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Preview: RealClearPolitics - Articles - Evgeny Morozov and Richard Shriver

RealClearPolitics - Articles - Evgeny Morozov and Richard Shriver

Last Build Date: Mon, 19 Jun 2006 00:19:35 -0600

Copyright: Copyright 2007

Putin's Energy Strategy

Mon, 19 Jun 2006 00:19:35 -0600

Such inconsistency is not lost by the "other side" in this game. Putin is proceeding confidently along the path of securing ownership of energy exports from both Kazakhstan and Turkmenistan. In other words, he believes (knows?) that Nazarbaev will cooperate with the US to achieve some near term goals, but in the end, he will turn his back on the US and do whatever Putin asks. Playing ball with the Kremlin is better in the long run than having to listen to the continued nattering of Western leaders about what is, for him, all this democracy baloney. Russia's Putin compensates for his lack of private sector background in the energy industry with a doctorate in economics and authorship of academic articles such as, "Mineral Natural Resources in the Strategy for Development of the Russian Economy". He has a good theoretical command of the uses and (by Western standards) abuses of the power of controlling energy supplies. In his case, effective control of 5% of the world's oil and, even more importantly, effective control of more than a quarter of the world's current gas reserves, translates into a relatively cheap ticket to more or less rule the world in a way that would make Stalin drool. No Russian troops are placed in harm's way, there is no costly arms race, no trains full of political prisoners heading for the gulag, and, in fact, Russian citizens are regaining their national pride as they watch Putin out-maneuver the Western powers. Furthermore, while Russian coffers are filling up, Western coffers are emptying (Russia's "Stabilization Fund" set up to collect proceeds from the oil and gas windfall, is approaching $70 billion). Putin intends to float the ruble and introduce its use in international fossil fuel transactions. Depending upon the extent to which such a strategy is realized, the US dollar could be replaced as the world's reserve currency, leaving the US with its current astronomical debt and too few buyers who want this debt, thus reducing the US to the status of a banana republic. Meanwhile, as Putin rolls out his master plan, the Russian people largely overlook the fact that he has slowly but surely set back the clock on democratic reforms, from independent media to free elections, put in motion by his predecessor, Boris Yeltsin. The Western powers have had plenty of time to plan and implement appropriate defensive strategies. The present energy crisis, which will continue for at least the next 3-4 decades even if the US and the EU immediately elected and appointed their most brilliant leaders capable of dealing with the crisis in a comprehensive way, began with the OPEC Cartel in 1973-4. OPEC ruptured a long-standing sweetheart deal for what were then the world's major oil companies who had determined decades earlier that a "fair" world market price to suppliers of crude oil was $2 per barrel. OPEC stood this buyer's market on its head in 1973-4 and said the price of oil is what we, the owner's and sellers of the oil, say it is. Well, almost. Even OPEC at the time had some difficulties getting its act together, but the initial scare caused the US Congress to conclude that dependency on foreign oil was a national security, as well as economic, risk. Congress passed a remarkable law in 1975 (the so-called Corporate Average Fuel Economy regulation) whereby US automobile manufacturers had to double the gas mileage of the average car sold by 1985. This law worked - efficiency of American automobiles went from 14 miles per gallon to nearly 28 (one error in hindsight is that the law excluded light trucks, the chassis' for today's popular gas guzzling SUVs). Not only did this law reduce US dependency on foreign oil, it also dramatically reduced harmful CO2 emissions at a time when Newsweek was warning the world of global cooling. Since 1975, no US Congress or administration has had the courage to take on the issue of US dependency on foreign oil. Now, to add to the task, the US is faced with growing dependency on foreign natural gas. If Vladimir Putin has his way, citizens of Europe wil[...]