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December 05, 2006 (the date of publication in Russian)

Sergey Pravosudov

THE "GAS OPEC" AND THE "NATO ENERGY CLUB"

Both projects may be implemented only in the distant future

The phantom of a potential analogue of OPEC, unifying natural gas- extracting and exporting countries, has lately become a subject of vivid debate in the mass media. Once raised by a Russian politician (namely, by Valery Yazev, chair of Russian State Duma's Committee on Energy, Transport and Communications), the "Gas OPEC" option is now being widely discussed also by European and US experts.

The existing Organization of Petroleum Exporting Countries, OPEC, unifies a number of countries which decide on amounts of oil exports, in order to prevent a decline of global prices. The mission of the supposed "Gas OPEC" would be similar. Officially, Gazprom, as well as the Russian President's Staff, denies any relevant intentions. That is quite natural, as any theoretical speculation over a business idea, long before it can be implemented, would undermine its prospects. It is also natural that a design of this kind would be strongly resisted by gas-consuming countries, including not only Europe and the United States, but China and India as well. Any consumer would prefer a choice among a number of producers, as competition among them would promote lower prices.

 

THE GAMES OF THE EUROBUREAUCRACY

The idea of a "Gas OPEC", as soon as it was made public, underwent harsh criticism from the European Commission and NATO. It is noteworthy that the leading EU countries – Germany, France and Italy, which are also the top purchasers of Russian gas, are behaving much more calmly. Instead of inventing mechanisms to pressure Gazprom, they prefer developing relations with Russia’s Government and its major gas exporting corporation. While Italy hopes to boost purchase of Russian "blue fuel" through expansion of the Blue Stream pipeline, Germany and France anticipate implementation of the North Stream project (earlier known as the North European Gas Pipeline, NEGP).

The protests of the European Commission are explained with a fight for the division of responsibilities between national governments and EU's central apparatus. At present, the EC intends to establish a common energy market within the EU framework. The Commission has already forced the major European energy corporations to disavow long-term contracts with consumers. Today, E.ON-Ruhrgas does not have a right to sign agreements for more than a year. This restriction is an element of the effort of Brussels bureaucrats to split local monopolies for gas delivery and thus guarantee a market competition.

Further plans of the Eurobureaucracy suggest a ban on distribution of natural gas for owners of gas transport networks. In the Netherlands, the national gas distributor, Gasunie, is already separated into N.V. Nederlandse Gasunie (owner of the infrastructure and logistics) and Gasunie Trade & Supply B.V. (involved in extraction, purchase, and distribution of gas). The former is now completely nationalized, for the purpose of "providing equal access to the infrastructure" for all of the companies. Now, EC officials impose pressure upon gas corporations of other countries, particularly E.ON-Ruhrgas. This is a headache for Gazprom, which has invested considerable amounts of money in the construction of gas pipelines and subterranean gas storages (SGS) on the territory of Germany (through Wingas), which the corporation is not going to give up.

Meanwhile, the European Commission obviously intends to achieve a right to negotiate with gas suppliers on behalf of all EU member states. If the effort succeeds, the producers of "blue fuel" are likely to be significantly weakened.

Naturally, major European concerns, with support from their governments, are resisting to EC's pressure. E.ON-Ruhrgas, ENI and Gas de France have lately prolonged their long-term agreements with Gazprom. In this way, they safeguarded large-scale gas deliveries for a period of two decades. Given the depletion of Europe's resource base, this precaution makes sense.

 

NATO HAS FOUND AN ADVERSARY

According to Financial Times, NATO experts have prepared a special report which warns the leaders of allied countries of a possibility of a "Gas OPEC", supposedly including Russia, Algeria, Qatar, Libya, Central Asia states, and Iran. The key role in this "cartel", as US analysts believe, is ascribed to Russia.

The undesired cartel Ц which has not yet emerged Ц is most hysterically opposed by Poland, which is now promoting a strategic counterbalance in the form of a "NATO Energy Club". The idea has already gained support among the younger EU members, primarily the Baltic States. Not surprisingly, this idea has been grasped by the US leadership, for which a "NATO Energy Club" would serve as a convenient tool for retaining American influence in Europe.

The NATO summit convened in late November in Riga and particularly focused on the subject of "energy security". On the eve of the event, Richard Lugar, chair of US Senate's Foreign Relations Committee, delivered a number of remarkable public statements. He actually urged to transform NATO into an alliance of energy consumer states, opposed to Russia Ц which, as he believes, is going to practice energy blackmail in the nearest future.

According to Mr. Lugar's forecast, a lack of energy and manipulation with energy are likely to emerge as the most probable source of armed conflicts in Europe. The Senator believes that Gazprom's decision to temporarily cease gas deliveries to Ukraine was a demonstration of the efficient use of the "energy weapon" for political purposes. Addressing the NATO summit, Richard Lugar proposed that the alliance develop a plan of measures in case Poland, Germany, Hungary, Latvia, or another NATO state undergoes "the same threat as Ukraine". In this way, the Senator plainly pointed out at the probable enemy of NATO in the next war.

Moreover, according to Mr. Lugar's view, an energy war should be equated to a usual war, as "an offensive, involving energy as a weapon, is able to destroy a national economy with hundreds or even thousands of casualties". From this standpoint, he urged to apply Chapter V of NATO's Charter, which recognizes an attack on one of the member states to an offensive on the whole alliance, also to the energy sphere. He even proposed that Reforger, the nearest large-scale military exercise, be modeled as a rescue mission in a country which has become a victim of "geostrategic blackmail".

 

THE ENERGY FRONTS

The lines of confrontation are visible already today. President George W. Bush has expressed support for entry of Ukraine and Georgia into NATO. It is noteworthy that the largest amount of Russian gas supply for Europe is transported across Ukraine. Meanwhile, Azerbaijan is going to pump gas to Turkey via Georgia. Definitely, the United States would like to achieve control over the transit countries. Not surprisingly, the North Stream pipeline, designed to establish a direct connection between Russia and Germany, is vehemently opposed by Poland and the Baltic states. For the same purpose of control of Russia's gas deliveries, Poland proposes to expand the facilities of Yamal-Europe gas pipeline.

The United States have always been opposed to the Blue Stream pipeline; today, Washington is trying to prevent its expansion. The US side is promoting construction of a gas route which would supply Turkey and then Central Europe with gas from Azerbaijan, Turkmenistan, and Kazakhstan. The Baku-Tbilisi-Erzurum gas pipeline is practically completed. However, Turkey is not ready to import gas along this route. It is probably satisfied with deliveries from Russia. Meanwhile, Turkmenistan and Kazakhstan have signed long-term agreements with Gazprom, and donТt display much interest in construction of a gas pipeline across the bottom of the Caspian to the Azerbaijani coastline.

In addition, the European Commission, as well as the leaders of Poland, is strongly insisting that Russia sign the Transit Protocol of the Energy Charter, which suggests free access to Russia's gas transport infrastructure for the "blue fuel" of other countries. President Vladimir Putin has already claimed that Russia is not going to sign the current version of the Protocol. Europeans are interested in development of Iran's gas deposits, hoping to build a pipeline from Iran. But the United States are against this, as they perceive the Iranian regime as hostile.

Russia would certainly like to join gas extraction and distribution projects in Algeria and Iran. However, this is not a simple task, and the "Gas OPEC" will hardly be established in the nearest time Ц as the gas contract prices are too pegged to oil quotations, and this situation is unlikely to change.

On the other hand, cooperation among gas producing countries is likely to increase if Europe and the United States agree to establish a "cartel of consumers". In this case, countries with high reserves of hydrocarbons, in their effort to pursue independent foreign policies, may seriously assess coordination of their projects in the sphere of gas exports.

In other words, a "Gas OPEC" would be of demand exceptionally as an alternative to a "NATO Energy Club".


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