THE HUNGRY
BEAR PART 4:
The West's thorny crown By W
Joseph Stroupe
(For Part 1, Promises
that can't be kept, click here. For Part 2,
Corporate gigantism, click here. For Part 3,
No more Mr Nice Guy, click here.)
Russian
President Vladimir Putin complained at the Valdai
Club meeting that consuming nations in the West
too strongly focus on their own energy interests
and security while simultaneously slighting the
interests and security of producers. He noted that
consuming nations want suppliers to pledge
continuity of supplies
for
the long term, "so customers should not be able to
turn around and say, 'We don't need it now.'
Security works both ways. We need assurances,
too."
Putin explicitly stated that
Russia and other suppliers want long-term supply
contracts with consuming nations so that suppliers
know there will be a "stable demand" for their
exports. It can easily be appreciated how
achievement of such goals amounts to a tiara or
coronet to adorn Russia in its key global energy
position. But the very achievement (successfully
concluding long-term supply contracts) that
constitutes Russia's victory crown simultaneously
serves as the thorny crown of the West.
The long-term supply contract tends, of
course, to lock the West's consumer states into
deeper and longer-term dependence on Russia,
thwarting moves toward diversification of supply.
Russia's economic and political leverage is
deepened and compounded, therefore. Additionally,
open competition tends to be diminished because
the consumer states are less able to shop around
for their energy needs. That factor could have a
negative, elevating effect on prices over the
medium to long term.
There is also the
distinct likelihood that as such long-term
contracts multiply, the world's energy supply and
even its reserves will become progressively
"locked up" into private pools for consumption
only by the states that are party to such
contracts, thereby robbing oil and gas from the
virtual global pool sustained by the traditional
liberal global energy market order. Especially is
that the case because, increasingly, such
long-term contracts include acquisition of equity
shares of the producing fields by key,
energy-thirsty consuming economies in the East.
That development has potentially
gargantuan implications for the West because, in
the strategically tight global supply situation,
the West cannot afford to see growing portions of
the already tight global supply "turn invisible
and inaccessible" because of the proliferation of
private, state-to-state long-term supply contracts
between suppliers and key consumers in the East.
The implications could include the development
that unless you're inside the circle defined by
such long-term agreements, then you're outside the
circle of energy security. That implication could
develop as a full-fledged concern much more
quickly than is generally recognized, because by
and large it is the economies of the East, whose
rise is meteoric and whose energy appetite is
ravenous, that are far ahead in the concluding of
such agreements with suppliers to secure their own
growing private pools of oil and gas. The West is
already far behind that curve.
The virtual
global pool of oil and gas could rapidly become
significantly shrunken, and inordinately slanted
toward serving the energy demand of the economies
of the West that refused or otherwise failed to
give suppliers such as Russia what they are
demanding - long-term contracts.
That
would tend to move the fundamentals in the
direction of a revival of the possibility of a
targeted energy embargo because, if the US-backed
liberal, traditional energy market order should
thus become inordinately slanted toward the West's
energy needs, rather than remaining balanced in
serving the global need, then a supplier or group
of suppliers could hit the West with a relatively
focused embargo simply by decreasing the amount of
its oil and/or gas that is sold on the open global
market. Those consuming states (at present
predominately those in the East) that have early
on entered long-term contracts with suppliers
would be relatively unaffected.
All the
building blocks to support and bolster a new
position of profound global energy ascendancy and
dominance are steadily being put in place by
Russia and its producing partners, in concert with
its consuming partners in the East. Consuming
states in the West are now faced with a terrible
choice: they can either lock themselves
irreversibly inside "the circle" of strategic
energy dependence on Russia and its partners for
the long term, or they can refuse to do so at
serious risk of being left outside the new
international circle of energy security whose
parameters, principles and terms are being defined
and completed by Russia and its partners.
When Putin promises to "play nice" with
energy and other strategic resources, it must be
understood that his idea of "playing nice" isn't
remotely the same as what is hoped for in the
West, which has been able until now to have its
cake and eat it too, almost always giving
suppliers the short shrift. Those days are already
over. There is emerging a new global reality as
respects energy security, and the West will have
to forfeit a significant measure of its economic
and political independence and autonomy in return
for what Russia, not the West, defines as "energy
security". The West is already forfeiting along
those lines. Are global energy developments
moving in that direction merely "by chance
occurrence" as Putin insists, or have Russia and
China been working for a decade or more to "cook
up" such developments, and what are the
implications?
Tomorrow: Russia
and China 'cooking something up'
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 and W Joseph Stroupe. All
rights reserved.)
position. But the very achievement (successfully
concluding long-term supply contracts) that
constitutes Russia's victory crown simultaneously
serves as the thorny crown of the West.
