The Russia-Ukraine crisis is a reminder that politics, not the
market, is driving global energy policies
Wednesday January 4, 2006
You may have thought the age of empires was over, that in today's
globalising world relations between states were governed by
economics, market forces and free trade, rather than battles for
political influence between the great powers. When it comes to the
quest for, and control of, energy supplies, however, we still live in
a partly 19th-century world.
Compared with the situation earlier this week, Russia's attempt to
more than quadruple the price of the gas it charges to Ukraine is no
longer affecting other European countries as severely as it was. None
the less Russia continues to seek to withhold gas from Ukraine,
exerting a stranglehold on the nation that would appear to be
motivated as much by politics as economics. Smarting from Ukraine's
recent turn to the west, including Nato and the EU, Russia wishes to
bring its once vassal state back into its sphere of influence. Russia
has long offered subsidised energy to such states to help keep them
within its fold. Threatening to hike Ukrainian gas prices to free
market levels is in this respect the modern equivalent of a warning
shot fired from the Russian imperial gunboat.
But Russia is not alone in treating energy security as the means of,
or motive for, imperial-style endeavours. The quest for influence
over oil and gas reserves underlies much recent western intervention
in the Middle East and has driven high-profile political developments
in Latin America, central Asia and elsewhere. We need to recognise
this energy imperialism as a fact of the modern world. For only by
recognising it can we find ways to soften its nastier elements.
There are two forms of modern energy imperialism. The first, typified
by Russia, involves producers using their leverage over supplies or
energy transport systems to influence political outcomes. Most
memorably, Opec, the Middle East-dominated oil producers' cartel,
tried this by restricting oil supplies in the 1970s, aimed partly at
shifting western policy towards the region.
Today two Latin American producer states are using energy as a tool
in standing up to the "imperial" west. Venezuela's Hugo Chavez has
threatened to interrupt oil shipments to the US and is tapping the
state's burgeoning oil revenues to win political support. In Bolivia,
Evo Morales recently swept to power on promises to take back control
of gas reserves from multinationals.
The second form of this imperialism involves consumer states
launching political or military manoeuvres to secure supplies.
Whether or not the US and Britain invaded Iraq with a sincere belief
in weapons of mass destruction, no one doubts that fears over oil
security played a part in strategic calculations - particularly after
September 11 had so shaken the west's trust in Saudi Arabia.
Now, with oil prices so high, and many western oilfields in decline,
western firms and governments are working together (peacefully this
time) to stake out new territories to reduce dependence on the Middle
East. Around the Caspian, western political interests have again
conflicted with Russia's: the path of a new BP-operated pipeline from
Azerbaijan to Turkey, for example, was the subject of a major
geopolitical tussle between west and east. Japan and China are also
arguing over pipeline routes from Russia's far-east energy reserves,
while China's oil corporations are busy seeking alliances with Middle
East and African governments.
If Britain opts to build more nuclear power stations this will be
partly due to fears of reliance on foreign (Russian) energy. With our
transport system still dependent on oil, however, reviving nuclear
will hardly remove this problem.
One reason energy helps to revive the imperial urge for consumer
nations is that, for all the growth of free markets and trade, energy
security is paradoxically too important to the smooth running of
capitalist economies to leave entirely to market forces. Our economic
systems comprise a huge investment in infrastructure (including
roads, cars, buildings and power stations) dependent on fossil fuels.
The imperial temptation for producers is related: the political
levers it creates can be too powerful to resist. The issue here is
not just geographic concentration of fossil-fuel supplies but the
fixed and monopolistic nature of energy infrastructure: pipelines
supplying entire nations can be flicked on or off on a political
The inevitability of modern energy imperialism needs to be
recognised. For consuming countries, securing energy supplies must be
achieved in a way that better serves the long term interests of
producing countries, rather than taking the form of western support
for compliant but corrupt regimes or ill-conceived invasions that
provoke further violence.
And producing countries should be encouraged to understand that their
long term interest is often better served by working with consumer
states, rather than imposing ultimatums upon them. Russia's hard-ball
tactics with Ukraine have damaged its credibility as a secure
supplier with big European customers.
Eventually oil and gas may be replaced by renewables but, for the
time being, energy imperialism is here to stay, and efforts should
focus on making it a more benign force.
Daniel Litvin is author of Empires of Profit: Commerce, Conquest and