THE
HUNGRY BEAR PART 2: Corporate
gigantism By W Joseph Stroupe
(For Part 1 in this series,
Promises that can't be kept, click here)
At the
Valdai Club meeting, Russian President Vladimir
Putin exclaimed: "We're not behaving like an
energy superpower!" Is that a true statement? In a
strictly confined context it is, but in a much
larger and more meaningful context it is entirely
a false
statement. How so?
In
the Ukraine gas dispute, for example, Russia
watched very warily as the United States and its
European partners instigated a series of "colored"
revolutions inside states strategically located on
Russia's perimeter, trying to cut deeply into
Russian political and economic power and
threatening Russian stability and even its
territorial integrity, all the while arrogantly
expecting Russia to continue to provide extremely
cheap, far-below-market-price energy to the new
anti-Russian regimes that had been set up with
Western clandestine and overt support.
Only an idiotic Russia complicit in its
own weakening and disintegration would have
continued to supply cheap energy under such
conditions and circumstances. Russia is neither
idiotic nor will it be complicit in its own
disintegration at the hands of the duplicitous
West.
Ukraine constituted the red line for
Russia. The Kremlin decided to give the West a
strong dose of the bitter consequences of its own
foolish foreign policies with respect to Russia.
It used its powerful energy leverage to demand
that Ukraine pay closer to fair market prices for
its gas, but more importantly it served notice
that the US and certain of its European partners
will not be given any further free ride, as it
were. If they insist on pushing Russia too far
then there is a heavy price to be paid, and Russia
will not shrink from pointedly exacting that
price.
After all, what was Russia supposed
to do? Simply collapse in the face of the Western
onslaught obviously aimed at carving away at
Russian influence, Russian territorial integrity,
Russian economic stability and other entirely
legitimate core Russian interests? Russia will
never simply hand over to the West what it keeps
seeking by hypocritical and underhanded means. But
while Russia has acted largely in a legitimate
fashion in the Ukraine context, in a larger and
more meaningful context it already gives powerful
evidence of beginning to behave "like an energy
superpower".
There was a time when the US
superpower could throw its irresistible economic
and political weight around virtually to guarantee
that it came out on top of any negotiations with
its allies and rivals alike. All understood that
the costs of angering the US were far greater than
any short-term (at best) economic or political
advantages that might be gained by standing up to
it in opposition.
The US didn't hesitate
to "behave like a superpower" and use its
unmatched strength, whether implicitly or
explicitly, to secure significant advantage for
itself. Of course, those days of unquestioned US
strength and dominance are now past. Yet the US
still attempts (mostly unsuccessfully) to get its
way by force, whether economically or even
militarily.
Russia has begun to do
similarly by virtue of its mounting energy
leverage. In the direct aftermath of the Ukraine
gas crisis, Russia either cut off gas or
threatened to do so to a number of other Eastern
European customers, including Bulgaria, Romania
and others, and has thereby secured for itself
terms more to its liking. It has threatened Europe
with accelerated diversification of its exports to
the East if Europe fails to open its markets to
rapidly advancing Russian investment and
acquisition of downstream assets.
It has
abruptly changed existing contracts and agreements
and forced Western oil majors to take much smaller
stakes in its oil and gas projects (or denied such
stakes entirely) and has sued in court to halt
projects headed up by Western oil majors. It has
cut off oil shipments to Lithuania and gas
shipments to Georgia. Russia increasingly plays
hardball very much like an energy superpower would
be expected to play. The energy weapon is
irresistibly effective and Russia already shows
signs that it enjoys the exhilaration of its
energy-based successes.
Additionally, a
new but profoundly significant trend has come to
light - the policy of "corporate gigantism" via
consolidation of Russian companies, especially
those related to strategic resources. According to
a September 12 report by Russia-based RBC News,
Russian companies are actively being urged to
consolidate into gigantic conglomerates that can
exercise radically increased leverage on the
global markets.
What is significant about
the new strategy is that by consolidating Russia's
own resources-related industries into gigantic
conglomerates that either approach, or actually
achieve, the status of global monopolies, it often
isn't necessary for Russian companies to sell
their shares to foreigners in an effort to expand
their global reach and leverage. Instead, what are
formed are gigantic corporate concerns possessing
powerful global leverage within and over the
markets without having to forfeit any measure of
autonomy via the selling of assets to foreigners.
RBC News states:
Gas giant Gazprom's plans to buy
pipelines in Europe, SUAL's acquisition by
Russian Aluminum, as well as Roman Abramovich's
initiative to consolidate Russian steel
companies [all constitute] a sign of a new trend
in the Russian economy - the creation of giant
companies able to claim the lead on world
markets.
Reports from RIA Novosti on
September 14 also indicate that Russian steel
giant Severstal is actively looking to consolidate
with an as-yet-unnamed "big industry partner".
Alexei Mordashov, board chairman of Severstal, is
quoted as saying, "We need consolidation - it is a
sound and useful process for the industry."
In effect, Russia has found a way to
increase radically its global resources-based
economic and political leverage while sidestepping
the costs and accountability normally faced by
Western corporations and conglomerates that must
render an account to their shareholders.
While Russia will undoubtedly pursue a
mixture of both the traditional Western-style
capitalization by initial public offerings and the
Russian-style corporate gigantism by
consolidation, the fact that it is embarking on
the new strategy of corporate gigantism sounds an
ominous warning for the West.
The global
strength and powerful leverage of Russia's new
gigantic corporate concerns will be difficult for
the West to offset or to limit because Russia can
move much faster down that path than can the West,
thus enhancing its global market leverage, and
even achieving monopoly status, in key
resources-related areas before the West can react
in a meaningful way.
At the same time, key
Russian corporations positioned very close to the
Kremlin continue to purchase significant stakes
in, and assets of, Western corporations and
industries related to energy, steel, aviation and
other strategically important industries.
Additionally, Russian companies continue to
advance down the road of entering carefully
selected joint ventures with certain of their
counterparts in the West, thereby further binding
the fortunes of such Western companies to
cooperation with Russia. All such activities and
strategies on the part of Russia work to compound
its global economic and political leadership,
influence and leverage deep into the West. That
is, in fact, the precise goal of such activities
and strategies.
Russia's very strong suit
is its industries related to strategic resources
and other key industries that rely heavily on such
resources, such as aviation, space, steel and
shipbuilding. The Russian Federation is
positioning itself in the global markets to
capitalize massively on, even monopolize, such key
industries. It has embarked on a clear strategy of
ensuring a central role for itself, and of
consolidating its global position in such a way
that it cannot be shifted aside and must be
reckoned with on its own chosen terms. It is
already beginning to "act like a
strategic-resources superpower".
Also of
great importance along these lines, Russia, by
actively taking leadership in defining and drawing
the circle of international energy security, is
"behaving like an energy superpower" by laying the
comprehensive global basis for a new definition of
energy security and the political and economic
groundwork for a new global energy security
arrangement with itself at the center, one that is
quite able to include into the circle those powers
that take a favorable stance toward Russia while
simultaneously excluding to a significant degree
those powers that do not take such a favorable
stance.
As instability mounts in the
oil-rich Middle East and Africa, Russia's global
energy leverage only increases, and its global
energy leadership is only more firmly
consolidated. Russian leaders see clearly that
geopolitical developments are rapidly ushering
Russia into the key global energy position, and
they are flush with more than mere cash - they are
becoming flush with the power that accompanies
Russia's key position. As such, Russia can be
expected to ever more fully act the role that it
is progressively positioning itself for and that
it is being handed - that of energy superpower,
notwithstanding Putin's disarming claims to the
contrary.
The West and the rising East are
locked into competition for control of strategic
global resources. There are high stakes and the
rules of the revived Great Game.
Tomorrow,Part 3: No more Mr Nice Guy
W Joseph Stroupe is editor of
Global Events Magazine online at
www.GeoStrategyMap.com. He has authored a new book
on the implications of ongoing energy
geopolitics, Russian Rubicon: Impending
Checkmate of the West.
(Copyright 2004-06
GeoStrategyMap.com & W Joseph Stroupe. All
rights reserved.)
