Kremlin Energy Strategy Encompasses More Than Oil and Gas
The world's energy map is being redrawn and Russia intends to plant its flag in the centre of the new world order. Already amongst the biggest producers of oil and gas, Russia is using its store of petrodollars to make sure it stays in the game when the world's hydrocarbons start to run out – or at least become so expensive that everyone switches to alternative sources.
In the last year, the oil and gas geo-political map has been redrawn after China managed to break Russia's half nelson on Central Asia by building two new big oil and gas pipelines that run east out of the region. The Kremlin has being playing the same game as it develops a trident of gas pipelines running westwards.
Less visibly, the Kremlin (or its oligarch friends) have been busy shopping for energy assets in what the Russians call "the near abroad" as well as further afield. Russian companies already own the main power station that supplies its erstwhile enemy Georgia as well as the main export power line out of the country. The Kremlin has launched a sustained campaign to build nuclear power stations in places like Iran, Belarus, Turkey, Bulgaria and beyond, and even the state-owned hi-tech agency Rusnanotec is investing heavily in photovoltaic cells.
Pipeline plays
The new pipelines will dramatically alter the rules of the energy game, but in addition to building new pipes the Kremlin has deployed its massive wealth to buy up as many of the existing pipelines and energy companies it can. Some countries have welcomed the Russian approaches, like Turkey and Serbia, while others, like Ukraine, are resisting for all they are worth.
... Other countries are succumbing to Russian pressure a bit more reluctantly. While Kyiv is resisting fiercely any suggestion that it may sell its gas pipeline to Russia, Belarus already caved in three years ago. Gazprom already owns 37.5% of the national pipeline operator Beltransgaz, but will raise its stake to 50% this February after transferring the last $625m payment of a $2.5bn deal. The Kremlin is now manoeuvring to buy out the other really attractive energy assets in Belarus - two modern oil refineries.
Russia threatened to cut Belarus' oil supplies off in January and at the time of writing a deal had reportedly been struck in which Russia got most of what it wanted (and the Belarusians didn't). Call it Ukraine-lite: turning off the oil spigots would also leave five European countries dry - Hungary, Czech Republic, Germany, Poland and Slovakia. Moscow wants to reduce the oil transit tariff, but Minsk is playing hardball. The issue of privatising the refineries has been mentioned, but currently there is no resolution for the row in sight.
Going nuclear
But Moscow doesn't come empty handed. Minsk may be unhappy about giving up first its pipelines and later its refineries, but in exchange Russia has promised to build (and, more importantly, finance) a $9bn nuclear power station in Minsk. This project has especial appeal after Lithuania shut down its Soviet-vintage Ignalina nuclear power plant at the start of this year.
This article appeared in
Belarusian Review, Vol. 22, No. 1
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Copyright 2010 Belarusian Review
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Source: Excerpts from an article on Website businessneweurope.eu , February 9, 2010
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Ben Aris in Moscow
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