Insider's Game

“This is not 1968 and the invasion of Czechoslovakia, where Russia can threaten a neighbor, occupy a capital, overthrow a government and get away with it.”Condoleezza Rice, August 13, 2008.

 

Oh really? What will Rice do to make sure Russia does not get away with it? And who in the media will call Condi’s bluff? After squandering so much in terms of lives, treasure, and credibility, this administration has turned America into a paper tiger. Our country lacks the resources to stand up to Russian aggression. While Russia has the resources to bend its neighbors to its will.

The rest of the world gets it. Russia is the world’s largest oil and gas producer by far. Its combined oil and natural gas production, on an energy-equivalent basis, is almost twice as large as Saudi Arabia’s. More to the point, Russia produces 30% of all natural gas in the eastern hemisphere. And Putin is more than willing to use natural gas as a political weapon.

This is why France and Germany opposed the U.S. proposal to admit the Ukraine or Georgia into NATO last spring. And that is why the rest of the world has been muted in its criticism of Russia’s actions against Georgia.

Putin regrets the breakup of the former Soviet Union, and he is strengthening Russia’s energy alliance with its neighbors and with Iran. Together, the former Soviet Union and Iran represent 45% of all natural gas production in the eastern hemisphere.

In January 2006, Russia suddenly stopped selling gas to the Ukraine, which had elected a government less friendly to Russia. The three-day impasse had regional implications because most of Russia’s gas destined for western Europe must be shipped through a pipeline that crosses the Ukraine, and gas shortages were felt throughout the EU.

But soon, Russia will be able to punish the Ukraine without inflicting collateral damage on itself or others. Russia will then have a chokehold over Europe’s natural gas that compares to the Standard Oil monopoly of the late 19th century. By 20011, the Nordstream Pipeline, which will move gas under the Baltic from Russia to Germany, and the Blue Stream Pipeline which will move gas under the Black Sea from Russia to Turkey, are both scheduled to be completed. Like John D. Rockefeller 120 years earlier, Russia will soon be in a position to tell anyone, “We can do without you, but you can’t do without us.”

We’ve already seen how Russia uses its resources to thwart U.S. moves against Iran. A few weeks ago, after Shell and Total announced they would not move forward with new investments in Iran’s South Pars field, Russia’s gas monopoly, Gazprom, announced that it wished to expand its oil and gas development in Iran.

Last October, Putin met with his neighbors to sort a longstanding impasse over mineral rights underneath the Caspian Sea, where an estimated 257 trillion cubic feet in natural gas reserves have yet to be developed. Prior to 1991, those claims were divided 50/50 between the Soviet Union and Iran. Today three new countries, Azerbaijan, Kazakhstan and Turkmenistan also touch the Caspian.

At the meeting, held in Teheran, Putin sent a message aimed, not only at the United States, but also at Turkmenistan which allows U.S. military transport planes to refuel en route to Afghanistan, and Azerbaijan where the U.S. financed improvements to a former Soviet airfield. “We should not even think of making use of force in this region,” said Putin. All five nations agreed that none would allow their territories to be used as a base for military strikes against any of the others. Putin also told Iran’s supreme leader, Ayatollah Ali Khamenei, that he desired for deeper relations between the countries.

This November, ministers from the major gas exporting countries will meet in Moscow to discuss the formation of a gas OPEC, an idea that Iran has been promoting for years.