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Oil and Gas is Reshaping the World (Again)

It is all about oil and gas

Through the tenures of George W. Bush and Vladimir Putin the United States and Russia have been tied at the hip with oil and gas. With one little difference: one desperately needs the resources and the other has them in abundance.

This predicament has re-shaped the geopolitical landscape to an era that we thought we will never again and no matter how much George Bush declares that “Russia is not the enemy” and “we are not back to the Cold War,” we are.

It all culminated a few days ago with Putin’s threat that "If the American nuclear potential grows in European territory, we have to give ourselves new targets in Europe.” If the purpose was to unnerve, driving a yet another wedge between the United States and many Europeans some of whom have become increasingly hostile towards the policies of their trans-Atlantic ally, it was effective. TV and newspaper commentary in Europe got the message and the coverage was swift and widespread.

Economy and culture, with decidedly different hues in the two countries, have been pivotal and, although unexpected by many, it is not so strange why things evolved to this point.

The year 2000 gave America a new president. That was a country that won 50 years of world conflict, the sole superpower, cocksure of itself with a booming economy. True to form, its most recent previous worry was Y2K. Russia, huge as it has always been and also with a new president, was a shambles of its self-image with a state of economy and civic makeup that one can find only in Africa. Numbers were staggering: millions of HIV cases, rampant alcoholism, life-expectancy for men was 53 years, for many young women the only venue to making a living was prostitution in foreign countries. But there was something that people were forgetting. Both countries, rich America and decrepit Russia still had enough nuclear weapons to annihilate each other 100 times over.

Then came September 11, 2001 and America’s intervention in Iraq. It did not take long for the familiar American culture to take over and to diffuse the country’s focus. Did Iraq have anything to do with September 11? Were there weapons of mass destruction? Did the President or the CIA lie?

What rarely surfaces is that the answers to these questions are irrelevant in the big scheme of things. Yes the war has been mismanaged for which Bush may be relegated to the cellar of America’s presidents. But America has been and still is in the Middle East for oil. Any threat to that supply will be devastating to the country’s economy. True to form our politicians from both the left and the right talk about solar and wind that will never amount for more than one percent of the energy needs of the country. Ethanol is a scam and anthropogenic global warming is a cruel hoax.

Russia under Putin has been licking its wounds like a fallen lion, still fully aware of its potential strength. Nuclear weapons were the lion’s teeth but the muscle, the bulk was oil and gas. Putin understood this better than anybody and slowly but surely re-centralized both power and especially control of the resources. State owned Rosneft, a nothing entity five years ago has become one of the largest oil companies in the world. Gazprom, a gas monopoly not just in Russia, is positively gargantuan, six times the size of the next biggest, Shell and growing. Both are used as Russia’s battering rams in many countries, in what can only be described as energy imperialism.

Culture helped Putin all the way. Somebody had to be there to feel Russia’s anguish in the late 1990’s and early in Putin’s presidency. But the country, jilted in the world after losing its grandeur from the Soviet collapse, has been gradually emboldened by its newly found power, oil and gas. Flushed with cash on the back of its vast energy resources and high oil prices, Russia is again unmasking the old Soviet beast. Familiar traits are showing up — international political defiance, ignoring democratic principles, growing the muscles of police forces whose function is repression instead of protection, adoption of a bunch of nuisance laws and the suppression of any opposition. This metamorphosis not only has reshaped Russia’s internal policies but has injected venom in the country’s external relations, not just against the United States, but also against other countries at a very inopportune time just before the G8 summit in Germany. And the clincher: Putin is adored in Russia.

The new multiple-warhead missile, tested recently by the Russian military added to Putin’s threats are bound to resume the arms race and perhaps a proliferation of a new generation of nuclear weapons that have not been seen since the end of the Cold War. After almost two decades of relaxation, at least in the rhetoric, we are making a full circle back to the pre-Gorbachev era.

Will this new brinkmanship end in Europe or will it spread elsewhere? An obvious next move by Putin could be to approach the countries of the “Bolivarian belt” in Latin America, headed and agitated by Venezuela’s Hugo ChÃ?¡vez. The long term agreements signed by Gazprom and Lukoil to develop oil and gas fields and surface infrastructure in the area may be just the needed pretext for a re-emergence of the former soviet military presence in the Western Hemisphere that at one time led to the Cuban missile crisis. In a world that has been lulled by a presumably integrated Russia into the world community, the prospect of another Cold War would have been unthinkable and, if anything, any hostile world competition was supposed to happen between the remaining sole super power and emerging China. But oil and gas have been the great equalizers. Russia has the resources and America needs them and with nuclear weapons in the middle the new Cold War is here.

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Written By

Mr. Economides is editor-in-chief of the Energy Tribune.

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