Publication: Eurasia Daily Monitor Volume: 3 Issue: 170

Russia is aggressively seeking to revise the rules of the game on global energy markets. The Kremlin leadership asserts that, in today’s world, energy producers cease to be hapless raw-materials appendages mercilessly exploited by the more fortunate industrialized nations, but act as equals and, on par with the rich West, participate in formulating the norms that regulate the world’s energy sphere.

During his September 9 meeting with a group of Western Russia watchers at the Novo-Ogarevo retreat, Russian President Vladimir Putin was exceptionally candid about what he does not like in Russia-West energy ties. It would appear that the perceived unfair nature of the relationship is what rattles the Kremlin most.

In an apparent attempt to sooth Western fears, Putin rejected the hubristic rhetoric describing Russia as an “energy superpower.” Instead of being a superpower, the Kremlin leader modestly noted, Russia is simply a country that has “more reserves than almost anybody else.” But, he immediately added, “We have always behaved, and we will continue to behave, in a responsible way.” Being one of the world’s principal energy suppliers and a responsible partner, Putin said, Russia is keen to take part in the elaboration of the common principles that would guide the world’s energy sphere. It is also ready to take an obligation to strictly abide by these jointly formulated principles. Russia’s only demand appears to be that the rules of the game be fair. As Moscow sees it, these rules should take into account “all aspects of energy security” — the production of energy, its transportation, and consumption. However, Russia is visibly annoyed that the Western countries, which constitute the bulk of global energy consumers, still fail to understand that energy security does not mean security for consumers only; there should also be security for producers of energy.

The Russian president was very straightforward about why his country is not going to ratify the Energy Charter treaty in its present shape. Putin advanced Russia’s four main objections to the document, which the West regards as the key roadmap destined to further energy cooperation.

First, Russia is wary of European intentions to liberalize access to the energy transportation networks. The ability to buy or lease the transportation infrastructure will result in a situation where various middlemen would be, in Putin’s words, “sitting on the pipe” and “reaping the super-profits” that otherwise would go to the producer who controls the network. Russia’s argument is that the participation of intermediaries would not lower fuel prices; the only difference would be who would pocket the profits.

Second, Russia expects that in exchange for letting the Western partners into the “heart of the Russian economy” — the country’s energy sector including its extraction and transport infrastructure — Russia would be rewarded with something equally tangible. But as Europe lacks the comparable energy resources and pipeline systems, the two sides will have to first agree on what might be the equivalent assets that Russia would be interested in obtaining and how it would get access to these assets.

Third, Putin made no secret that Russia is miffed by Western reluctance to give Russia access to advanced technology. In particular, he singled out the “huge lists of restrictions” compiled by the U.S. State Department that hinder the exchange of high technologies between Russia and the West.

Finally, Russia demands for itself a fair treatment on the nuclear fuel markets. So far, it feels it is being discriminated against in this important energy sector.

Putin’s bottom line appears to be as follows: Russia is not interested in setting forth any conditions to anyone; what it wants is fair play.

Some Russian pundits argue that Russia’s assertive behavior is an indicator of the tectonic shifts in the world economy. The essence of the deep geo-economic changes lies in the fact that Western companies that dominated the world energy market in the 19th and 20th centuries appear to be slowly losing political control over the sector. As time goes by, countries like Russia, Kazakhstan, Iran, and Venezuela will account for an ever-larger share of world energy production. For Russia, this means the country’s importance will inevitably grow not only in terms of production of fuel, but also in terms of its transportation.

For the West, the loss of political control over the energy market means a serious weakening of its position in the world economy with a likely “prospect of the revision of global economic and, possibly, political rules of the game,” some Russian analysts suggest.

Seen through this prism, the West’s pressuring Russia to ratify the Energy Charter is a last-ditch attempt to prevent the final loss of control over the world gas market.

But these days, Russian strategists display an enviable self-assurance. The West will likely have to reconcile itself with the fact that its dominance in the global energy sphere belongs to the past, they contend. In the 21st century, the United States and the European Union will have to accept the “energy agenda” advanced by Moscow, one recent commentary asserts.

(Nezavisimaya gazeta, September 14, 11;, September 9)