Page 2 of
3 RUSSIA'S ENERGY DRIVE, Part
1 Global axis of
oil and gas By W Joseph Stroupe
around which to construct a global
grouping that is desired to operate with truly
potent and irrevocable leverage.
Since the
cartel excludes consumers, it is a one-sided
confederation that cannot stand on its own, no
matter its pretensions. In practice it is often
obliged to compromise with and seek political and
financial capital from prominent members within
its
counterpart, the markets. This undercuts the
global leverage of the cartel and provides
opportunity for certain market members to drive
wedges between its members, further undermining
the cartel's leverage.
The cartel model
almost always ties its members down to quotas - a
very undesirable constraint from the perspective
of producers, who in response to market forces and
opportunities will often cheat the quotas, thereby
further undermining the unity and leverage of the
cartel.
On balance, the cartel model has
roundly failed oil-producing nations. As a number
of Russian leaders and experts have stated
recently, the idea of a global gas cartel is
neither a desirable nor a workable one from the
standpoint of producers. A far better model for a
new global energy grouping exists, one that Russia
has repeatedly recommended and adhered to in its
oil and gas dealings with its partners.
Russia's new and better model A
far better model is that of the symmetrical
confederation built on the principle of
complementary symmetry, that is, producers and
consumers banded tightly together via private,
bilateral, long-term supply contracts and serving
each other's needs in full complementary fashion.
(For a graphic illustrating this, click here.)
Such an
informal confederation has global reach and
virtually irrevocable economic and geopolitical
leverage. The new model around which such a
confederation is already being constructed is
compelling, ingenious and yet entirely simple.
A simple confederation (like the
producers' cartel) is a grouping or an integration
of sovereign states cooperating together toward a
common goal or purpose - price-fixing, for
example.
However, the model of a
confederation dictates the formation of a
symmetrical (balanced) grouping composed of both
key producers and key consumers in complementary
economic, political and security ties. It
incorporates members who share a common concept
and vision of international energy security, and
also a common geopolitical ideology - they are on
the same page on the issue of US-led unipolarity v
multipolarity, that is, they seek an early end to
every semblance of the inequitable US-led unipolar
order.
Because it fully integrates key
states on both sides of the producer-consumer
equation, the model fully addresses from within
itself the vital, complementary interests of both
producers and consumers (ie, both products and
markets), thus forcefully reinforcing both the
internal cohesiveness and the external
geopolitical leverage of the confederation.
Russia is already actively employing this
model in the creation of new confederations of
both gas and oil, ones that are balanced,
principally self-contained, self-sufficient and
largely undeclared, yet enjoying enormous
independence - state-owned producers and consumers
in tight cooperation to serve each other's vital
interests in multiple spheres.
However,
producers and consumers that are not on the same
multipolar political and geopolitical page with
Russia and its strategic partners need not apply
for membership, since their presence within the
grouping would only scupper its inherent unity and
cohesion. Such states find themselves outside the
new circle of international energy security
actively being drawn by Russia and its global
partners.
The Russian-led global oil
grouping has already displaced the West's oil
majors (and their host governments) from their
position of control of reserves, control of
production, control of the markets and control of
the global oil order itself.
It is
increasingly true that the current so-called
"liberal" oil order continues to operate only at
the consent of Russia and its global producer and
consumer partners. Hence, while the figurative
"front elevation" of the new Russian-led
confederation of oil may not be ostentatious (as
is that of the Organization of Petroleum Exporting
Countries - OPEC), its stealthy accomplishments
are profound.
For good reasons Russia has
kept its public profile low and clouded the
perception of its mission and strategies behind
ambiguity and deniability, although Russian
President Vladimir Putin has advocated the very
model outlined here - featuring "the reliable
offering [from producers] and the stable demand
[from consumers]" as respects oil and gas.
A feature of the model is that producers
and key consumers are locked into mutually
beneficial, private, bilateral long-term supply
contracts. This inherent supply rigidity contrasts
with the high level of supply liquidity in the
current US-led oil market. The more fundamental
rigidity that exists in an energy order, the
greater the
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