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BusinessWorld (Philippines): UPSHOT: Russia wants ExxonMobil out of Sakhalin I and Royal Dutch Shell out of Sakhalin II.

Bernardo V. Lopez,
Published: Jan 24, 2007

Parts 1 and 2 of this series tackled the American initiative through Dick Cheney and gang to “encircle” Russia by bringing its former satellites into the NATO fold to access its energy resources. Part 3 tackles Russia’s response, an expansion of energy pipelines to service Eurasian countries, and America’s counter-response of “nuclear primacy,” based on an article by William Engdahl.

Russia ingeniously offers bread as a win-win formula, but America sadly wants bullets as a win-lose formula. Whereas Russia is offering its energy resources to the world, America wants it all. The hawks in Washington will bring down the planet because of their greed for oil and gas. Armageddon will be a series of regional energy wars polarizing the world into two large camps, culminating in World War III.

The Russian response is a labyrinth of pipelines, first to Germany via the Baltic Sea ($4.7 billion, 1,200 km.), second to China via Perevoznaya Bay in the Russian Pacific east coast through the so-called Taishet Route ($11.5 billion), third to Japan via Nakhodka Port, fourth to North and South Korea by branching Taishet at Vladivostok to Blagoveshchensk and Daqing, fifth to Turkey via the Black Sea ($3.2 billion, 1,213 km.), and sixth to South Europe and East Mediterranean, covering Greece, South Italy and Israel), via Turkey. In addition, it is setting up an oil refinery on the Amur River at the border with China. The rough estimate for this network is about $60 billion. The Russian pipelines are constrained by its former satellites which have joined NATO. Russia has to skirt around pro- Western former satellites and rely on sea routes through its ports, and land routes through friendly nations.

Russia also wants American ExxonMobil out of Sakhalin I and British Royal Dutch Shell out of Sakhalin II. The entry of these two giants to develop oil and gas resources were forged during the Yeltsin era. At that time, Russia did not have the money to go on their own and needed the income desperately.

ExxonMobil used a one-sided contract authored by the Cheney boys called a Production Sharing Agreement (PSA) which unfairly favored the multinational to the detriment of client countries. The James Baker Institute drafted the PSA for Cheney’s Energy Task Force Review. It was used to regain control of Iraq oil “hidden behind the facade of an Iraqi state-owned oil company.” Aside from offering tax-free incentives, the PSA provides that the first drop of oil can flow to Russia only after all production costs are recovered.

ExxonMobil suddenly increased its production cost by a suspicious 38% in a project at Sakhalin I, thereby denying oil for Russia further under the PSA. It is not a surprise that ExxonMobil’s lawyer is James Baker III, whose family founded the institute that drafted the PSA for Cheney. It is also not a surprise that “the Russian Environment Ministry and the Agency for Subsoil Use suddenly announced the terminal did ‘not meet environmental requirements’ and is reportedly considering halting production by ExxonMobil.”

The move of Russia to get oil partners from Europe and Asia rather than from the US was triggered by the bad experience at Sakhalin. America has not learned the lesson. It is a basic principle of enterprise taught in American universities that you lose clients and partners in bad deals and you gain them with good ones. If the US-British multinationals stuck to the fair share instead of the lion’s share principle, they could easily have been the Russians’ long-term partners.

Russia also made moves against another PSA holder, Shell in Sakhalin II, which is handling the first-ever Russian liquified natural gas project, a $2-billion undertaking employing 17,000. It is 80% completed and is considered the world’s largest integrated oil and gas project. It also includes Russia’s first offshore oil production and first offshore integrated gas platform. In September 2006, a dispute triggered the revocation of the environmental permit for Shell’s Sakhalin II project, which was due to deliver liquified gas to Japan, South Korea and other countries by 2008.

In summary, the Russians embarked on a grand scale to build economic alliances far and near as energy supplier in response to an American energy foothold through NATO encirclement. The American counter-response was total.

The article ‘The Rise of US Nuclear Primacy’ (March/April 2006) written by Kier Lieber and Daryl Press, explains vividly the vast implication of nuclear primacy, “Today, for the first time in almost 50 years, the United States stands on the verge of attaining nuclear primacy. It will probably soon be possible for the United States to destroy the long range nuclear arsenals of Russia or China with a first strike.” Nuclear primacy means no retaliation possible after the preemptive first strike.

US nuclear primacy evolved due to the decline of the Russian arsenal after the empire fell, China’s snail-paced nuclear modernization, and leaps and bounds in the US missile “defense” system. Nuclear primacy is the Pentagon’s “Full Spectrum Dominance.” It is really a pun on the word “spectre.” Nuclear primacy is the omen of Armageddon.

The US has been pursuing nuclear primacy for some time. In September 2002, Bush’s National Security Strategy explicitly expressed the goal to attain global nuclear supremacy. Don Rumsfeld started a multi-billion missile “defense” program. The hawks and the Pentagon consider preemptive strikes a form of “defense.” The US-dominated NATO is also building the European Missile Defense System. Engdahl feels that in a massive US first- strike, China and/or Russia may not be capable of retaliation. But it takes only one crude missile launched in retaliation long after the first-strike to kill millions in the Big Apple. There are no winners in a nuclear war, nuclear primacy or not.

An apt response to US nuclear primacy is biblical rather than geopolitical: “Fallen is Babylon. The kings of the earth who had intercourse with her will weep when they see the smoke of her pyre. The merchants of the earth will mourn because there will be no more markets for their cargo. In one hour, this great wealth has been ruined.”- Revelation 18.

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