Page 3 of 3 RUSSIA'S
ENERGY DRIVE, Part 2 All power
to Russia By W Joseph Stroupe
is the more stealthy undeclared
confederation based on the principle of
complementary symmetry. In forming that innovative
kind of global structure, Russia avoids the
needless rigidity and acute limitations of the
clumsy OPEC-style cartel.
With respect to
the new informal gas grouping that is now forming
under Russia's lead, no formalized price-setting
mechanism is either required or desirable. Rather,
increased coordination on
price is what is desirable.
Rather than setting a firm market-wide price, the
new grouping will establish pricing guidelines or
bands that maintain the flexibility needed to
address the needs of the various diverse gas
market segments.
Additionally, the degree
of the desired disconnection (whether total or
partial) of gas prices from the price of oil will
be mutually agreed on, by the gas market segment
if need be, to ensure that neither gas producers
nor consumers are unduly penalized by what may
occur in the largely unrelated oil market.
Considering the large investment required
on the part of producers, and especially as
related to LNG, the flexible pricing coordination
Russia is working to establish in the new grouping
will ensure that producers are not cheated out of
what they deserve in the way of profits. At the
same time, prices will be kept at reasonable
levels to ensure a stable demand from consumers.
Thus gas pricing flexibility is
maintained, and undesirable and unpopular producer
quotas are avoided, while simultaneously the
benefits of greater price coordination are
achieved. No formal cartel could achieve such
benefits. Additionally, because formal
price-setting is not on the table, but rather
flexible price coordination, it won't take the
extended number of years a formal cartel would
require for the new grouping to come into its own,
We will likely see it operational on an informal
but effective basis by next year when Russia
presents its proposals to the group for
consideration and adoption.
With respect
to exploration, supply and ownership-stake issues,
the principles of cross-investment and shared
ownership stakes among producers and between
producers and consumers will be encouraged,
thereby deepening the complex of economic,
political and security ties among the members of
the group, making it increasingly tight-knit and
cohesive.
Those factors will greatly
increase the grouping's internal stability and
external global leverage - but on an informal
basis that allows flexibility. The members of the
grouping can work out mutually beneficial
arrangements for the sharing of technologies
related to pipelines and advanced LNG facilities.
They can decide together on the most preferable
pipeline routes and can close ranks against
predatory policies and strategies employed by the
United States and its closest allies aimed at
undermining the group's influence and cohesion. In
short, the new producer-consumer grouping will be
able to guide the emergence of the global gas
market as it sees fit, with little regard for the
interests of the US.
Confined only to
gas? The principles and developments
discussed above have been applied and detailed
principally to the emerging global gas market, but
they apply fully to the established global oil
market as well.
The same political,
economic and energy-security considerations and
motivations in the rivalry between two market
models (the US-led liberal model and the
Russian-led private/closed model) and the two
respective associated rival concepts of
international energy security are already at play
in the established global oil order, and its
foundations are already being altered from strict
global adherence to the US-backed model toward
increasing subscription to the more private
Russian model. This is especially true when
considering how China, India and the other rising
powers in the East approach energy security. They
neither trust nor prefer the US-led model.
Instead, they are locking up an increasing
percentage of global resources for their own
private consumption. While there has not yet
occurred a large-scale abandonment of the current
liberal global oil market order, the foundations
for just such an abandonment are already being
laid by the accelerated emergence of the rival
Russian-led order, and also by the anticipated
increased aggressiveness of US foreign policy in
the energy-rich Middle East, in Southeast Asia and
elsewhere.
In association with its
producer and consumer partners, Russia is already
constructing a new global confederation of oil,
one that enjoys ever greater global leverage and
internal cohesion. It has been called the largely
undeclared, yet potent, global axis of oil. It is
taking control of global reserves, leaving the
West's oil majors with mere leftovers. What Russia
is already doing with global oil in association
with its producer and consumer partners it can
readily do with gas, too - and it is already
proceeding down that path, not noisily, but
quietly, insidiously, in stealth.
The
geopolitical implications Heightened
instability in the energy-rich Middle East will
only continue to enhance Russia's global leverage
and its ability to shape unfolding developments in
the energy and geopolitical spheres, because
consumer states around the globe will increasingly
rely on the more stable and thus more attractive
Russian supplies. The key energy-exporting states
of the Middle East will increasingly abandon the
United States and its failed policies to deepen
cooperation with the Russian-led global grouping.
The US is responsible for this trend and is
inadvertently shooting itself in the foot as it
strengthens Russia's energy-based hand by its
failed Middle East and global policies.
The rivalry between the two camps ("East"
and West), in the economic, ideological,
political, diplomatic and military spheres, will
intensify as each side seeks to finally
consolidate its control of the trump card in this
highly industrialized world - strategic resources.
Russia, by virtue of its global energy leverage,
will be able to co-opt key Western powers, thereby
cutting deeply into the already flagging unity and
cohesion of the geopolitical pole of the West,
leaving the US more weakened and isolated than it
already is. And the full brunt of the implications
and repercussions outlined here will arrive in
this very decade - meaning within the next three
years.
As the US becomes more weakened
politically at home and also on the world stage,
as its rivals and competitors continue to rise, we
are more likely to see US military action in the
Middle East, and possibly in Asia if the North
Korea nuclear deal turns out to be yet another
Pyongyang "scam", sooner rather than later.
That seriously risks shoving all the
latent, but pent-up and now barely restrained,
global forces opposing US-led unipolarity fully
into the open and thrusting the world order and
all its elemental economic, energy, military,
diplomatic and ideological arrangements into full
transition from unipolarity toward lopsided
bipolarity.
Russia and its partners,
through their oil and gas policies, are achieving
the power to shape these developments.
This is the concluding article of this
report.
W Joseph Stroupe is author
of the books Russian Rubicon: Impending
Checkmate of the West and Grand Reversal:
Russian Global Ascendancy, and is editor of
Global Events Magazine online at
www.GlobalEventsMagazine.com.
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