Oil and gas: Russia's new weapons

In the crowded hallways of the Polish Parliament, there is talk of a new Cold War in which the weapons have changed from nuclear warheads to oil and gas. The rival in a widening game of pipelines and corporate strategy is Russia and its empire of energy r

Oil and gas: Russia's new weapons

Ninety per cent of Poland's oil and much of its natural gas flow from Russia. Such equations are distressing for Poles as they rise in stature in the West while remaining tethered in many ways to the political and economic whims of their past enemy.

"Russia is exploiting its control of oil and gas as part of its foreign policy," said Jerzy Marek Nowakowski, a former national security adviser. "This is an extremely dangerous political instrument. Oil and gas are more effective for Russia today than its nuclear weapons were during communist times." The quest for energy resources in Poland and throughout Europe is unfolding in tales of untapped reserves, frozen outposts and labyrinthine financial deals involving historical foes and new world alliances. Since the Cold War ended 15 years ago, Russia's energy prowess has become crucial to a continent wary of the political chaos and unpredictable markets of the Middle East.

The changes across Eastern and Central Europe, especially the democracy movements in the former Soviet bloc, are politicizing the dynamics of energy distribution. Many analysts and legislators say Russia's agitation over democracy's eastward expansion, and its long-standing unease with Nato at its borders, has persuaded Moscow to exert power through oil-and-gas diplomacy that rewards friends and punishes foes. Such a policy, especially if it led to price increases or cuts in service, could be disastrous for the fragile economies of Poland, Ukraine and other nations trying to slip further past Russia's shadow. Russia's state-controlled Gazprom natural gas monopoly this week threatened to cut off service to the Ukraine on Jan. 1 if Kiev does not agree to higher prices. Russia supplies about one-third of the Ukraine's natural gas, and Gazprom has proposed hiking rates from $50 per 1,000 cubic meters to about $220.

Higher prices would put Ukraine more in line with rates worldwide, but an immediate quadrupling would stun a nation whose costs have been kept low because of its former ties to Moscow. Russia informed the Polish government in early November that it would dramatically raise natural gas prices in 2006. With 18 per cent unemployment and an economy struggling to modernize, Poland would risk recession if energy costs escalated too quickly.

Russia and the US have crucial political and energy interests in Poland and countries farther east and south. Moscow and Washington are competing for influence with governments from Eastern Europe across the Caucasus and in the oil capitals of the Caspian Sea region. Polish politicians say that Warsaw's close relationship with Washington should help in its pursuit of energy sources to reduce Russia's oil and gas dominance.

Moscow's grip on the Polish market was strongly felt in September, when Russia and Germany signed a $5 billion deal for a natural gas pipeline to run under the Baltic Sea. The pipeline will bypass Poland and the Baltic countries and give Russia access to new markets. Polish political leaders compared the deal to the 1939 Hitler-Stalin nonaggression pact and complained that Russia could play political blackmail.

The pipeline is an "attempt by Moscow to divide the European Union by bypassing Poland and other Central European countries," said Marek Jurek, speaker of the lower house of Parliament. "Russia needs to accept that old Soviet bloc countries are now part of the EU. It has to accept that these changes are permanent and not revert to the revisionist tendencies of a fallen empire."

Relations between the nations are at their worst point in years. Former Polish President Aleksander Kwasniewski suggested that Russian President Vladimir V. Putin's gas deal with Germany was punishment for Warsaw's support of the democratic revolution in neighbouring Ukraine. Russia is also irritated by Poland's new right-leaning government and its close ties to the US.

Poland is finding that the pipelines of today are as potent as the armies of the past. The 720-mile conduit to be built by Gazprom and two German corporations strategically cuts Poland out of a sprawling energy grid. Russia had planned to complete the second leg of a pipeline through Poland to reach markets in the West. This would have allowed Poles to collect millions of dollars in transit fees, which will be lost to the Russian-German project that began construction earlier this month.

Poland has raised the "biggest ruckus," Sergei Kupriyanov, deputy head of Gazprom's information policy department, said in a recent interview. "Its rationale is simple, that the construction of such a pipeline on the (Baltic) seabed rather than on land through Poland deprives it of possible profits." He added that the German deal gives Gazprom better links to a wider consumer market in the West.

Some analysts see a more veiled hand at work. "Russia's current government is pathologically incapable of speaking to the countries of the former Soviet bloc as equals," said Vladimir Milov, president of the Moscow-based Institute of Energy Policy. "It wants to be a big brother and dictate its terms."

Milov said that bypassing Poland is "extremely unsound economically" and was done for the "sake of political objectives." He said politicizing energy policy risks destabilization of the market. Putin downplays such talk.

At the October EU-Russia summit in London, Putin reminded some Western countries that Russia provides 90 per cent of their natural gas. "No one's complained so far," he said. The president added that new energy projects will allow Europeans to "control everything from production to the final consumer. ... This creates a completely new situation. So the rumour of Europe's possible loss of its independence in terms of energy is hugely exaggerated."

Recent history shows, however, that Russia is not shy about reminding its neighbours that it controls much of Europe's energy flow. In October, the Lithuanian government briefly detained a Russian pilot whose fighter jet crash-landed on its territory. Russian protesters marched to the Lithuanian Embassy in Moscow, carrying signs that read, "No Pilot, No Gas."

Disputes over prices and politics have led to natural gas disruption in the past. In 1992, Moscow severed gas supplies when Lithuania ran afoul of Russian political interests in the region. The hardships that ensued helped the Communists make a stunning electoral comeback. Poland will remain dependent on Russia for years, but it is looking for new energy sources. They include the possibilities of imports from Norway and Iran and tapping into the $3.4 billion Caspian Sea oil pipeline that will begin in Azerbaijan and bypass Russian territory to supply Western markets.

"We have to coordinate with US companies. They're the only ones big enough to intervene," said Nowakowski, the former Poland national security adviser. "There are possibilities opening in Kazakhstan and gas fields in Turkmenistan."—Dawn/Los Angeles Times News Service

By Jeffrey Fleishman

Source: Dawn

Last Mod: 20 Eylül 2018, 18:16
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