Monday, July 6, 2015

Putin's New Secret Weapon, Ownership Of 30% Of The World's Gas Supply

Published: November 23, 2006 Author: Tom McGhie
For Education and Discussion Only. Not for Commercial Use.

Putin's New Secret Weapon, Ownership Of 30% Of The World's Gas Supply

Tom McGhie, Mail on Sunday
23 November 2006

President Vladimir Putin came to the conclusion three years ago that Russia was sitting on a secret weapon more powerful than all its military might.

Ownership of 30% of the world's gas supply and being the second-biggest oil producer has given him a new and powerful economic bargaining counter.

And the former KGB officer has shown that he intends to use these resources to restore pride in Russia, which suffered in the years after the downfall of communism.

The bad news for Britain is that two of our largest oil companies, BP and Shell, which between them have invested more than £10 billion in Russia, are in the firing line as Putin attempts to get Russia a larger slice of the action. But the treatment meted out to Shell and BP pales into insignificance compared with the brutal way it treated Ukraine last year.

In the midst of negotiations on raising gas prices, the Russians suddenly cut supplies to Ukraine. This was devastating for Ukraine, but also for the rest of Europe, which relies on Russian gas coming through Ukraine's pipelines.

There has been similar pressure using gas as a political and economic weapon on other countries on its borders. What countries such as Lithuania and Georgia have in common is that they are mainly pro-West and have opted out of the Russian sphere of influence.

Earlier this month, Russia was accused by the Georgians of using its gas resources as a political weapon. The complaint came after Gazprom, Russia's state-owned gas company, announced that prices would double. This decision came in the middle of a political row between both countries sparking accusations that gas was a tool of Russian foreign policy.

Gela Bezhuashvili, Georgia's foreign minister, says: 'They present it as a commercial deal, but there is a portion of politics in it.'

Russia has a good argument for raising prices. Existing prices are heavily subsidised and half the market rate. And the Kremlin is reluctant to sell cheap gas to countries that have decided to shift their loyalties to the West.

But energy analysts have noted that there is a pattern to demands for price rises. Countries loyal to Russia get a better deal.

Strangely, Russia's crude use of gas has had a beneficial effect on UK energy policy. Suddenly, security of supply has become a key issue with the Prime Minister arguing that Britain must boost its own supplies of energy by restarting a nuclear rebuilding programme and developing our own renewable energy sources such as wind and wave power.