Royal Dutch Shell Plc  .com Rotating Header Image

RIA Novosti: Russia defends its gas honor

11:50 | 26/ 12/ 2006 

MOSCOW. (RIA Novosti economic commentator Nina Kulikova) – This year has been the most eventful for Russia’s energy policies since the break-up of the Soviet Union. Moscow has convinced everyone that the many years of subsidized gas prices for neighboring economies are becoming a thing of the past and that it is firmly determined to defend the position of its energy industry on the international stage.

When Gazprom first announced its plans to go over to market prices for all its partners, including in the CIS, few could believe it possible or imagine the outcome. Yet the first days of January 2006 showed that Gazprom was determined to deal with the gas transit problem in a decisive way. Throughout 2005, Ukraine had ignored the gas monopoly’s proposals to discuss gas prices and their rise. When 2006 came, and there was still no agreement in place, gas supply to Ukraine was suspended. Then Kiev began siphoning off Russian gas transported via its territory to the EU, which caused a shortage of gas and a subsequent outrage in West Europe.

The Russian government argued that the shift to market gas prices inside the CIS, no matter how painful, would eventually improve the competitiveness of economies and companies in these countries. Moreover, Europe had often called for ensuring equal terms for everyone, Moscow emphasized.

Yet if anyone in Russia had expected support from the West, they were completely wrong. The EU lodged complaints about disrupted energy supply to Moscow, not to Kiev. Western mass media began discussing Russia’s “unreliability” as an energy supplier. All objections of the Russian authorities, which pointed out that Russia had never ever failed to honor its energy commitments, even during the Cold War, were drowned in a chorus of accusations of gas blackmail, with which the Kremlin allegedly thought to undermine the neighboring economies that were leaving its sphere of influence. When similar talks began with other CIS members, the phrase “energy weapon” came into use. Russia allegedly used it to “mount the gas blockade” of Ukraine and Georgia.

This unilateral interpretation of the complicated situation on the part of the West shows one thing clearly: the EU has its own interest in the sphere and it is determined to get what it wants. Concerns about the growing energy dependence on the “unreliable” supplier provided another opportunity for Europe to announce the need to diversify energy sources and to demand that Moscow ratify the Energy Charter and sign the transition protocol to it. Russia believes that the protocol in its present form contradicts its interests as it envisages open access to Russian pipelines for independent gas producers, and insists on amending it.

There has been no progress on the issue this year. As a result, the Russia-EU summit in November blocked the decision on a new agreement on partnership and cooperation. The previous one, which expires in 2007, is to a large extent outdated and does not reflect the current state of bilateral affairs. So Europe in fact has refused to create the basis for further cooperation until Russia makes concessions in the energy sphere. The fact that formally the ultimatum was delivered by Warsaw, not the EU, does not change much.

Yet despite the West’s attitudes, Russia has been active on the energy markets this year. First of all, the shift toward market gas prices for the CIS has become irreversible. Despite the intense discussions with Georgia and Belarus, all talks are expected to be completed by the end of next year. Compared to the events in January 2006, Gazprom has succeeded in making the dialog with its partners constructive.

Last spring, the West expressed its annoyance with the agreement on further cooperation in gas production between Gazprom and Algerian Sonatrach. Russia’s intention to take part in the construction of a gas pipeline from Iran to Pakistan and India alarmed it, because this rapprochement between Moscow and Tehran could lead to the appearance of a so-called gas OPEC that will set prices and put political pressure on European countries. Given that Iran has the world’s largest gas reserves after Russia and Algeria is an important supplier for Europe, this fear can be understood.

As to Russia’s domestic energy policies, the most important was Gazprom’s announcement in October that the Shtokman gas field in the Barents Sea would not be developed under a product-sharing agreement. Given the Russian government’s obvious dissatisfaction with other PSAs and Gazprom’s talks on joining Sakhalin 2, Moscow is apparently determined to toughen control over its own gas reserves. This resulted in vehement criticisms in the West. Experts and journalists began speaking of Russia going back to totalitarian rule, of economy nationalization and of the Kremlin’s energy dictate.

The concept of energy security proposed by Moscow exposed one of the bitterest controversies on the global energy market: misbalance between the interests of energy suppliers and consumers. Russia argues that a stable system of energy security should take the interests of both into account.

Until now, the global energy system has been based on the interests of developed countries, which are mainly energy consumer. The West is accustomed to oil and gas majors from G8 member states controlling energy production and transportation and determining the development strategy of energy markets. Yet the major energy producing centers are located in developing countries. Meanwhile, Europe’s own energy reserves are gradually running out.

The world’s most promising oil and gas provinces – the Middle East, Latin American producer countries, Russia and Central Asia – are in no way controlled by Western companies. The instability in the Middle East, the declarations of the Bolivian and Venezuelan authorities about new measures to control operations of foreign energy producers and Russia’s active efforts to build new pipelines and develop new markets show that the balance of power in the global energy industry is shifting.

So the more active Russia’s energy policy, the more pressure comes from the West, both economic and political. Any Russia’s moves on the energy stage are rejected and the energy dialog boils down to a fight for control over energy resources and transportation routes. This is the reason behind all gas conflicts.

Given obvious mutual dependence between Russia and the EU, it would be logical for them to unite efforts in solving common problems. This year, however, Russia and the West have failed to reach an understanding on the essence of energy security.

The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “RIA Novosti: Russia defends its gas honor”

Leave a Comment

%d bloggers like this: