The Unraveling of Russia’s Europe Policy
Russian President Vladimir Putin and his anointed successor, Dmitri Medvedev, were in Bulgaria on Jan. 17. The point of the trip was to put the crowning touch on a Russian effort to hook Europe into Moscow’s energy orbit. After a touch of bitter rhetoric about how Russia and Bulgaria were “doomed to be partners,” Putin agreed to grant equal rights to the South Stream natural gas pipeline Moscow hopes to lay through Bulgaria. Yet the tension of the meeting and the concessions that Putin had to make simply to get permission are symptomatic of a broad unraveling of Russian foreign policy toward Europe.
The Russian Scheme
Russia often has had a love-hate relationship with Europe. Dating back to the time of the czars, Moscow has had to aim for a mix of economic integration and military intimidation to make its voice heard. In the aftermath of the Cold War and the degradation of the Red Army, the military intimidation factor has largely fallen away, leaving economics as the primary method of impacting Europe. In this, Russia has forces at its disposal every bit as useful as Soviet tank divisions. Cold War-era infrastructure provides the 27-member European Union with roughly one-quarter of the natural gas and oil it consumes. Such dependence might not be sufficient to force European deference, but it certainly guarantees that Europe will hear Russia out.
Natural gas is unique among the various industrial and energy commodities. The combination of its gaseous nature and the sheer bulk that is required to power large economies (the European Union uses more than half a trillion cubic meters of the stuff a year) means that it can only be efficiently transported via pipeline. While oil and coal and alumina and wheat and platinum can all be loaded into trucks, rail cars and tankers — allowing any producer to supply any consumer — natural gas can travel only along existing pipeline networks. Canada therefore only supplies the United States and Russia only supplies former Soviet republics, Turkey and Europe. This contained relationship gives Russia leverage in a way that its mineral and oil wealth do not. And so it is here that the Europeans have tried — with some success — to slice through the ties that bind.
Putin has sought to strengthen this energy leverage via two pipeline projects in particular. The two natural gas lines — Nord Stream, which would run under the Baltic Sea from St. Petersburg to Germany; and the aforementioned South Stream, which would run under the Black Sea from near Novorossiysk to Bulgaria — would increase the European dependency on Russian natural gas from 25 percent to 35 percent of its total consumption.
Economically, neither of these projects makes sense. Building long underwater pipelines to Europe — a region with which the former Soviet Union shares a land connection — is simply asinine; landlines typically cost less than a third of their underwater equivalents. Additionally, Nord Stream would be the world’s longest underwater natural gas pipeline and South Stream the deepest.
But the Russians did not plan these projects with profitability in mind — having tripled their natural gas export prices since 2000, they have profit aplenty. Instead, they are thinking of the Americans. The Kremlin’s Cold War mantra has long been that if the Europeans can be neutralized, then American influence can be purged from Europe. Ergo, American presidents dating back to Ronald Reagan have opposed (explicitly or not) any expansion of trade and energy links between Europe and Russia. And there also is the minor detail of Russia hating to involve transit states such as Belarus and Ukraine that are able to siphon off Russian energy en route to hard-currency-paying Europeans.
Given the political nature of these projects, then, the numbers have always been a touch wacky. The Russians have underestimated the costs of both of the natural gas lines to a humorous degree (likely by a factor of four or more), they lack the technological ability to build the lines themselves and they have insisted that the Europeans foot the bills. Specifically they expect ENI to pay for South Stream, and BASF, Gasunie and E.On to cover Nord Stream. Topping it off, they expect themselves — not the countries on which the pipes will lie or the companies that finance and build them — to own the projects when they are completed.
The European Response
The Europeans certainly exchanged some worried looks when these projects were proposed and Russia started assembling consortia to work on them. But in January 2006 an event happened that galvanized European action to wean the Continent off of Russian energy. A natural gas pricing dispute with Ukraine resulted in a brief suspension of deliveries to Europe (Russian natural gas deliveries to Europe currently transit Ukraine and Belarus). Russia attempted to leverage this energy crisis to force the Europeans to back Russian policy in Ukraine. Specifically, Moscow wanted Europe to repudiate Ukraine’s Orange Revolution against Russia’s preferred Ukrainian government and recognize Russian suzerainty in the former Soviet Union.
The strategy backfired and sparked intense interest across Europe in diversifying sources of petroleum and reducing total demand. European states and firms launched alternative supply lines, rafts of terminals were built to import natural gas shipped by tanker in more expensive liquefied form, a new fleet of nuclear reactors were commissioned, and the European Union adopted ambitious alternative energy and conservation programs (which incidentally dovetailed nicely with Europe’s anti-greenhouse-gas plans). The formal European goal is now to reduce total energy consumption by 20 percent — with 20 percent of the remaining total coming from alternative sources — by 2020. The EU states are still squabbling over who needs to bear what specific burdens, but there is no disagreement as to the goal — or the reasons it exists in the first place.
There are two questions remaining.
The Question of Time
First, how long will it be until the Russians realize that their energy tool is no longer sharp? The answer is, longer than you might think.
The Russians have persevered in their pursuit of these projects despite increasingly obvious signs that the Europeans not only are not interested in the projects, they are not interested in the Russians. In part it is because, if Moscow’s plan were realized, it would be a very good plan indeed, as it would harness Europe irrevocably to Russia.
But mostly the lack of realization is because of Russia’s historical blind spot. Russia’s wide-open geography means that it has few barriers to invasion. Consequently, Russian history is one of occasional foreign occupation, which has resulted in a culture that mixes xenophobia, bitterness, persecution and a sense of entitlement in equal measure. This idea of “we have suffered so much so you should do what we say” — a sort of superiority complex based on an inferiority complex — clouds Russian strategic thinking and contributes to the seeming inability of the Kremlin to sense that the Chinese are stealing Central Asia from under the Russian nose.
It also explains why the Russians have not realized that the Europeans are moving away from them in as expeditious manner as feasible. The European reactions to Russian entreaties on these natural gas projects can best be summated as humoring the Russians. Few states want an out-and-out breach in their relations with Moscow, which could result in an actual and immediate energy cutoff before the Europeans are prepared to sever economic ties. So they have been taking advantage of Russia’s cultural blind spot while quietly developing alternatives.
This is doubly true for firms such as E.On and Gasunie, which supposedly are involved in consortia to build the projects. All are key purchasers of Russian energy exports and have found it easier to feign support than to be bluntly honest and so risk losing reliable deliveries of Russia natural gas. The one possible exception might be ENI, which is desperate for any source of natural gas to maintain its market position in Italy. But even here, it is far from clear that a single firm — even one as large as ENI — can shoulder realistically the massive burden of financing and building a project as questionable as South Stream by itself.
Years from now, Putin’s Jan. 17 trip to Bulgaria will likely be seen as the turning point in the European-Russia power balance, because that is when the humoring broke down. As Putin was en route to Bulgaria, Sofia insisted that, should South Stream come about, it will be Sofia — not Moscow — that holds a majority share in the portion on Bulgarian territory. A compromise — a 50-50 ownership split — was ultimately struck, simply because there is little Moscow can do to punish Bulgaria without deeply damaging its own interests. Bulgaria does not border Russia (or any former Soviet republic) and since it is a transit state for Russian natural gas to third countries, it cannot simply be cut off.
Bulgaria is hardly the bravest or most powerful of the EU states. It also is not among the crop that has done the most to diversify its energy consumption away from Russian sources. Consequently, it stands to reason that the nod-and-smile approach that has dominated European attitudes toward all things Russian is starting to crack. In the first 10 months of 2007 alone, total European demand for natural gas already dipped sharply, according to International Energy Agency data — reversing a 50-year upward trend.
Add in increased alternative supplies that are not merely prospective (such as the Nord and South Streams), but actually under construction — within three years Europe will have established alternatives for at least two-thirds of the natural gas Russia currently supplies — and Russia’s energy grip on Europe is slackening quickly.
In short, Europe is reorienting its entire energy sector to eliminate the “Russian factor.” This is allowing the Europeans to take a firmer line on Russia in other areas as well. For example, on Jan. 17 the European Union gave Ukraine the green light to join the World Trade Organization (WTO). Until recently the Europeans had expected Ukraine under a pro-Russian government to join the WTO at the same time as Russia, so the Europeans played softball with the Russians in accession negotiations. But now that a pro-Western coalition has returned to power in Kiev, and since a pro-Western Ukraine will have the ability to block Russian accession on its own, the Europeans sense an opportunity to pry Ukraine out of Russia’s economic orbit and lash it into Europe’s. Consequently European negotiators have switched to hardball tactics on economic issues ranging from timber to transport, pushing back — yet again — serious efforts to bring Russia itself into the WTO.
Such isolation is far more damning than it sounds. According to the European Commission, if energy is shorn from Russian-European trade, then the new (much reduced) total value of that trade shrinks to an amount equal to that of the European Union’s trade with Iceland, a country with fewer than half a million people.
The Question of Response
That brings us to the second question. What will the Russians do about it?
For Russia, the challenge is not about the lost income — between rainy day funds and currency reserves, Moscow has socked away nearly $700 billion — but lost influence. Russia’s other exports, primarily metals, minerals and weapons, still fetch a pretty penny and put Russian fingers in pots the world over, but none grant it influence where it truly matters: in Europe.
Russia faces a near future in which the economic might of Europe will reinforce the geopolitical ambitions of the United States. Washington’s desire to whittle Russia back to a more manageable size is nothing new, but few realize that Brussels has its own ambitions. The Europeans would like to expand their economic reach into the bulk of the territory between the EU border and Moscow, as well as into the Caucasus. Europe does not see this as an imperialist venture, but simply as the natural order of things. The Russians, of course, see the world through a different lens, and European plans would be even more damaging in the long run to Russian interests than will American efforts, as they would make these border territories not only politically unreliable, but rather like the Baltics: firmly integrated into a rival system.
If economic tools no longer are relevant, Russia will be forced to fall back on political and military tactics, including:
- Military intimidation of the Baltics and Finland.
- Reunion with Belarus and a return of the Red Army to the Polish border.
- Overt intervention in the Russian-speaking portions of Ukraine.
- Active and public participation in Georgia’s secessionist conflicts, both to block European influence and to disrupt some of those alternate energy supplies.
- Support for Europe’s various secessionist regions.
None of these options is clean and easy, and all are laden with consequences. Two of those consequences are critical enough to warrant mention here. First, any action from this list would rejuvenate NATO to the point that a Western military response, likely resulting in a new containment strategy, would be a foregone conclusion. Second, a renewed Russian confrontation with the West would certainly provide ample opportunity for China to make inroads into Central Asia and the Russian Far East, a region where Russia’s own intelligence services warn that Chinese squatters already might constitute the majority of the population. Yet with Russia’s economic toolkit impotent, such options are all that remain before the Kremlin.
Russia’s best hope is to recognize, before it is too late, that the tide is irrevocably turning. But Moscow faces one other complication in wrestling with the changing geopolitical reality — one that could critically delay an adjustment in strategies: itself.
Though Putin is undoubtedly the man in charge, he is not the only one with ambition. His inner circle is split roughly in half by a clan war between Vladislav Surkov and Sergei Ivanov. Both are loyal to Putin, but their battles have absorbed the majority of the state’s ability to deal with any issue. While the two overlords clash, the Europeans make ever-greater strides toward freeing themselves from dependence on Russian energy, steadily closing the window of opportunity for the Russians to adjust.
And when that window closes, Russia will face a world in which the United States no longer is consumed with all things Middle Eastern and the Europeans no longer are afraid of all things Russian.
Please feel free to distribute this Geopolitical Intelligence Report to friends or repost to your Web site attributing Stratfor.
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22. January 2008 at 13:31
Peter:
Great analysis….stuff spy novels can be made of…..I enjoy reading about the Russian “gangs,” I can only hope that the Dons will begin to start knocking each other off sooner rather than later, that will actually give VVP something else to worry about. I like to get your feel for just how quickly Russian shipyards will build all the new carriers and subs Putin’s
is mentioning….ditto for when they’ll get a solid fueled version of their new SLBM, the Bulava, to work as advertised.
For some reason, heretofore, Russian boomers have always carried liquid fueled ICBMs. The ongoing spat between Indian and Russia over the upgrades to India’s older Project 877EKM Kilos and the unending tale of woe about India’s Russian carrier are almost comedic…..except the underlying message is: What happens next? India may have to find a new weapons supplier……she needs the newer carrier ASAP, ditto naval a/c to fly from it….. China is flexing her muscles in the Indian Ocean and South China Sea, Beijing’s Mare Nostrum, and wants a piece of the sea route from China through The Strait of Malacca to the Arabian Gulf……May you live in interesting times….the old Chinese curse…we do.
22. January 2008 at 14:15
Peter,
Your assumptions would hold true if we were in a holding pattern of summer ‘06 economic conditions. Perhaps you might want to turn on Reuters today. The ability of Europeans to pay a premium for energy diversification is quickly eroding. Russia’s leverage will only increase as economic conditions in America and Europe deteriorate. Perhaps you might want to take this into account in your next piece.
22. January 2008 at 14:25
Between Midsummer’s Night Dream and the Terror, you seem to have forgotten that there are few - numbering a little over 100, beside ‘OLD EUROPE’ that could benefit from Europe’s denial of Gas and therefore economic expansion.
However, everybody’s allowed a dream once in a while.
BTW, do you believe in Global Warming, just for the info?
22. January 2008 at 14:31
Peter,
Putin is one sharp cookie and can probably eat George, Angela, and Gordon for lunch..he has outmaneuvered so far, I wouldnt count Russia out just yet..Regardless, A global meltdown (Western banking) is coming and has already begun. The US is a third world banana republic (bankrupt) with a only a strong military. The US and European banks are contaminated with derivatives..in the trillions..only matter of time before they have to mark their so called ‘investments’ to market.. that means insolvency..Citicorp already is..so is Goldman, so is Merrill, so is Bear Stearns…so is UBS almost..The almighty dollar is going to meet its cousin..the Zimbabwean dollar in the trash bin of history..to which the europeans will devalue the Euro…called competitive devaluation to preserve their outdated socialist credit based economies…what does this mean…Prices of natural gas and all commodities go up up up and away..The whole system is going down…and the Russians will be least affected by it..since their banks are largely immune from this meltdown..and hey, even if the west is starving..you still need food, water and natural gas in those higher altitudes…by the way, China will collapse..its not unhinged yet from the West..their banking system is a mess as well..too dependent on sprendthrift Americanos…now with rising prices of wheat, beef, soybeans, pork etc..what do you happens when 500 million chinese peasants cause a revolution…????…Going to be fun these next few years…
22. January 2008 at 14:53
THIS is interesting BUT islam is and will have a VERY big influence(negative) on and in Europe.Will the islamic influence not change things for the WHOLE world…??? The whole world is being surrounded by “them”,ie,islam.Russia,as well as China and the USA has its woes with islam if not at the moment,SOON….david
22. January 2008 at 14:55
Peter,
Great article. Please follow up with future articles to keep us informed on what actually becomes of these proposed pipelines.
1. European energy dependency on Russia
No question that this is what Putin wants. Then he can turn off the spigot and pressure Europe on any issue he wants. We’ve seen this type of pressure already in Ukraine and White Russia.
2. Putin strengthening NATO
NATO was under severe attack by the combination of Chirac/Schroeder. Clearly Putin would like to have a weak NATO or drive the US away from European defense. His actions, however, are doing exactly the opposite of what he wants. He is actually strengthening NATO. That’s a little silver linining in the black cloud of a resumption of the Cold War.
3. Russia needs NATO
What the Russians should realize is that any threat to them is not coming from Europe or the US. It’s China, stupid! China’s GDP exceeds that of Russia. When its military is comparable, watch out. It would be very tempting for China to take over Siberia (10 million Russians vs. a Billion Chinese). Russia’s best defense against this is to be integrated into NATO. Their hostile actions are just doing the opposite.
2.
22. January 2008 at 15:10
VERY educational and insightful. Thank you.
Steve
22. January 2008 at 15:18
Excellent piece.
22. January 2008 at 15:23
Very insightful but there are several other geopolitical factors that will also come into play. Russia is again asserting itself into the Middle East. If Europe attempts to find additional energy from the Middle East you can beat that Putin will have an impact. Russia will willingly trade weapons to Arab nations, the Arabs in turn will raise prices to Europe forcing Europe on to the sword of, do I pay Russia or pay the Arabs. With the growing Islamic problem in Europe and the conflicts in the Middle East Europe may go back to buying from Russia as there will be less political strings and feathers ruffled attached to those purchases.
22. January 2008 at 15:50
Best analysis to date!
22. January 2008 at 15:55
good stuff.
I wish the moderators of the presidential debates would ask the candidates what they think about Russia and Europe, instead of some of the puffery they dwell on. The Democratic debates are a joke; there’s no substance being shown by anyone. The Republicans seem more concerned with the confederate flag and what to do with the flagpole.
It would be nice to have the guys from Stratfor hold a debate and see what the candidates think they know about the world’s trouble spots.
22. January 2008 at 16:07
Very insightful analysis all around. This one in particular was very informative and thought provoking.
I have to say that I appreciately the information in the emails I receive. I have been considering the yearly subscription but I believe my wife would kill me if I sign up for another online news service. Once my one of the other services I have expires, I will be paying to receive your full analysis reports and receive access to the website.
Thanks!
22. January 2008 at 16:08
Dear Mr. Zeihan,
Gazprom has plans to participate in gasprojects in Nigeria and elsewhere in West-Africa. Might that be a part of Russia’s strategy to counter Europe’s ambition to diversify energy supplies away from Russia? I would be very interested to read your view on this.
22. January 2008 at 16:19
I’m astonished at the relentlessly hostile tone of the article on Russian gas distribution, so unlike the balanced analytical essays Stratfor usually publishes.
Why is this Cold War agitprop parading as analysis? This is the kind of tonality that characterized articles in “Pravda” in days of yore (may they never come again).
Stratfor should be ashamed of itself.
22. January 2008 at 16:45
I wish the moderators of the presidential debates would ask the candidates what they think about Russia and Europe, instead of some of the puffery they dwell on.
Wow. I would pay good money to see George Friedman, or select members of his staff, moderate one of the Presidential debates later this year.
22. January 2008 at 17:07
This seems like a very clear analysis of the Russian natural gas play vis-a-vis Europe. I hope it is accurate and that matters develop along the lines mentioned above.
22. January 2008 at 17:12
Hi Peter,
Great analysis. I was wondering what your perceptions of the Nabucco pipeline are? From what I’ve read this may not be the life-saver Europe wants it to be; not only is securing gas in a region (Central Asia) heavily influenced by Russia and Iran (and China for that matter) a challenge, but I’ve heard planning and construction is not going to smoothly. Surely this plays into your above analysis.
Thanks again, very insightful
Brad
22. January 2008 at 17:15
A very well thought out;yet throughly entertaining piece.
This is the type of well written article that makes me renew my Strafor subscription (for 3 years); because it is so well written and includes both analysis and perspective that no one else does.
Nice Job!
22. January 2008 at 17:16
This analysis is rendered pretty useless without discussing geopolitical ramifications of Serbia gas pipeline deal: state-owned Serbian oil monopoly Naftna Industrija Srbije, Russia’s Gazprom and the South Stream project…moreover,there is NO united EU energy policy OR a united policy toward Russia…Russia has successfully undermined the EU attempts at establishing a common energy policy by signing LONG-TERM energy contracts with the significant French, German, Italian and Austrian companies. Alex Kimoff is correct most of your Russian analysis appears very biased and even outdated to the array of roles Rusais plays internationally…I was hoping this analysis with your new look would prove more relevant …it does not.
22. January 2008 at 17:22
Intresting article however things are changing with respect to the supply and transportation of natural gas. Liquified Natural Gas (LNG) technology is now allowing consumers to hook up with suppliers free from geographical restrictions.
22. January 2008 at 17:27
Peter seems to be leaving in a bubble in Austin, TX…this article is an American geopolitical wish list. The reality is quite different. I can speak from German business perspective and can say that German business sentiment is heavily in favour of deepening ties with Russia and is equally disgusted with American peddling financial junk and sticking their nose where it does not belong. To sum it up US is viewed as a Soviet Union circa 1980 that has to resort to its military to impress, and Russia is viewed as a place to make good business. You cannot even be sure nowdays if US can pay on its bonds in 5 years or what the dollar will be worth.
22. January 2008 at 17:42
Thank you. Very interesting article. Very interesting comments.
I believe the demise of the Bush Administration’s Near East Oil and Soviet Satellite grab policy is happening rather suddenly. I suspect we are seeing massive US$ outflows and will be seeing further US$ devaluation, further weakening US ability to project influence abroad.
On a longer timescale, the sheer mass difference between Eurasia/North Africa and North America made a power shift inevitable. The Bush Administration’s willful refusal to see and react appropriately to the ongoing economic changes has hastened this shift. Let us hope that Russia’s ambivalence between being the heavy vs integrating into Eurasia continues impeding the shift to North American relative impotence because the consequences on the American self-image will be substantial.
As you point out, land communications are cheaper and faster than sea communications.
22. January 2008 at 17:47
As I think back over the analysis I have received from Stratfor on Russia in the last little while, it seems to me that, as an entity, you blow hot and cold. Russia’s trouble making here; their fleet there; their huge montetary warchest and the improvement of their military — these and other factors are threatening. On the other hand, your piece makes me feel almost sorry for them: their goose is cooking if not cooked. I can see that these positions can be reconciled and perhaps my concern is merely stylistic.Still, if the seeming inconsistency were missing I would be less in the position of evaluatting Stratfor against Stratfor than I find myself needing to do.
22. January 2008 at 17:55
Hi George.
Thanks for a great post. Very interesting. A question does pop into my mind thoug. What would the EU have to gain by stopping the integration at the Russian border? The US would not like the idea of couse. But what would the EU have to gain by a weak and potentially aggressive Russia that can not defend its southern border. Second I thing you give the Eurocrats a tad to much cred. They are not a very coherent bunch ;). And as you are pointing out that are getting less and less so over the time.
22. January 2008 at 17:59
Dear Peter:
I have been following a US based energy company, FX Energy, Inc. that has committed iteslf to developing the vast potential of a number of natural gas fields in Poland. Take a look at their website www.fxenergy.com and review the various presentations that they have made to better understand what they are doing. They have assembled an excellent technical team and a wonderful working relationship with the Polich government and their energy industry. The success of their project will no doubt be another alternative for Europe to look to besides Russia.
22. January 2008 at 18:15
Information coming out of US news sources including Stratfor is very different from the rest of the world. I think tomorrow we will see someone come out and say that the dollar strengthening is a vote of confidence in US.
Actually, the reason the dollar is strengthening is that virtually all currency trades are against US dollar in local/dollar pair trading. Most banks and funds also hold their liquidity facilities in US dollar. All of the stock sold in foreign markets results in huge cash flows on settlement of the bargains. Those cash flow currencies are first traded for dollar, and then left in US accounts until the decision is made where to move them next for reinvestment. Expect a nice sharp bump in the dollar in the next few days. Paulson, Bernanke and the Wall Street whores will doubltlessly hype this as an expression of global confidence in the US and precursor to a “flight to quality”. It will be nothing of the kind, just a temporary holding station before capital flight from US dollar assets recommences.
With all the proceeds of foreign selling heading back for US shores, it would be interesting timing for a cut. The dollar would rise regardless because of the exchange flows from yesterday’s massive stock liquidation, giving the Saudis and others who might normally object a brief window to get the hell out before things crash again. I wonder if this is what Bush agreed with King Abdullah.
Bush, Bernanke and Paulson have no credibility left, and no one can see anything but incompetence in the handling of this train wreck so far.
22. January 2008 at 18:18
When you mentioned the intimidation factor, it reminded me of an article I read several months ago about the resumption of regular bomber flights by Russia. It seems to me that some of this has already started.
22. January 2008 at 18:18
Greetings
I agree with your insight and reasonning of Russian influence in Bulgaria. However I find Bulgarian national character as a ” boarderline”. Bulgarian close geographical proximity to the giant Bear may be used to convince the Bulgarian people. However, what is the free west is giving Bulgaria so they can ignore Russia?
22. January 2008 at 19:28
Fascinating reading that makes a patriotic American smile…unless the American wants a profitable peace among equals with Russia. I must agree with other comments that there is a distinct tone of glee that casts doubt on the objectivity and, therefore, the accuracy of the analysis. For instance, when the window closes “for the Russians to adjust,” has nothing to do with the relationship between the Western world and Islam or the state of war in Iraq and Afghanistan. So the analysis makes an unjustified leap when you wrote, “And when that window closes, Russia will face a world in which the United States no longer is consumed with all things Middle Eastern….” Unfortunately, religious wars have a way of lasting hundreds of years. I also agree with other comments that mention the potential impact of the U.S. economy. The nation will be dealing for years with the impact of the greed of our captains of industry, which will decrease U.S. global influence (did you read that the Arabs recently provided $Billions to prop up Citigroup and others?) Your piece suffers from a tad bit too much confidence in itself and from a narrow view of the factors involved.
22. January 2008 at 19:44
all this begs the question of ‘to what extent does cash/relative wealth define geopolitical reach?’
A rich Russia without other leverage can nonetheless define its presence over time. Further, I do agree that the Mid East is a place ripe for military intervention over the next decade, either from China or India(probably requires a sea change in naval and/or air capabilities) or Russia - (roll the tanks in)
and THAT would be leverage, baby.
22. January 2008 at 20:42
Hm… … So un-Stratfor. One can’t help thinking - OK, here he is going to stop kidding and get serious. Nah, never happened.
Nord Stream that is being built with a huge German participation is a sign of Europe trying to get off the Russian gas hook??? Come on, gentlemen! Europe is as much sick and tired of the transitors’ greed as is Russia. To get rid of parasites on the pipeline is very much in the interests of Europe. And the notion that Russians - together with the Europeans! - are building those pipes into nowhere, to where nobody is waiting anxiously for that gas tops it all! Give Putin SOME credit.
Europeans can give lip service to solidarity with all the newly acquired allies like Poland, but when a German burger starts counting his Euros he gets realistic and quickly understands that each mile of pipeline going across Poland or Ukraine costs him a real penny, and whoever in the governments does not realize that gets voted out.
Well, if political considerations will get upper hand in Europe after all and they will start buying gas from Venezuela - they are welcome! Chinese and Japanese will only be happier.
The whole piece may sound very patriotic - assuming that it was written by an American, but in the end is just a compilation of wishful thinking, exactly of the type that lead to Iraq and Afghanistan, as if the Middle East was not enough of a burden.
I could not help smiling watching how upset the author is about the high oil and gas prices from which the Russians are benefitting so much. He can barely conceal his disgust of the man who committed the ultimate crime – he does not want to be one of us. No, it is not that we don’t allow him - he is not asking for that! That changes everything: he denied us the pleasure of refusing him, he chose not to beg! What does he think he is? What’s the word…? Oh, the tyrant!
“Stratfor” in the better traditions of “Pravda” of, say, 1980-s? That’s a sight not to miss! A collection of cold war clichés that would look right at home in the Communist Party Congress materials. I almost felt nostalgic.
22. January 2008 at 20:44
It is an interesting question how far men would retain their relative rank if they were divested of their clothes.
– Thoreau, Walden 1854
Interesting analysis indeed. Russia isn’t so bad, though, after all, surely a multi-polar world is preferable to the unipolar world pursued by the greedy captains of corporate industry through whose actions the USA is rapidly being economically relegated to thirld-world status?
We in stone-age cultures watch the global events unfolding with great interest and behold how men play games reminiscent of kindergarten schoolyards.
It reminds us of a famous saying that World War IV will be fought with sticks and stones. Hopefully we will be in the best position for that, and will do everything we can in the meantime to escape the coming global nuclear meltdown of WWIII.
Eternal happiness to all.
22. January 2008 at 20:47
Sorry, website is http://www.koteka.net - in case anyone is interested…
22. January 2008 at 21:03
Thanks for “The Unraveling of Russia’s Europe Policy”. I hope the Russians are not reading Stratfor.
22. January 2008 at 21:07
Thanks on great article but you never say anything on where all of the problems come from in the last 200 years.The problems do not come from Russia:The all problems come from West:Napoleon,Austrohungary-Hitler,NATO-EU….Communisam come from the west not from Russia[Karl Marx-Fridrih Engels]
22. January 2008 at 21:09
Peter, sounds like a great report. Putin can only move in so many ways. I’d like to see a similar analysis soon on the U.S. position globaly.
22. January 2008 at 21:45
Seems this is an example of Putin overplaying his hand.
With the election loss in Ukraine, the overt hostility of the Poles and other moves going the way of the west in recent months, Vlady appears desperate to increase the perceived strenth of the Russian Bear.
I think he miscalculates the effect that doing things like testing tactical missiles off Nato allies France and Spain and pushing for the Serbia Radical Party will have among EU members.
Russia has a world of problems and they will not be solved by trying to reestablish old orders, but Putin et al can create a world of hurt while the Russian ship struggles to find it’s way….
22. January 2008 at 21:50
Kudos!!!
Your best report ever!!!
Brilliant!!!
Thank you so much.
Igor
22. January 2008 at 22:16
Outstanding perception and analysis.
I hope our candidates for high office read these reports.
They must realize that the global economy is here to stay!!
Thanks.
Peter
22. January 2008 at 22:28
Seems to me the big unanswered question is: What are European leaders thinking about?
Specifically, do they realize that zero dependence on Russia isn’t necessarily a good idea? Friedman himself pointed out that the current situation allows Russia to get its voice heard in Europe– and that losing an economic voice in Europe means needing a political or military voice in Europe. Are they realizing this and using these developments to push for Russia being satisfied with a voice, or are they really pushing for zero connectivity like he seems to suggest?
Also, how are they factoring in the US? Forcing Russia to use military means to get their attention would force the EU to either build up its own military capacity or to (like Friedman pointed out) strengthen NATO. Leaving their Russian relationship at economic-voice level allows them to play Russia off against the US.
22. January 2008 at 23:25
I find the analysis fair and containing some interesting historical insights. However, I would not say that entire Russian foreign policy is constructed on infiltrating Europe with gas pipelines. What the author misses in this article is internal developments in modern Russia that will significantly influence the situation. Current political leadership in Russia is increasingly becoming a hostage to its own invention - “evil West” and so the self imposed collision with the West is almost inevitable for Russia. Gas pipelines play some role in this, of course, but the problem is much deeper. Putin is no less than sort of mild (so far) Hitler for Russia. It is a shame how readily some westerners repeat over Russian propagandist myths about “Putin being a superman that saved the nation and is taking it to the glory”. He is just mere mortal that was able to make up an image of “strong and great Russia” and sell it to the public. But it is ultimately Russian people who bought it. So Putin is just an answer to Russian aspirations for greatness, what they understand by this “greatness” can be viewed on the examples of Russian power exertion in various parts of the world. There is no other way of dealing with contemporary Russia, but containing it (and this does not depend on Russian leadership, as Putin’s successor will be about the same, maybe perhaps less lucky with oil prices). Containment of Russia could incluce things like, balancing its power in CIS countries, which has almost been achieved, I must say; developing ways of restricting Russian elite’s interests abroad, if needed; firmness (I hope the British are not going to back off with Litvinenko murder case at least), but absence of “war rhetoric”; checking Russian creeping influence in EU
23. January 2008 at 00:30
Dear Peter,
Your article was thought provoking, and given your and Stratfor’s credentials and experience, I feel hesitant to critique it. However, there are a few points I’d like to make.
In my opinion, EU talk on independence from Russian natural gas is little more than the never relenting rhetoric in US politics about independence from Middle Eastern oil. It’s mostly talk.
I believe that the actions carried out towards European energy diversification are designed to hedge more so against the instability of transit states like Ukraine, than against a Russian master plan to sell them more cheap energy in exchange for leverage. Similarly, Russian plans to build the pipelines is also more telling of their desire to not have to depend on former USSR states that resent them, in getting their energy to the actual customers to the west of them. The fact that it had to be the most incredible and impossible workaround they could think of, is likely a trusty Russian combination of stubbornness and megalomania.
I think you very accurately captured the Russian attitude and “negotiating style” towards their partners in Western Europe, but it would (could) be a notable “mis”underestimation of both sides to think that their behaviors are driven by geopolitically opposing interests. Despite the very real and consequential tensions between them, I don’t think Russian and European interests have ever been as closely aligned as they are today. Geopolitically, they can compliment weaknesses each might have in dealing with the two most pressing concerns on their minds: the barely hatching dinosaur egg that is China; and the US, which is increasingly viewed as a juggernaut that wondered off the reservation.
European perception of Putin himself is not quite as black-and-white as it is in the US. They publicly protest against many of his tactics, but privately applaud what he’s done in Russia. A decade ago, Europe’s worst nightmare of an imploded Russia was far too close to reality for comfort.
Unfortunately, I don’t have the writer’s gene to be more concise, or the time to ramble on. In one thought: Thank you for the interesting article, and I hope you will continue to expand on it.
Best Regards,
B
23. January 2008 at 00:34
So un- stratford. Streched arguments.
23. January 2008 at 02:26
After having lived and worked in Russia and the FSU for the past 5 years I can 100% agree with you. the only thing I would add is the level of corruption at the highest levels in Russia. It is my opinion that only manner in which Russia will survive China is to ally itself with the US and Europe. I have spent a good deal of time in Siberia and Far Eastern Russia. As an example in Omsk the majority of workers are now illegal chinese and they are doing a good deal more than squatting. they are buying apartments, cars, and have a very very large impact on the local economy. If Omsk looses its Chinese workers the city would find itself in a very dire situation.
23. January 2008 at 03:53
Very well done, Peter!
May be, what missing is an explanation why Russia found herself cornered so desperately. Let us have a quick look at its recent history after collapse of the Soviet Union and downfall of the communist ideology as it is seen from within.
By mid-80’s Russia was ready to start for better society, for stronger state and for more harmonious individuals. But this chance was not used: instead of our Deng Siao Ping we got first an irrelevant henpecked chatterbox then still more irrelevant power hungry and selfish drunkard. Russian elite, first of all, intellectuals, claiming to be brains and conscience of the nation was lured by the bright paper-cover of common values of mankind and individual freedoms. As a result the country was ruined down to its base.
At first it was done through incompetent democratic yeltsinoids who lost control over any process in the country giving way to organized crime and a batch of abramovichs, the latter basing themselves on an international Jewish capital. Criminal privatization a-la Chubais strengthened position of the abramovichs and in 1996 they arranged an actual coup d’etat by falsifying Presidential election (which were applauded by the West and approved by OSCE and PACE as an example of true democratic declaration of the majority will!) to keep at nominal power seriously ill and incapable Yeltsin. Russia was ruled by a stable symbiosis of comprador oligarchy, organized crime and corrupt bureaucracy.
All the above was conceived, encouraged, guided and financed by Washingtonsky Obkom. The strategic goal to eliminate the most important geopolitical rival was close to be finally achieved. (You put it very mildly yourself: “Washington’s desire to whittle Russia back to a more manageable size is nothing new”). A road to the New World Order inscribed in the one-dollar banknote was open.
Neither Russian industry nor agriculture any longer exist. Notorious Red Army was ruined both technically and morally so that it is easier now to close the remaining one and to start building a new one from zero ground. Population is dying out: if in the 70’s in the Russian Federation each year was dying about 1,3 million people, which corresponds to an average European death rate, then starting from 1992 about 2,3 million people is dying each year. That results in a New Holocaust, democratic this time: 15 million victims vs. less than 6 million in a previous better known Holocaust. All most common western values like prostitution, drug addiction, and consumerism reined all over Russia supported by most common local value: alcoholism. Public moral was destroyed by the most free in the world Russian TV, owned by the same abramovichs, which since mid-90s is the worst enemy of our own population. On the top of that external debt of Russia exceeded five-fold its State budget revenues. Russia was bankrupt by all parameters and all dimensions. Technically default was declared in 1998. Russia was about to repeat the fate of the Soviet Union, which meant then civil war: all against all.
So it was the country inherited by Putin. Within his eight years he managed not only to consolidate Russia to a certain degree, but to fulfill that without using an axe and barbed wire, remaining inside democratic way and a sort of a liberal ideology.
I brought all that up to illustrate one fact only: Russia so far is not in a state to play the role played by the late Soviet Union and will not be in the next 15-20 years. All that Russia is doing now – trying to overcome disastrous results of the deathly experiment: implantation of alien ideology, which can be compared to trying to grow corn beyond the Polar Circle. Russia is trying to overcome the New Holocaust, to construct on the ruins of almost anything that makes crowd a society and bunch of clans – a state.
Unfortunately, the West still dreams of prostrate Russia. Any other Russia is unacceptable to Washingtonsky Obkom as by default she would be an obstacle on the way to the New World Order.
Talking about gas pipelines we have to keep all that in mind.
My best regards,
Niko, Moscow
23. January 2008 at 05:26
[…] става въпрос за самоубийство, а за нещастен случай. 2. Интересен анализ на споразумението за Южен поток. Споменава се, че […]
23. January 2008 at 05:42
Europeans are already laying a pipeline from Azerbaijan through which Iranian gas can also be imported.
23. January 2008 at 07:29
[…] for signing the gas/oil/nuclear power station deals with Russia. The article is published on the StatFor blog. Stratfor stands for Strategic Forcasting, […]
23. January 2008 at 09:29
Once again an excellent analysis. Without my subscription to Stratfor I would be inclined to question but, with each Situation Report you direct me to follow the news in those regions. The pages turn to your conclusion.
Excellent insight Doc.
23. January 2008 at 10:03
With all due respect, this report is dangerously condescending and optimistic in many more ways that can be explained in a post. It greatly overestimates the European ability to respond to energy dependence (which is already a fact, not a threat)and it underestimates the Russian strategic determination. Russians are not as foolish as they are described here. The political implications of their energy policy for many European states are not addressed sufficiently. Russia, for one, is about to buy the Serbian energy state company, which amounts to buying Serbia itself. I really, really hope decision makers will not act on such analytical basis. We had one Colin Powell’s UN speech already.
23. January 2008 at 10:09
The major point concerning the bilateral agreement to link Russia and Bulgaria directly to the South Stream natural gas pipeline is that from Bulgaria’s perspective it is more concerned about its national energy needs for the foreseeable future than necessarily the EU as a whole. Similarly, Germany’s link with the Nord Stream project, and the high profile corporate position that former Chancellor Gerhard Schroeder has in the project, indicates that from Berlin’s vantage point Germany’s energy needs trump a common EU policy on energy diversification. In fact when one examines the national energy policies of the 27 EU countries, national needs projected through ca. 2050 appear to get priority over EU needs. Of course a European Union aim, as set forth in the Energy Charter, which was a EU initiative, is that natural gas and oil pipelines should not be owned or controlled by the same enterprises that produce the gas and oil, and thus is a major reason why Russia has not ratified the Charter. The reality that sellers (in this case Russia) and buyers need each other may eventually force Moscow to relent on this point. Despite all the fanfare and subsidization to develop alternative forms of energy in the EU, most of the 27 members are going to be dependent on fossil fuels for a large percentage of their energy needs for a considerable period of time. This is especially true in terms of their projected growth rates through mid-century, which ultimately will require more energy even with the implementation of alternative forms of energy and greater energy efficiency.
23. January 2008 at 10:11
Peter,
Great analysis. I hope you are right. Let;s hope that the Trojan Horses of the Kremlin inside the EU will not block this movement.
Dimitris.
23. January 2008 at 10:26
“…and platinum can all be loaded into trucks, rail cars and tankers”
Wow!!!
[for a “noble” metal with its not-so-insignificant market price]
23. January 2008 at 12:19
I have received from you a password XMCPF4kE
Am I now a member? I have given you a credit card for membership, but have received nothing that would require user name and password for youranalysis. Please advise. wtnightingale@comcast.net
23. January 2008 at 12:44
Global Warming should increase Russian power. How does a stronger Russia (as the result of Global warming)interact with Europe? I do like the article.
Sincerely,
Tom A. Bowen
23. January 2008 at 12:57
Nothing but wishful thinking on the part of Mr. Zeihan…
23. January 2008 at 16:59
Keep in mind that Peter Zeihan is quite young whose entire adult life was spent in years of American invincibility, hence the overconfidence and refusal to accept a grand geopolitical reversal that is taking place.
US is faced with creditors who have very little appetite left to finance US living beyond its means. The question is whether US will peacefully accept reduction in its military spending and standards of living to adjust to a new reality. I doubt that it will and fear we will see a period of nasty confrontation with its geopolitical opponents: China and Russia. It does not have to be this way, such arrogance usually ends in tears.
I wish Americans of goodwill to take its country back and make it a republic that it once was.
23. January 2008 at 17:22
Very objective view of situation in Europe. I will closely follow the developments in the next 6 months.
Regards,
Nitin Sharma
23. January 2008 at 20:27
Verey, very interesting
23. January 2008 at 23:49
If NATO is encouraging a Balkanization of the Russian nationalities bordering upon NATO’s western borders, that might be short sighted and fraught with danger. I can’t stop thinking of the mélange of Balkan alliances of the early 20th century that resulted in WWI. Balkan alliances are tinder boxes of unreliability, consumed with blind hatreds, that do not react in logical fashion to their own best interest. A strong Russia is a more reliable opponent. It may be cheaper in lives and money to encourage a strong Russia rather than risk the short sightedness of a capital intensive economy. Europe is bound to Russia and political stability. Any plots to undermine these early Russian attempts at melding Russian interests with those of NATO nations is counter productive, short sighted and dangerous. The Russians are going through the same evolution to a free economy that the rest of Europe and the USA went through over the past three centuries, except they are doing it faster. They have no monopoly over bribery, special interests, unbridled greed, etc. that were not firstly invented elsewhere.
24. January 2008 at 05:37
How refreshing to read a (presumably) American analyst who doesn’t see Europe as a geriatric continent which is about to be converted into ‘Eurabia’ by moslem fanatics. One thing I have to say though is that I think it would be unwise in the extreme of any Russian leader to attempt to encourage separatism in other countries, Russia herself would be too easy a target for similar treatment.
24. January 2008 at 08:08
The only way to stop Russia’s intransigence and unruliness is to bang them on the head exposing and freezing the accounts of the Kremlin dons in the London banks and West Indian offshores zones-what nobody in the West dares to do . Moscow knows that it is insulated by its nukes and hydrocarburants’ resources-hence its new “self-assertive” tones and jerky adolescent actions to bring back the Soviet-style prominence.
24. January 2008 at 11:23
Ahh, the continuing evolution of geopolitical intrigue. But, is any of the present day drama anything really new, or just the present circumstances that have to drive the various geopolitical objectives?
I found the article very informative and enlightening as I am but a casual observer of world history being played out. Although each of us individually can do little if anything to influence the course of human events, it is wise to understand that some individuals do have that power. I’m not nieve to think that a utopian ‘why can’t we all get along for everyone’s best interests’ is the way the world should work. However, it is fact that, we all on this planet have to get along to large extents for mere survival.
It sure seems that Russia has long felt to be an ‘underdog’ although being a major world power. The article surely suggests that this history is repeating itself. The troubling dynamic is also the same: Russia feels it has to play the bully to acquire its objectives and that everyone else be damned if they don’t like it.
I can’t help but wonder, if we had done more to ally ourselves to Russia’s interests after (the first) cold war as we did with Europe and Japan after WW2, would we have better succeeded in really evolving Russia’s geopolitical stance with the rest of the world? It sure does seem that the world wanted to keep Russia as an ‘underdog.’ But also, because of trust, the world reacts as it should. The Russian mentality is hard to ignore. The need to ‘walk softly but carry a big stick’ has wisdom.
I used to hate history. I now realize that in studying history so as to learn and not to repeat past mistakes should be every nation’s leaders (and its people’s) obligation for mankind. As in the past, we live in potentially dangerous times.
24. January 2008 at 12:01
This article explains why US intelligence community never understood what’s going on in Soviet Union in the old days and why they still have no clue on what’s going on in Russia today. This is just a case of incompetence and wishful thinking passing for “researched” analysis similar to ‘confirmed reports’ about weapons of mass destruction in Iraq.
What’s really going on in Europe is rather different from the overly rosy view presented above. Europe has no means to diversify it’s gas supply because European sources are all but exhausted and the only other viable alternatives are Iran and Turkmenistan. But Europe was suckered into following US-led effort to saber rattle at Iran while Russia took advantage of the situation and courted Iran into becoming a strategic partner. What this all means is Iran will not supply its natural gas to Europe but will rather work with Russia to build a pipeline through India into China. Turkmenistan has been visited by dozens of American and European delegations in 2007 but that brought no dividends as Turkmenistan is too close to Russia and too far from EU to feel safe going against its big northern neighbor.
Reality of the situation is that while US State Department and executive branch are being led by a coalition of average mediocrity and US intelligence services, however ineffective they may be, are tied up in Iraq and Afghanistan, Russia has been winning one geopolitical battle after another, slowly taking over Europe’s gas supply chain from Serbia to Greece and from Bulgaria to Austria with Germans all but playing along. After all, German future success depends on reliable supplies of gas to fuel its economy and not on shooting themselves in the foot by cooperating with US in the fight that can only hurt them.
Is it not obvious that inevitable economic collapse much like the one that happened to Soviet Union in 1990s is becoming a reality in the United States and the only way out is to stop playing games that current US administration is incapable of playing anyway and turn their attention to the coming economic depression and bankruptcy fueled by weak dollar, banking and mortgage sector disaster and 56 trillion dollars of foreign debt?
24. January 2008 at 12:15
Mr. Z
you are still the best writer, expository, on
the net, and everywhere, thanks for another
clean and clear tome
bob
24. January 2008 at 13:44
Dear Sergei, your figure on “foreign debt” is off by about a factor of 20. $59 trillion includes SocSec and MedC unfunded liability, which is bad, but not anywhere near the same as debt, which is about $9 trillion, or 65% GDP. Very bad, indeed, but not quite “Apocalypse” bad. $4 trillion of that is intragovt, which is not to say that it is much better than publicly held, but is still different. The remaining $5 trillion is held by domestic and foreign (60+% domestic) entities. This is all off the top of my head, but it should be close.
“Collapse”, “Disaster”, “Depression”, …wow
B
24. January 2008 at 19:38
The west, and the rest of the world to a very large extent have often
24. January 2008 at 20:11
The west has often consistantly failed to appreciate a centuries old, psycological componant of Russia’s historic approach to other nations, specificly those ajacent to it in Europe and Asia. While the west has concerned it self to varied degrees with what we consider threats to our security in the traditional sense, Russia’s approach has often presented it self to the west in such a confusing and contritictory manner; due to it’s wildly different and fluid perceptions of the world. The west see’s physical and C4I attack as a threat, of course. This applies to acquistion of advanced industrial technology, in addition to anticipation of certain economic moves by the U.S. government, and multi-national corporations. Needless to say for the west, and specificly the U.S. any large scale interuption of fuel supplies would result in a very dramatic U.S. response.This interuption may well be accidental.That however is irrelevant. Russia’s fear has always manifested it self as deep cultural and political insecurity.A friend of mine who moved to the U.S. in the 1980’s said only slightly in jest, that Russia may be more assured with a war, at least with a war, you know who you enemies are. Western corporations, if aware of the opportunity, have the potential to conduct research (specificly in physical chemistry, and experience in extreme energy environments). There are tremendous opportunities in mult-national energy development. As America and others move to more benign energy sources, in the mean time we still need the old ones. Russia has a well educated population, with national interests in some areas remarkably similar to the United States. Industrial technology and product development cross in manny areas. We need to look into this very closely.
24. January 2008 at 21:07
Dear Peter,
I have some thoughts on a couple of things. One is the Greco-Turkish relationship. Due to their strategic relationship to Europe and the Middle East it would be best if they could resolve their differences and make peace with each other.Their locations make them perfect as a bastion of protection against anything coming out of Europe or the Middle East, and vice/versa. And Russia. Is Europe so afraid that Russia is going to dominate them? For centuries Russia has had one foot in Europe and one in Asia. They are trying to belong to somewhere, but everyone is afraid of them because of the Cold War era. So, the word of choice is containment. Contain good ol’ Russia, keep them in their place. They are evil. I don’t think so. After studying your intellegence, reading about Mr. Putin and his government I think people are making a mountain out of a mole hill. The problem boils down to the two P’s: Power and Pride. Everyone has their noses stuck up in the air saying we are better than anyone else, and I want power. I want to control my world, your world, everone’s world. Crush the infidels! Well, the Bible and Qu’ran are right: the wicked will destroy the wicked. So I am going to sit back and watch the fun. Oh, and uh, it’s already begun.
24. January 2008 at 22:10
Major progress has been made in the negotiations on an asset swap between Gazprom and E.ON in the framework of which E.ON will acquire a stake in the west Siberian gas field Yuzhno Russkoye and Gazprom will acquire stakes in E.ON assets in western and central Europe
25. January 2008 at 05:10
E.On and Eni are following a similar pattern: a “separate alliance” with Russia. But in the long run, and sooner than we imagine, this will bring about the end of a free and united Europe, especially Eastern Europe. Exactly the opposite of what the article says, especially if we consider the broader political context (waning of NATO and US influence). Sergei’s description is much more realistic and he is completely right: the “US intelligence community … still have no clue on what’s going on in Russia today”. From my point of view this is appalling.
25. January 2008 at 08:03
Russia internal gas demand rising
Gazprom ability to provide decreasing
Major new projects in wrong locations Sakhalin & Kyvotka
It just is not as simple as portrayed, Europe has a gas problem and Russia is the strategic answer thats setting the rules
25. January 2008 at 10:33
Peter
What are your sources for concluding that within 3 years Europe will have established alternaties for at least 2/3 of current Russian natural gas supplies? - that is at least 100 bcm/y. New Norway gas will not be sufficient to offset EU gas declines elsewhere. Do you really think all the LNG facilities - what data are you using - will come to pass?
25. January 2008 at 21:40
Are you good or what, good grief I love your articles, thank you. Jeri Spence
26. January 2008 at 13:00
The decline in Gazprom production fits with the info from: PhD thesis of Frederik Robelius (2007): Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production. 6.2 Size and Location of the Giant Fields: Discoveries of giant fields have been done on all continents, with the exception of Antarctica (Mann et al., 2003). However, as with all other oil fields the distribution of giant fields is very uneven. The largest number of giant fields is located in Russia, where 70 of the 507 have been discovered. In the USA (including Alaska), which is the most explored area of the world, 53 giant fields have been discovered. However, both the USA and Russia are very large areas and the concentration of giant fields are consequently not that high. The Persian Gulf, on the other hand, has the most dense population of giant fields on an area which is less than one tenth of the area of the USA.
Reserve Group I URR ≥ 2Gb
Reserve Group II 1 ≤ URR < 2Gb
Reserve Group III 0.5 ≤ URR < 1Gb
Reserve Group IV 0.1 ≤ URR < 0.5Gb
Reserve Group V URR < 0.1Gb
Field name Country Fields on–stream Discovery Peak Level Peak Year Reserve [kbpd] Group
Sakhalin 1 (Chayvo field) Russia 2005 1979 250 2007 II
Salym fields Russia 2005 125 2010 II
Ust-Vakh Russia 2005 2000 75 2009 IV
Verkhnechonsk (E Sib) Russia 2008 1978 200 2013 II
Vankor (E Sib) Russia 2008 1988 280 2011 I
Prirazlomnoye Russia 2008 1989 155 2011 IV
Talakanskoye Russia 2008 1984 120 2010 III
Uvatskoye Fields Russia 2009 60 2010 IV
Bolshehetskiy Russia 2010 and later 170 2013 III
Dolginskoye (Barent) Russia 2010 and later 2000 135 2011 II
The giant oil field model is based on past annual production, URR and three different assumed decline rates. The results from the modeling of 333 giant fields are used in combination with the other forecasts in order to predict future oil production. Four different scenarios have been modeled and peak oil governed by the giant oil fields is a common result for the scenarios. The worst case scenario shows a peak in 2008, while the best case peaks in 2013 although at a higher production level. The production in the best case scenario increases more rapidly than a future demand growth of 1.4 per cent. Therefore the production can be adjusted to follow the demand growth, resulting in a postponed peak oil to 2018. Thus, global peak oil will occur in the ten year span between 2008 and 2018.
26. January 2008 at 13:08
Excellent article
I have one question - if South stream is finally built, how will the gas pipeline be laid from Bulgaria, west to Italy ?
27. January 2008 at 10:16
Enjoyed reading this. Hope you are correct.
27. January 2008 at 15:29
Good Peter, now ask yourself why the US hasn’t tryed the European stategy to free itself from the Middle East. Who is more short sighted, Russia or the US?
28. January 2008 at 15:41
Let’s talk about realism and why Russia continues to be so agressive: the prospect of Europeans cutting their gas consumption (what with their increasing pressure to go green and growing energy demand overall and dwindling North Sea supplies) and/or procuring natural gas elsewhere (LNG from North Africa/Middle East that is VERY expensive and where they face tight competition with the Japanese/Koreans) are much more far-fetched than Russia’s two pipelines and attempts to dominate the consortiums. The majors and supermajors won’t pull out of Russia for a long time, and Europe (by the way, Eastern/Central European countries are more than 60% dependent on Russian gas) will grumble but accomodate. Like they did after January 2006. The same way that US will continue to host Saudi princes while they sentence rape victims to flogging.
29. January 2008 at 02:13
From Slovenia. Sadly we humans tend to project likely future outcomes that favour our requirements or wishes. This is natural, we need motivation otherwise nothing would ever happen. In reality the future is a blank canvas with far too many butterfly wings flapping to enable anyone to be so pat and assured about probable outcomes. This is mildly intellectual and self-gratifying entertainment - no more than that…and no less either. I recently read that Russia is doomed to become ‘a petro-vassal’ of China. Another possible outcome, which differs in immense depth from your own putative scenarios. There are many such examples of gaming the future, rarely do they impact reality. However, thank you for an entertaining read.
29. January 2008 at 02:27
To Ann
Just two remarks.
1. Is Russia really so aggressive as for example the USA in Iraq and elsewhere? Or is it again about double standards: one standard for those whose goal is to dominate the World and to impose democracy from outside as an instrument of achieving that goal and a different standard for all the rest, including those who are trying to get real freedom and true independence from that domination? Saudis are another example of that doble standards, but there are many more: recent events in Georgia and their more than mild treatment by the West, for example, or lack of hysterical outcries about the obvious absence of western type democracy in China, etc.
2. About January 2006. I fail to understand why so much of hysteria about it? Our Russian property (gas) destined for the West has been stolen when in transit via Ukraine and continued to be stolen by Ukraine then due to whatever (known) reasons. Instead of deploring behavior of a thief and bringing her to justice - a fierce campaign against Russia was unleashed, although Russia was a victim of a criminal act that time. Why? Because Ukraine is considered by Washington to be a shovel to bury Russia? Because Russia was doomed to be totally slaved but instead demonstrated some signs of independence? Is it fair? Is it democracy?
I believe, not.
Sincerely yours,
Niko, Moscow
29. January 2008 at 04:21
Niko’s second remark makes sense: double standards will always rebound to the detriment of both the hypocritical and the seemingly aggrieved alike. Such actions - as in thermodynamics - often create equal and opposite reactions. Odium of a regime should reflect individual circumstances rather than a broad-brush negative approach to everything a regime does. The important thing is to try and understand how actions are perceived - we are subjective creatures, and what people think is in fact the only reality. Insensitivity on the one hand should not be met with a wall of opposition. I do not condone Russia’s activities in this case. I merely suggest they may feel genuinely hard done by. The logical reaction would be to communicate specific sentiments about specific incidents along with explanations, thus not committing the identical sin and reinforcing the negative feedback that these incidents create. Hard to achieve? We employ diplomats don’t we? It seems to me that they are not doing too good a job.
29. January 2008 at 06:23
To John Newson
Thank you, Sir!
The problem is neither in circumstances nor in understanding but exactly in the “broad-brush negative approach to everything” Russia is doing.
“Everything” here means everything that does not fall within the course of Washingtonsky Obkom to a New World Order, which we here in Russia feel to be disastrous, also for the West itself.
Yeltsin’s Russia that followed that course contrary to the own interests of Russia was always praised by the West for its freedom and democracy irrespectove of awful crimes of the regime that ruined economy, ruined public moral and created an undefeatable symbiosis of comprador olygarchy, organised crime and corrupt bureaucracy.
Alas!
My best regrads,
Niko, Moscow
29. January 2008 at 09:07
Niko
My wider sentiments are not those of approval; I merely utter these sentiments because I believe in fair play, without which nothing permanent is ever achieved. I agree with you about US hegemony - or any other for that case - but I fail to understand why Mr Putin should see the EU as a strategic opponent, and behave towards several of its members in a strategic manner that would appear to assert his perceived Russian strategic interests. Furthermore his tactics are odious in the extreme: no-one in the world does not believe he or people close to him ordered murder by Polonium, for example. Perhaps you take my point? Both sides are exhibiting bad behaviour - but the EU is not really a ’side’. It’s an empire of the willing. My dearest wish would be to see Russia sign up to it - thus putting an end to the possibility of a very unattractive US-dominated world of hamburgers and Mickey Mouse.
29. January 2008 at 09:41
To John Newson
Dear John:
To me EU is not a strategic opponent of Russia. I hope that both Mr.Putin and his heir-apparent share my view. As from here I do not see any events that would fit to support the opposite.
Polonium case to the best of my knowledge is a part of a scheme used by some oligarchs thrown out of Russia by Putin. So it was either a deathly accident with polonium courier or a mean to settle accounts within the smugglers group. There are some indications that smuggled radioactive materials were intended to Israel who lacks some important positions in his production of nuclear warheads. Another theory is a “dirty bomb” assembled by chechens (Zakayev circle). After the accident it that was used for a purpose to cover their own crime and simultaneously throw over the point to the Kremlin.
Just note how many “strange” deaths are happening with those who are serving such oligarchs, even when they were on much better terms with the Kremlin. And how easy it is to incapacitate an acting president by such a death is very well demonstrated in Ukraine with poor Gongadze. The same attempt in Belarus (Zavadsky) was tried but failed due to a better functioning of Belarus KGB.
All that above are modern instruments of destabilization and destabilization usually preludes imposing from outside democracy on innocent people.
Sorry to disillusion you,
Niko, Moscow
29. January 2008 at 13:55
Like I’ve said Niko, the butterflies flap their wings. I generally work on the old maxim of the simplest explanation usually fits the facts, so I know I can only ever get things partly right. Truly, we can never know.
You said:
“To me EU is not a strategic opponent of Russia. I hope that both Mr.Putin and his heir-apparent share my view.”
Me too brother. Let’s leave it there.
John
29. January 2008 at 21:45
question for you — i understand that over the past week Russia has signed various deals with various countries that has had the effect of making Europe more reliant on Russia. Does anything that happened this past week change your views from that which you published in this article? Please send me a note directly to my ic@ciment.com address as I don’t follow this blog.
29. January 2008 at 21:45
Peter - question for you — i understand that over the past week Russia has signed various deals with various countries that has had the effect of making Europe more reliant on Russia. Does anything that happened this past week change your views from that which you published in this article? Please send me a note directly to my ic@ciment.com address as I don’t follow this blog.
30. January 2008 at 12:58
Your comments on Russia, and her blind side in geopolitics, are equally applicable to Bolivia, where her neighbors (Brazil, Argentina and Chile) are in desperate need–at least for the short-term–of gas. Bolivia has signed gas supply contracts (with Brazil and Argentina)that she cannot currently meet–and it will likely only get worse in the future.
All those neighbors appear to be rubbing Bolivia’s leg–they fear a winter of freezing to death in the dark. Meanwhile, they’re instituting plans to build regasification plants, so they can buy LNG from other sources, and free themselves from ties to an unreliable partner.
Still, however, the government continues to talk about “gas commercialization” projects as if gas reserves are unlimited, needing only more drilling. It is quite possible (likely?) that only nominal additional reserves will be found by companies facing increasingly onerous contracts/taxation, and Bolivia–which claims to have South America’s second-largest gas reserves (after Venezuela) will find herself once again having squandered another opportunity to pull herself from the quagmire of poverty.
30. January 2008 at 16:13
Peter,
I guess the new projects in the Balkans that would further tighten Russia’s grip on Europe’s gas supply are all part of the same ‘unraveling’ process. Right? As well as the most recent Gazprom - OMV (Austria) deal. Then there are certain prominent EU politicians who are openly musing about the possibility of using the ill-fated Nabucco pipeline to transfer Russian(!) gas to Europe (so much for coherent EU opposition to Russia). Even Poland is proposing a new pipeline project to Russia. Europe/EU has virtually lost the ‘pipeline war’ with Russia. It’s a fact. It’s a fact acknowledged by a majority of energy analysts.
There has never been such a thing as ‘nod-and-smile attitude’ towards all things Russian in EU. However, given the way events are unraveling (no pun intended) Europeans or European politicians will find themselves forced to nod and smile to many more things Russian very very soon.
I am sorry to say this but articles such as this one make me wonder if I should just cancel my Stratfor subscription. Recently, Statfor analysis has been lacking in strategic depth, often compensating by large quantities of material very tactical in nature. Bottom line is you may impress some clueless housewives but if you really want any serious analysts to consider a source such as yours valuable and worth spending money on you will have to kick it up a notch. But that may just be your target audience…
As C.S. Lewis said, if you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth only soft soap and wishful thinking to begin, and in the end, despair.
30. January 2008 at 20:17
Dear Peter,
I see your article as propaganda as far as it concerns the style, the use or misuse of data and facts, and the main goal:
- you use “would be” every time you describe agreements or situations you don’t like; you use strong emotionally negative words to describe Russia and its politics
- you data and prognosis on gas consumption is surrealiastic and you may know that; your desription of Nord Stream project as European “just smiling” is a bit surprising - billions EURO are already engaged and future contracts signed; you manage not to mention the name Schreder - bravo!; saying “Russian culture that mixes xenophobia, bitterness, persecution and a sense of entitlement in equal measure” is just not intelligent for a service of your kind.
- goals:
Stratfor always describes as unexisting the things it deslikes, such as EU; and now you try to desribe in this way EU-Russia pipelines!
People who dislike and fear “terrible Russia” may like your article, but not people who know the issues you discuss even if they deslike Russia. I am Russian;)
The surface goal of your article - the message to Russians - don’t trust Europeans, fear Chinese. I may insure you Russians already do both thin. But the basic goal of your article is to say to Russians: don’t take asserive tone, as your future is gloomy and your confidence is adolescent complex. Well, that is no analysis, and no invitation to a dialogue, Peter. It’s intimidation and anti-Russian propaganda together with anti-Russian venom for Russians.
The all-pro-Western policies of late Gorbachev and early Eltsin were accepted by USA and EU with no gratude and backfired: bombing Kosovo, rapidely integrating Baltic countries in NATO, not leting Russia into WTO (Communist China is in, by the way) and few other points. Russia’s interests were never taken into account and promises were unkept. If there is no trust and talk, Russian elite drew conclusions: they (West) are dishonest with us and they take into account only strong boys.
The current Russian elites are indeed no rosy boys and they might be difficult partners. The real issue of Russian-EU and Russian-American relations is precisely mistrust. You deliberately contribute to it.
I wish we all do the opposite and thank you for reading this, Peter!
Sincerely
Timur
30. January 2008 at 20:31
The idea that Russians want to attach EU to Russia is correct.
But why you think it is dangerous to EU !?
EU likes stable gas supply and knows Russia is as tight to EU as EU to Russia. She is fundamentally dependent on these pipelines as difficult to move away as you underline it. How could Russia cut off supply to a given country unless it’s unpaid!? Do you remember that USSR never cut its supply with its ideological distrust to Europe. Russia made a unique mistake wrestling with Ukrain, but not with any of EU members. It’s business and mutual depedence no one can abuse without damaging itself. It’s a strong bond.
That is precisely what you deslike in this EU-Russia bond, but USA’s interest is not chaos and division in big Europe. Well, geopolitics say your have to break the German-Russian bond any time at any price. That is all for your analysis!?
I read Stratfor with interest and respect. But it seems that Russia is treated in a particular way. Is it unraveling of Stratfor?
30. January 2008 at 20:38
I count on Stratfor’s commitment for honest and accurate analysis and therefore I believe the anti-Russian propaganda will be replaced with neutral analysis.
31. January 2008 at 01:48
Bravo, Timur!
As for alleged Russian xenofobia we use to say here that there are only two forms of it in Russia.
First is ksiądzofobia - historically justified Russian mistrust for Western intentions.
Second is xynagogia - continuous attempts to quarrel Russian people with Jewish one.
All the rest is pure propaganda.
Thank you for your balanced and straight answer to Peter.
My best regards
Niko, Moscow
31. January 2008 at 10:36
Timur,
Da poshli oni na xer so svoei ksenofobiei. Nashi Migi syaadut v Rige!
2. February 2008 at 19:43
This is nothing more than a hatred-lead propaganda. And a very badly written piece, indeed.
2. February 2008 at 20:00
To Denis and Niko.
Thank you boys for supporting my open words to Peter. The aim is not to accuse, but to suggest a mild change in style.
If Stratfor says and thinks it provides intellegence about the world, and not only defends interests of a particular USA lobby with PR, it should treat Russia as well as India, China, or France. In some respect stronger, in some weaker.
Peter’s article is the article about and against the enemy. To serve global business Stratfor will abandon this view.
2. February 2008 at 20:13
To Denis O
Denis, ne soglasen s tvoimi migami. V blijaishie sto let ne sjadut, a potomu dogovarivatsa nado s EU i s Americoi. Ob’asnat, shto mi ne kings of the world s raketami, a partner.
Rossia ne vsegda, no poslednie dvesti let vela oboronitelnie voini i seichas nas voinoi ne uvlechesh, esli ne budet javnoi ugrozi pogibeli. Orujia - eto fon. A dogovarivatsa kak?
5. February 2008 at 10:12
Timur,
Kak? Nu vot kak syadem v rige tak i dogovorims’a))).
Eto vse shutki. Na samom dele nikto na zapade dogovarivatsa ne hochet i razgovarivat’ s nimi nado tol’ko s positsii sili. No eto konechno ne znachit chto ih nado migami pugat’ ili posadkami v rige… Nujen vseobyemlyuschii konstruktivnii podhod vklyuchayuschii v seb’a tak zhe elementi diplomatii, chem Putin & Co v printsipe uje i zan’ati.
5. February 2008 at 13:47
the russians are going to build the pipeline under water and let it sit there unnoticed and safe from turmoil since putin keeps his power by granting favors of immunity to the various crime syndicates operating within russians borders(and outside)it is only a matter of time before he calls in favors and accidents start to happen within this new liquified natural gas supply system that is going to undercut russian dominance in europes energy needs and when the european community is tired of the high price of exspensive and unreliable imported NG/LP then they are going to look for a cheaper and more reliable source buisness is WAR (there are alot of unemployed spetsnaz operatives looking for work )…just food for thought ….Ian
11. February 2008 at 03:48
A nice fairy tail as Bill Clinton recently said. Russia has been having its way in Europe for awhile now. German president is on board of directors Nord Stream project. Germany has exempted NordStream from all EU regulations. President Bush lobbied hard for Bulgaria not to join South Stream. Bulgaria chose alliance with Russia. Russia will control South Stream despite 50-50 split. Russia took control of Serbia energy company as thanks for support in Kosovo dispute.
As for China nothing to worry about. Russia recently slowed down military orders from China as well supply of spare parts. China is wholly dependent on Russia military hardware as well as spare parts.
24. February 2008 at 09:57
U CAN NOT ESCAPE FROM WHERE U SIT. TRHER FOR BIG DISEDVETIGE
IN YOUR RESONING.
5. March 2008 at 17:23
In the recent daily pocast on Europe and Medvedev, there is a reference on the correct prognosis made by Peter Zeihen about the new Russia-Ukraine gas dispute in this article.
I can not find any evidence of this correct prediction?
There is one passage: “Overt intervention in the Russian-speaking portions of Ukraine” - did here Peter ment gas cut off for unpaid supply?
This kind of self-referring “profecies” is bellow the waterline for a prognosis oriented think-tank.