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Central Asian Gas: Russia Steps Up Competition for Resources

Posted on: Thursday, 17 May 2007, 09:00 CDT

The EU and Russia's only common ground on energy policy is that Europe wants the gas Russia has, but that is not enough to ensure security of supply in Europe's energy-starved future. President Putin's recent tour to secure new contracts in central Asia is symptomatic of a fundamental difference of opinion between the EU and Russia on how energy markets should be organized.

With each passing week, the energy liberalization agenda of the EU - which is focused on open competition and transparency - seems completely out of step with the agenda of Gazprom, wrapped up as it is in the naked self-interest of the Russian state.

To be sure, European governments are constantly intervening in the energy business in sly and not-so-sly ways, to push their national interests above purely commercial decisions. However, Brussels, in particular the Competition Directorate-General, normally acts as an effective counter-balance. There is no such counter-balance in Russian policy-making.

In this light, the constant harping of Brussels on the need to open Russian gas network infrastructure to foreign access, for instance through the provisions of the Energy Charter, seems idealistic. It simply will not happen, because President Putin sees energy policy through the prism of big power politics.

For instance, Russia has long declared that central Asia is within its special sphere of influence. Russian policymakers are steaming at the influence of the US in its "near abroad" (particularly in Kazakhstan, where the US is the largest foreign investor) and at the proposal for the Nabucco pipeline to cut out Russia from the central Asia-to-Europe transportation route.

In response, President Putin set out on a tour that has been described as a Caspian 'energy quest.' This reflects the fact that any increased American (or Chinese) involvement in extracting central Asian energy resources is a blow to Russia's strategic interest: dominating the extraction and delivery of gas.

Acknowledging that Russia operates on a different model would help the EU formulate an external energy policy built on more than wishful thinking. The CEOs of Europe's largest utilities have already offered their solution: increased consolidation and the formation of super-utilities. Liberalization may not be antithetical to security of supply, but, by the same token, access to energy resources is nowhere left purely to the market, and this must be taken into account in Europe's grand strategy.

Source: Datamonitor

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