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Richard Morningstar recently spoke before the US House Foreign Affairs Committee, and outlined United States policy toward Russia and Central Asia, reports the Asia Times. Morningstar reaffirmed that "Europe is our partner on any number of global issues from Afghanistan to Libya to the Middle East, from human rights to free trade." As a result, the United States intends to be deeply involved in Europe's energy security. In that regard, the US will work for Europe's "diverse energy mix" in regards to supply, transportation routes, and types of energy.
Morningstar then made the following points:
- The US will encourage Central Asian and Caspian countries to find new routes to market;
- The US will push for the privatization of the energy sector;
- The US remains as committed to the Southern energy corridor as it was under presidents Clinton and Bush, and will promote all three possible routes (Nabucco, ITGI and TPA) as possibilities;
- Turkmenistan can be a major supplier of gas to Europe through the Southern Energy Corridor;
- The Baltics should be integrated into the European energy market so it is not as vulnerable to Russian pressure;
- The US will challenge Russia's efforts to monopolize Ukraine's energy sector;
- European countries should not negotiate energy deals unilaterally with Russia, but should negotiate together as a single energy market;
- Europe should consider shale gas as an alternative to Russian natural gas; and,
- Europe should not allow Gazprom to penetrate the European retail market.
Morningstar's message places US interests in the region clearly in opposition to Russia's. Diversity in energy sources, new Caspian energy routes, the Southern gas corridor, etc. all are designed to limit Russian energy dominance of the Eurasian land mass. What was missing from Morningstar's testimony, however, were plans on how the United States was going to implement the goals he outlined. Implementation will require more attention to the region than the current US administration has given it, to date. While the Ambassador can claim that the commitment to the Southern corridor is as strong today as previously, the last two presidents at least had ambassadors appointed to all the countries in the area--something President Obama has not done after three years in office.
- The Kremlin views energy as a tool to pursue an assertive foreign policy;
- Russia's is attempting to exclude the US from Central Asian and Caspian energy markets;
- Russia is using energy to "re-engage" with India, Southeast Asia, the Middle East, Africa and Latin America;
- Russia is forcing neighboring countries to use the Russian pipeline system for energy exports;
- Western countries are blocked from entering into Russia's energy sector by an absence of the "rule of law;"
- Russia is not interested in developing energy ties with the United States.
Cohen said the United States has identified a number of geopolitical concerns arising from these policies:
- European demand for energy is projected to grow, leading to a greater dependence on Russia. This has serious implications for Russo-European relations;
- The German decision to abandon nuclear energy and increase energy imports from Russia could eventually weaken European unity and the underpinnings of NATO;
- Russia wants to be a part of the European energy distribution system, and the energy retail market. If successful, it raises the question of Europe being able to side with the US on key issues;
- Russia is supporting the Shanghai Cooperation Organization (SCO) to keep the US out of the Central Asian energy preserve, and has begun discussions with Pakistan about the mechanics of building the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline Moscow is outflanking the United States in the subcontinent.
A Russian diplomat confided similar conclusions to Sentaku Magazine as reported by the Japan Times, noting that the Kremlin's strategy is to decouple Western Europe from the United States, based on its abundant natural resources. Moscow wants to create discord among NATO members and block any expansion of NATO by promoting bilateral ties with individual NATO countries.
Russia's policies are fueled by energy exports. But can Russia keep up the pace? This question needs to be divided into two subfields: oil and gas. Prime Minister Vladimir Putin argues that Russia can continue its production of oil at 500 million tons annually for decades, but it will require investments of 280 billion dollars over the next ten years, Oil and Gas Eurasia quoted the Xinhua news agency.
The Russian Ministry of Natural Resources concurred with Putin's assessment, but was more pessimistic about how long the production can last, says AFP. Russia is tapping into its existing light crude reserves in western Siberia at alarming rates while failing to replace them with new finds in regions that sit further away from Russia's industrial heartland. According to the study, oil quality was deteriorating steadily, and Russia can only sustain its current production rate for another 13-15 years. Most of the oil that Russia possesses (70%) is heavy crude that is hard to recover and cannot be used on the world market without additional processing.
Russian natural gas production has grown slowly, only 0.5% from 2001 to 2009, according to the president of Coburn International Energy Consultants, Leonard Coburn. In 2009, production fell almost 20% because of Russia's closing of the Ukrainian pipeline system for two weeks in January 2009. Gazprom, the producer of 85% of Russian gas, is delaying investments in new production, trying to husband domestic resources while purchasing gas from other countries. This strategy is being challenged, however, by Central Asian countries selling their gas to China instead of to Russia. Coburn notes that when Turkmenistan opened its gas pipeline to China in December 2009, Russian President Dmitry Medvedev immediately launched a tour of Central Asian capitals to repair relations. The establishment of a new customer for Central Asian gas was a wakeup call for the Russians, that Central Asia has the ability to maintain some independence.
Russia is also looking to China as an energy market. The International Energy Agency (IEA) told the St. Petersburg International Economic Forum that European demand for gas was stagnating, according to a Financial Times blogger. The IEA's chief gas analyst told the Forum that China would be the main driver of increasing gas demand, accounting for one third of global growth. The IEA predicted that the global growth in gas would be 2.4%, so that would mean that the Chinese would account for .8% of global growth in gas consumption.
What conclusion can we reach? Russia has a 15 year window to throw its energy weight around. After that, it gets difficult. It appears that Russia has plenty of natural gas, but the weak economic recovery and the shale revolution is slowing Europe's demand for the product. Russia needs the sale of gas to maintain its own economic recovery, and that means they will have to turn to China as a new market. American concerns are valid for the next decade but, in the long run, Russia's energy superpower status will begin to fade.