by Jerome a Paris
Wed Sep 20th, 2006 at 11:18:46 AM EST
Moscow faced with global oil backlash
Russia was yesterday facing a global backlash over its threat to halt work on a $20bn (£10.6bn) energy project led by Royal Dutch Shell.
Japan led the chorus of anger. Shinzo Abe, chief cabinet secretary and front-runner to be next prime minister, warned the move would damage international relations and jeopardise foreign investment. The European Union voiced concern and Britain protested to the Russian authorities.
But even as the international community was protesting against the suspension of an environmental permit for the Royal Dutch Shell-led Sakhalin-2 project, it emerged that another large foreign energy project faced a similar threat.
Russian prosecutors have threatened to suspend an exploration licence for TNK-BP, the Anglo-Russian joint venture, to develop Kovykta, the massive gas field in Eastern Siberia.
Many speculate (and I tend to share that view) that these are just politically motivated moves backed by the Kremlin to impose Gazprom as a significant shareholder of each of these projects.
The West is furious at Russia for trying to improve the terms of the complex agreements that regulate the development of these assets, and ominous threats to reduce investment in the country are aired, at the same time as a recurring theme in the press is that Gazprom is unwilling or unable to invest enough to produce all the gas that we should be getting in the future and "needs" Western help.
This is all totally, utterly stupid and pointless.
Let's state it quite clearly: on current trends, we are becoming increasingly dependant on Russia for our oil and gas supplies (we meaning first and foremost Europe), and they will be in a position to dictate terms.
And, it would seem, they have started to do so. That only reflects a shifting balance of power in the energy markets between suppliers and consumers. We are free, as consumers, to accept thse terms or do without their oil and gas.
What we cannot do is expect to keep on wanting to get all the gas we want on our terms, at perpetually low prices.
What we can do is to work on what is under our own control, i.e. our energy demand. Maybe we should stop building gas-fired power plants if we find Russia's behavior so outrageous. Maybe we should stop spending so much power to heat and cool unproperly isolated buildings. Maybe we should stop driving such heavy cars.
If we want Russia's gas, then we have to do so under whatever terms the Russians deem sufficient for it to be worthwhile to be extracting their gas and sending it over to us. Obviously these degraded terms are still less painful than the expected cost of changing our energy patterns.
All I can say to Russia is: keep it up, we're apparently too stupid to even think about alternatives, and your greed will be handsomely rewarded before we get to our senses.