGY SECTOR
Ioannis Michaletos
(RIEAS Junior Analyst)
Copyright: www.rieas.gr
Russia over the past 7 years and under the Presidency of Putin has emerged as a balancing actor of worldwide energy policies and a gravity center for the energy security in Europe. The planning and execution of the Russian policy is interrelated with the overall aim of Moscow to retain a global role in the contemporary world and gradually suit itself as the main actor in the Eurasian politics.
There are four main energy projects, by which Russia strives to establish its role and expand its influence over the following years.
Firstly we have the domestic energy projects-The ones having as a base the Russian Federation territory:
1.The Russian oil transport network of the Caspian basin. The latest development on this network was the signing of the construction of the Burgas-Alexandroupoli pipeline that will transfer Russian oil to the Mediterranean.
2.The reconstruction of the Mourmansk port in the Arctic Ocean. According to Lucoil Corporation the lack of serious infrastructure is the cause of a tremendous loss of export abilities up to 15 million tones a year.
3.The creation of the pipeline Asia to Pacific Ocean in Easter Siberia that will stretch from the heartland of the Russian Federation and end in the Pacific Russia just north of the Chinese borders.
4.The North European pipeline of natural gas, a joint German-Russian project that will be fully functional by 2013 and will meet 30% of European gas needs
5.The “Blue stream” natural gas pipelines that will connect Russia with Turkey-Greece-Italy and with the energy European network
Secondly we have the energy projects in the near abroad states of the Russian Federation:
1.Kazakhstan is promoting a 7 billion USD program by 2020 in order to modernize its oil industry. Moreover it aims to achieve the status of energy supplier to the Bacu-Cheihan pipeline and invests in the state of Georgia as well.
2.Turkmenistan has plans up to 45 billion USD, that include mostly the investment in identifying and exploiting new reservoirs of oil & natural gas by 2020
3.The Russian corporation Lucoil plans to invest 1 billion USD in a project in Uzbekistan
4.The Russian Corporation Gazprom forms a strategic partnership agreement with the state of Tatzikistan
Nuclear energy projects in Russia
Russia has also set target for exploiting nuclear energy in parallel with its hydrocarbon projects. Currently 16% of Russian energy needs are being met by nuclear energy. It is planned that by 2030 this percentage will have increased to 25% by constructing 40 new nuclear plants of modern technology. Moreover it should not be forgotten that Russia has been the supplier of nuclear technology to Iran and other states and it is surely one of the few countries in the world that could facilitate the spread of nuclear technology worldwide, if it chooses to do so.
The Russian natural gas sector
According to the International Energy Agency, Russia produced some 150 billion m3 of natural gas in 2004. Furthermore from the above production 134 billion m3 was exported to Europe and covered 25% of its imports.
More analytically Europe consumed 535 billion m3 of natural gas:
1.60% came from British, Norwegian, and Dutch resources in the North Sea
2.10% from Algeria
3.25% from Russia
4.2% from Nigeria
5.3% elsewhere across the world
From the Russian imports -125 billion m3-, Germany imported 33 billion m3, Italy 20 billion m3, and France 20 billion m3.
The largest by far percentage of Russian imports came via Ukraine and through the pipeline named “Brotherhood”. A second route called “Yamal” trespasses Byelorussia-Poland and reached Germany. There is a third route passing the Balkans and finally a fourth one, the “Blue Stream” that has being developed sub water and connects Russia with Northern Turkey in the Black Sea.
Currently Gazprom started developing a fifth pipeline that will be built beneath the sea surface and will connect Russia with Germany, thus bypassing Poland. The Chairman of the company that controls the project is the ex German Chancellor Gerhard Schroeder.
Finally Gazprom has negotiated with the Japanese administration to commence the Shachalin-2 project by which Russian Liquefied Natural Gas will be exported to Asian markets.
Gazprom controls 95% of the Russian natural gas production and its reservoirs are the largest in the planet. In 2004 it produced 541 billion cubic m3 and exported 140 billion m3. By 2015 it is estimated that it could produce up to 750 billion m3.
Its main international partners include the companies: Ruhrgas AG, Wintershall AG, Verbundnetz Gas, Siemens AG, Gaz de France, TotalFinaElf, ENI, BOTAS, Fortum, Gas-Unie, Statoil, PetroChina, PGNiG, ExxonMobil, ChevronTexaco and Royal Dutch Shell.
The Russian exports to Europe operate under the commercial framework of 25 year contracts based on bilateral agreements. The European states have agreed on paying for a standard and minimal amount of natural gas, thus Gazprom has for the long-term a steady cash flow and plans accordingly. Even if the liberalization of the European Union leads to a spot trading practice, Gazprom will retain its status because the amount imported by the EU is simply tremendous to risk a confrontation with Moscow.
The reach of Gazprom is not related only to its exports to Europe. In 1993 it signed an agreement with the German corporation Wintershall AG, by which the jointly formed WINGAS that currently owns 2,000 km of pipelines and a reservoir bunker for natural gas of 4 billion m3 space. Gazprom has a 35% stake and consequently a portion of the German natural gas pipeline network. Moreover it controls large parts of the Baltic States natural gas companies, like Eesti Gas, Latvijas Gase, and Lietuvos Dujos. The Baltic States have naturally imported most of their energy needs from Russia, some 5, 4 billion m3 of gas in 2004.
In the energy crisis between Moscow and Kiev in winter 2005, showed that the Russian strategy is inexorably related with the formation of pipeline networks across Europe. It will need tremendous amount of capital and considerable space of time for Russia to be able to bypass states deemed either hostile or impractical to its future aims. Moreover Russia is unlikely in the future to prevail the supply of Europe and become an unsuitable natural gas supplier because it will loose credibility and much needed export income. That is the main reason Russia continues to reluctantly to accept the fact that a large percentage of the gas commerce capital gains, are being directed to the countries acting as “energy corridors” like Ukraine. In 2004 Gazprom gained around 18 billion USD from its European exports but the middleman earned considerably more, owning nothing more than their strategic location.
Gazprom has grown to become a corporate emblem of modern day Russia and an eminence of the importance of energy as exercised by the Kremlin. Despite the vast amounts of capital-financial and political- invested by Putin’s administration; Russia is still considerably dependent on Europe for its economic renewal through the steady flow of energy exports. Even if Russia fully constructs an export policy with China and Japan, Europe will form a large segment of its revenues and it is a geopolitical unit that is not interested in gaining political advances against Russia or threatens its territory.
The main element characterizing Russian deficiency in the world political environment is its lack of access to the open seas and consequently cannot develop a dynamic and sustainable commercial basis. For that the role of Europe is integral that could facilitate Russian economic expansion over the long-term. That will also mean that Europe aims to gain reciprocal profit by the Russian side and more specifically access to its internal market –Still operating under a mercantile 17th century notion- and be able to exercise influence in energy related developments in the Eurasian mass.
The real question however is: Will Europe assumes a single role & voice in energy issues and view energy and political developments as a single interrelated phenomenon? For the time being it seems that individual countries strive to gain only for themselves, thus hindering the overall European strategy and allowing Moscow to add more footholds in the continent and steadily be able to dictate policies in a wider scale.
Sources & further readings