The price of the next subheading
Let’s discuss it in greater detail. First of all, growth of demand for hydrocarbons exceeded 10% annually for the first time in history in 2006, which means that no alternative was found to this kind of energy. Secondly, gas clearly prevails in global energy consumption, which is to a large extent due to expectations that oil reserves will be exhausted within the next 50-70 years, i.e. during the lifespan of those who have already been born. Thirdly, the most optimistic estimates of reserves controlled by the biggest gas suppliers are as follows: 1. Russia – 40 billion cu m, 2. Iran – 28 bln, 3. Qatar – 26 bln, 4. Saudi Arabia – 7 bln, 5. UAE – 6 bln… 11. Kazakhstan – 3 bln, 12. Turkmenistan – 2.9 bln. So a consortium of Russian and Central Asian gas supplies becomes a factor of importance for entire Eurasia. If Iran joins in, it will be a macroeconomic and, consequently, a geopolitical factor.
The West cannot let it happen. How can it prevent it? Through “diversification” of sources. In reality, we are asked to “internationalize” the transit routes. Let’s simplify the calculations down to figures that are easy to remember. Imports of all kinds of energy now account for three fourths of the Russian budget’s revenues. Transit of Russian and re-exported gas accounts for about one third of it. We cannot say that someone is threatening as much as 25% of the Great Russian Budget, but re-direction of Central Asian supplies will definitely cost us 6%-8% of our export revenues. All this is being done in the name of prosperity of those who are already better off than we are. And they don’t even promise to be our friends. What will you do, if faced with such a prospect for your family budget?
Central Asia: Russia’s Rear Area
Political allying is proportional to economic interests. No matter what prospects of cooperation with the West are, it will always remain for us an honest rival at best. Economic rivalry with China will also be growing. It needs increasingly more energy to sustain the achieved growth rate. Do you think it will be better if a pipeline goes there directly from Central Asia? Or if it goes across Russian territory – as much as it is possible? The latter requires that the supplier and the transit country unite their efforts. This is the political meaning of energy integration with Central Asia. As long as we can influence gas prices, integration is possible. Because Central Asia’s interest in using explored natural and human resources, its 5-6 million of Russian speakers (out of 60 million), the survival of some elements of the common worldview of the past and nostalgia over the Soviet stability create prerequisites for Russia’s comprehensive presence in the region. But Russia’s integration resource depends on the amount of Central Asian supply that goes across Russian territory.
They, however, have difficulties adjusting to the new geopolitical reality and shaping foreign-economic (i.e. foreign-political) concepts. The Central Asian countries have failed to adjust to the conditions of autonomous economic management beyond their framework relations with Russia. Their invariable commodities orientation makes them hostages of the global market, making them live up to expectations from outside. In this sense, equidistant political and economic diversification is a bluff; not even Marshal Tito, the Communist friend of the West and leader of the non-alignment movement, managed to be friends with the entire world. Do you remember what happened after he left?
Closer to pipes
By mid May, our refusal to diversify under the proposed model was in fact equaled to a “threat to energy security” of West Europe. The notion of “protection of vitally important energy supply routes” of the alliance’s member states was introduced. This is directly related to the southern route of energy supply from Central Asia and the Caspian Sea region (bypassing Russia). They even recalled Article 5 of the Washington Treaty, on collective resistance to aggression: what if one of the countries considers itself “vulnerable energy-wise”? The situation was further aggravated by the unclear outlook for a new Russia-EU agreement (because of Russia’s refusal to ratify the same “diversification” charter), the Ukrainian crisis, our scandalous relations with Tbilisi, Tallinn and Warsaw and escalating military-political disagreements with the U.S. and NATO. Finally, it was time to make a choice.
On May 13, Krakow hosted an informal energy summit of Ukraine, Poland, Lithuania, Azerbaijan and Georgia. With expected participation of Kazakhstan and “implied” attendance of Turkmenistan the discussion of the southern route could have become practical. Because a pipeline starts from a source. But despite invitation to Krakow, President Nazarbayev stayed home and welcomed his Russian colleague. Then they together paid a visit to Turkmen President Berdymukhammedov, a new figure in big-time politics. This, however, does not mean that the new Turkmen leader was afraid to make a mistake during his debut. Turkmenistan’s energy is not enough for the proposed pipeline bypassing Russia. It can be filled only in partnership with Kazakhstan.
But then Kazakhstan and Turkmenistan would have to face changes in their energy transit across Russia. Astana and Ashgabad decided not to risk, reasonably believing that an egg today is better than a hen tomorrow. The “egg” in this case is the existing Caspian pipeline Central Asia – Russia – Europe, which pumps about 500 million cu m of gas annually. This brings up to 40% of the Kazakh and up to 70% of the Turkmen budget on average.
In the town of Turkmenbashi (Krasnovodsk) on the Caspian coast, also on May 13, the three presidents decided to build a pipeline parallel to the existing one. Its maximum capacity – up to 30 billion cu m annually – will be 60-fold higher than the current transit amount. This means that there will not be enough gas for the alternative route across the Caspian Sea. Politically, we have not just improved our influence in Central Asia, but also deprived the West of the bargaining chip. ON the other hand, Astana and Ashgabad will most probably demand an increase in purchase prices and additional investment from Russia, which obviously depends on the amount of our sales to the West.
Who has won?
It is a dialectic problem: who is more dependent on whom: the buyer on the seller or vice versa? Of course, it is better when they are friends. But Russia and the West have entered the shaky ground of half-competition and half-confrontation. Competition (just as relations between the consumer and the supplier) increases mutual dependence of the parties (one cannot do without the other) to the extent confrontation divides them. The difference between them is that both parties win in competition, but in confrontation one wins over the other.
In the current circumstances, a conflict manager advises to include “parallel values” in bargaining before it is too late. Some of them are obvious for him. But the decision will be made by a politician on recommendation of an economist.
First of all, it is a level of energy supply diversification that does not rule out Russia’s involvement and, of course, is not ensured by military presence along the new pipeline’s route, which will alarm us. We are referring to NATO’s plans in the Caucasus and on the Black Sea. Secondly, it is the very relevant for us “exchange” of underwater pipelines: the Baltic for the Caspian. A delay in the construction of the North European Gas Pipeline or its complete cancellation will hurt us as much as the European Union’s dependence on Russian energy. Thirdly, to put it bluntly, redirection of oil from the Caspian Sea, which has not been demarcated, to the Turkish port of Ceyhan concerns us too.
In early April we came up with another variant of energy diversification, the trans-Balkan oil pipeline Burgas-Alexandroupolis. After it is completed, undisputed oil from the Caspian Sea and Russian oil as well will get to the world market bypassing the Turkish straits, i.e. by a shorter route. In response, the West hopes to add Kazakh oil to Caspian and to send it via Ceyhan. Isn’t there room for compromise there?
Even more opportunities are offered by linkage, so favored by the West. These conditions can range from NATO’s expansion to a mitigated stand on Chechnya. But even an irresponsible conflict manager understands that politics, as well as diplomacy, is an art of achieving plausible goals. Now, however, we have scored a tactic victory in Central Asia, but escalated the strategic confrontation on the global front of the 21st century, i.e. the energy front.