Energy Security – for whom?

Article 21 Aug 2006 admin

Some commentators saw this summer’s G8 meeting in St. Petersburg as a clash of empires, with Vladimir Putin using the theme of “energy security” to reassert Russia’s global power. What has received less attention is how the concept is intended to bring ever-increasing supplies of energy to all of the G8 countries, potentially at the expense of the rest of the world – This article was first published in Platform’s Carbon Web Newsletter, Issue 5.

The meeting came just days after the official opening of the Baku-Tbilisi-Ceyhan oil pipeline, a project explicitly designed to bypass Russia. Putin’s  theme served as a reminder that Russia is the world’s second largest producer of oil, and largest of gas. Europe is expecting to import 70% of its gas by 2030, much of it from Russia.

Although Russia has tried to portray itself as a reliable supplier to Western markets, its three-day shut-down of gas exports to Ukraine in January had knock-on effects in Europe, leaving the Europeans worried about further disruptions. Nominally, the dispute was over price, but in reality it was an attempt by Russia to reshape the politics of its immediate backyard, following Ukraine’s orange revolution.

It is within Russia itself that the visions of East and West are furthest apart. Since 2003, Putin has increasingly centralised control in his own hands, and buoyed by the high oil price, has moved to close the door to foreign companies.

Europe has tried unsuccessfully to pressure the country to ratify the Energy Charter Treaty, which would guarantee foreign companies equal investments rights to Russian companies. And as St. Petersburg geared up for the summit, in Moscow the Duma approved a bill stipulating that Russian gas exports (except exports from Shell/Exxon’s Sakhalin production) must flow through pipelines owned by the state monopoly Gazprom.

But when talking about the world outside Russia, the G8 leaders agreed. The summit’s declaration on energy security emphasised ‘competitive, open, equitable and transparent markets’, with enforced investor rights.

In Iraq, for example, one of the companies working hardest to try and obtain contracts is Lukoil – backed by Putin’s government.

In fact, much of the declaration seemed targeted at forcing Middle Eastern oil out of the public sector into the hands of multinational companies – while also countering nationalist moves elsewhere, especially South America.

The declaration promised that “We will work to reduce barriers to energy investment and trade. It is especially important that companies from energy producing and consuming countries can invest in and acquire upstream and downstream assets internationally”.

The free market approach will naturally favour those with most power in the market, the largest consumers of energy. Indeed, it is a sad irony that often the peoples of major oil-producing countries suffer severe energy poverty, and their countries are forced to import expensive refined products – a situation reinforced by the long-term contracts with multinational companies that the G8 favours, as those companies focus on export to the largest markets.

The other respect in which Russia and other G8 members agree on energy security is on the use of military force to achieve it. The USA is best known for this, notably in the Middle East and more recently in the militarisation of West Africa. But it has been equally obviously manifested in Russia’s war on Chechnya, which sits on a key pipeline route. All of which makes it harder to see the world as more secure.

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