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Washington Post, DC
Oct 20 2004
A New OPEC in the Pipeline?
By Artem Agoulnik
The recent surge in the cost of crude oil has made energy security a
crucial election issue. Both President Bush and Sen. John Kerry have
cited the development of a viable "hydrogen economy" and renewable
energy infrastructure as important aspects of a diversified U.S.
energy policy. But so far neither has focused on a fuel that is
likely to become the second-most-used energy source in the world in
the next few years: natural gas.
This lack of attention is a serious oversight. Natural gas is the
fastest-growing source of primary energy, with global consumption
projected to rise by over 2 percent annually through 2025. The most
noticeable increase in use will take place in some of the world's
developing nations, including the former Soviet republics and Eastern
Europe, where Moscow is the leading supplier. But, according to the
Energy Department, demand for natural gas in the United States is
also expected to increase steeply -- nearly 40 percent by 2025.
The growing dependence of the United States on gas has the potential
to alter its political dialogue with Russia, a country whose 28
percent share of global natural gas reserves is made more significant
by the instability of the other leading exporters, including Iran and
Saudi Arabia. Western Europe already relies on Russia for more than a
third of its natural gas needs, Finland and Slovakia for a full 100
percent of theirs. Even the United States is expected to
substantially increase its imports of liquefied natural gas from
Russia by 2025.
Over the past several years, the Kremlin has emerged, virtually
unchallenged, as the dominant global player in natural gas. Already
heralded as the "Saudi Arabia of natural gas," Russia has also been
able to solidify its grip on gas in its "near abroad" of Central Asia
and the Caucasus.
Much of this has been done through Russia's sprawling, state-run
energy monopolies. In April 2003, Gazprom, the Russian natural gas
giant, finalized a 25-year deal with Turkmenistan to purchase Turkmen
natural gas. As part of the arrangement, by 2009, Moscow will
effectively be in charge of exporting all of Turkmenistan's natural
gas, giving it crucial political leverage in the self-proclaimed
"neutral" republic.
In June Russian President Vladimir Putin signed a 35-year agreement
with his Uzbek counterpart, Islam Karimov, giving Gazprom rights to
develop Uzbek natural gas reservoirs. Since then Gazprom has further
expressed interest in acquiring a 44 percent share in the Uzbek
pipeline monopoly, Uzbektransgas.
Also in June, Gazprom announced its intention to sign a five- to
seven-year contract with Kazakhstan to participate in the development
of its energy-rich Karachaganak field, and the company has expressed
interest in acquiring a sizable share of the country's pipeline
infrastructure. Discussions between Gazprom and high-ranking
officials in Kyrgyzstan and Tajikistan have also taken place in the
past year on similar topics.
In Russia's hands, natural gas has become a geopolitical weapon.
Citing a "lack of payments," the Kremlin, via Gazprom, has shut off
gas supplies to Belarus, Ukraine, Georgia and Armenia when the
domestic or foreign policies of those countries have run counter to
its interests. It has also managed to mend ties with Turkey, a
longtime regional rival. Beginning in 2001, Gazprom linked Russia's
Stavropol region to the Turkish capital of Ankara via the "Blue
Stream" pipeline, making Turkey a major Russian energy client.
Additional pipeline plans -- with Armenia and Iran -- are also in the
works.
Russia has even begun to organize the world's natural gas exporters
under its aegis. Analysts are predicting that the Gas Exporting
Countries Forum, founded in 2001, may serve as a precursor to a
natural gas OPEC with Russia at the helm. In the wake of the forum's
June meeting in Cairo, the deputy chief executive of Gazprom,
Alexander Ryazanov, made clear that the natural gas policies of
member states should be "coordinated" so as to sell gas at the
"highest price possible."
In the process, Russia -- already the world's leading oil exporter --
has positioned itself to become the undisputed global energy czar,
with the proven ability to dictate policy to Europe and the United
States.
This outcome can hardly be part of an energy policy either
presidential candidate has in mind.
The writer is a program associate at the American Foreign Policy
Council.
Oct 20 2004
A New OPEC in the Pipeline?
By Artem Agoulnik
The recent surge in the cost of crude oil has made energy security a
crucial election issue. Both President Bush and Sen. John Kerry have
cited the development of a viable "hydrogen economy" and renewable
energy infrastructure as important aspects of a diversified U.S.
energy policy. But so far neither has focused on a fuel that is
likely to become the second-most-used energy source in the world in
the next few years: natural gas.
This lack of attention is a serious oversight. Natural gas is the
fastest-growing source of primary energy, with global consumption
projected to rise by over 2 percent annually through 2025. The most
noticeable increase in use will take place in some of the world's
developing nations, including the former Soviet republics and Eastern
Europe, where Moscow is the leading supplier. But, according to the
Energy Department, demand for natural gas in the United States is
also expected to increase steeply -- nearly 40 percent by 2025.
The growing dependence of the United States on gas has the potential
to alter its political dialogue with Russia, a country whose 28
percent share of global natural gas reserves is made more significant
by the instability of the other leading exporters, including Iran and
Saudi Arabia. Western Europe already relies on Russia for more than a
third of its natural gas needs, Finland and Slovakia for a full 100
percent of theirs. Even the United States is expected to
substantially increase its imports of liquefied natural gas from
Russia by 2025.
Over the past several years, the Kremlin has emerged, virtually
unchallenged, as the dominant global player in natural gas. Already
heralded as the "Saudi Arabia of natural gas," Russia has also been
able to solidify its grip on gas in its "near abroad" of Central Asia
and the Caucasus.
Much of this has been done through Russia's sprawling, state-run
energy monopolies. In April 2003, Gazprom, the Russian natural gas
giant, finalized a 25-year deal with Turkmenistan to purchase Turkmen
natural gas. As part of the arrangement, by 2009, Moscow will
effectively be in charge of exporting all of Turkmenistan's natural
gas, giving it crucial political leverage in the self-proclaimed
"neutral" republic.
In June Russian President Vladimir Putin signed a 35-year agreement
with his Uzbek counterpart, Islam Karimov, giving Gazprom rights to
develop Uzbek natural gas reservoirs. Since then Gazprom has further
expressed interest in acquiring a 44 percent share in the Uzbek
pipeline monopoly, Uzbektransgas.
Also in June, Gazprom announced its intention to sign a five- to
seven-year contract with Kazakhstan to participate in the development
of its energy-rich Karachaganak field, and the company has expressed
interest in acquiring a sizable share of the country's pipeline
infrastructure. Discussions between Gazprom and high-ranking
officials in Kyrgyzstan and Tajikistan have also taken place in the
past year on similar topics.
In Russia's hands, natural gas has become a geopolitical weapon.
Citing a "lack of payments," the Kremlin, via Gazprom, has shut off
gas supplies to Belarus, Ukraine, Georgia and Armenia when the
domestic or foreign policies of those countries have run counter to
its interests. It has also managed to mend ties with Turkey, a
longtime regional rival. Beginning in 2001, Gazprom linked Russia's
Stavropol region to the Turkish capital of Ankara via the "Blue
Stream" pipeline, making Turkey a major Russian energy client.
Additional pipeline plans -- with Armenia and Iran -- are also in the
works.
Russia has even begun to organize the world's natural gas exporters
under its aegis. Analysts are predicting that the Gas Exporting
Countries Forum, founded in 2001, may serve as a precursor to a
natural gas OPEC with Russia at the helm. In the wake of the forum's
June meeting in Cairo, the deputy chief executive of Gazprom,
Alexander Ryazanov, made clear that the natural gas policies of
member states should be "coordinated" so as to sell gas at the
"highest price possible."
In the process, Russia -- already the world's leading oil exporter --
has positioned itself to become the undisputed global energy czar,
with the proven ability to dictate policy to Europe and the United
States.
This outcome can hardly be part of an energy policy either
presidential candidate has in mind.
The writer is a program associate at the American Foreign Policy
Council.