The End of Russian Energy Terrorism
For too long now, the Putin regime has been terrorizing Eastern Europe, Central Asia and the West with energy warfare, little different from what Al Qaeda does with bombs. At last, though, the tide seems to be turning on this pathetic last-ditch effort of the Russian Kremlin to once again dominate the globe.
At the recent World Gas Conference in Buenos Aires, the world learned that exciting new sources of natural gas are being developed in response to rising prices, which in turn in part result from Russian energy terrorism. The Telegraph reports: “If the new forecasts are accurate, Gazprom is not going to be the perennial cash cow funding Russia’s great power resurgence. Russia’s budget may be in structural deficit.”
Writing in the Financial Times, David Clark of the Russia Foundation, lays out the details of Russia’s horrifying miscalculation regarding energy. He notes that Russia has just rejected the Energy Charter Treaty, which would apply the rule of law to international energy transactions, because “there is no room” in Putin’s vision of worldwide energy terrorism “for the niceties of international law or respect for property rights.” But Clark calls this tactic “unsustainable” over the long haul, and points out that it could lead Russia as a nation over the precipice of ruin.
Even the Russian government itself acknowledges the state is far too dependent on energy prices, yet this move further isolates Russia from international markets and literally puts all its economic eggs in the energy basket.
It’s not a sturdy basket. As Clark points out, Russia’s pandemic corruption and inefficiency mean it has increasingly greater trouble with extraction of fuel from its frozen, remote fields. Foreign investment is crucial to increase technology and efficiency, but Russia is repudiating that investment by rejecting international law.
Clark makes the crucial point that the development of new energy resources is not the only serious pressure Russia will Face. It must also deal with “the EU’s drive to liberalise its energy market by forcing a separation of production and supply activities and building the interconnectors needed to switch energy supplies rapidly across Europe. Properly implemented, these measures will neutralise Russian strategies of vertical integration and market segmentation while encouraging new suppliers to enter the market.”
The comes his devastating conclusion:
In its zeal to recover lost global status, Russia has over-played the energy card in a way that threatens to destroy demand for its own primary export. The second gas war with Ukraine earlier this year forced a widespread rethink about the level of European dependency on Russian supplies and accelerated the search for alternatives. After Russia’s rejection of the guarantees contained in the ECT, investors may now follow suit and look for less risky options for a return on their capital. If so, Russia’s potential as an energy superpower will remain unrealised and it will pay a heavy economic penalty in lost revenues and flagging growth. The Putin model is broken and sooner or later Russia will have to prove its worth as a reliable energy partner by signing up once again to the ECT or something very much like it.
In other words, Russia’s days as a nation of energy terrorists are numbered.