Vladimir Milov
The main topic of Russia's current presidency of the Group of Eight
leading industrial nations is supposed to be energy security. At the end of last year
President Vladimir Putin called for a better investment climate, improved corporate
governance and innovative technologies as tools to address international energy security
challenges and claimed that Russia deserved a status of "fashion leader" in a
new global energy architecture.
Russia's official rhetoric is a sharp contrast with reality. Recently,
its energy policies have all been about increasing state control over the energy sector,
sacrificing investment, growth and efficiency. Production growth last year in the oil
sector fell to just over 2 per cent compared with an average of 8.5 per cent a year in
2000-2003. The earlier impressive increases were led by private sector companies, which
served as benchmarks of growth and efficiency for the whole country. But, by raising oil
export taxes, banning the construction of private oil pipelines and restoring control over
some of the oil companies (Yuganskneftegaz and Sibneft), the growth era was brought to an
end.
Destruction of Yukos, the largest private oil company, contributed to
the decline in growth as well: in 2004-2005, Yukos lost around 270,000 barrels a day of
oil production.
In the gas sector, production growth by Gazprom, the Soviet-created
monoA‚Apoly, was below 1 per cent in 2005. Market restructuring of Gazprom was blocked
by Mr Putin in 2003. Now production at the largest mature gas fields is sharply declining
and Gazprom's inefficiency does not allow the company to invest enough in development of
the new gas fields in the Yamal peninsula. These are no closer to introduction than 15
years ago.
Russia holds the largest gas reserves in the world but they are
stranded and the market cannot expect significant new volumes of gas from Russia in the
next eight to 10 years.
Russia has also announced a closing of doors for foreign investors in
the oil and gas sector through new legislation. This is a particularly heavy blow not only
for international energy security but for Russia itself. Oil and gas production is moving
to new greenfield and remote areas such as eastern Siberia and offshore, with extremely
long-term, capital-consuming and risky projects. The weak Russian financial system and
state energy companies, pressurised by the burden of debt generated during the recent
asset acquisitions, are not ready to finance such projects - but foreigners will not be
allowed to.
The era of quick recovery and success of the Russian oil sector, led by
private initiative and openness, is over. It has been replaced by a new era of state
domination, non-transparency, high risks and stagnation.
The recent gas conflict between Russia and Ukraine demonstrated what a
poor source of "energy security" Russia can be. We had been subsidising Ulkraine
with cheap gas for years but Russia made up its mind to increase gas prices more than
fourfold overnight only after the election of the new democratic leader, President Victor
Yushchenko. During the whole crisis, no Russian representative approached other European
importers of Russian gas to at least advise European partners what to do if Ukraine was
cut off and the bulk of Russian gas supplies to western and central Europe was putat risk.
"This is not our responsibility," Russian officials said on television,
A‚Adisengaging from the protection of European consumers. Political games in the
post-Soviet space seem to matter more.
Using the muscle of energy supply to exert more political influence and
put European energy-importing nations at risk - is that an example of the "global
architecture" the Kremlin wishes to build? Can we expect a serious world energy
security discussion under this environment?
As a Russian, I would welcome it if my country used the G8 presidency
to contribute to the improvement of global energy security, encouraging more transparent
and assured international energy markets. But you cannot build a global energy security
architecture on the basis of non-transparent state-dominated monopolies, destruction of
successful private businesses, closing doors to international investment and using energy
as a tool of neo-imperial politics.
Russia still has a long way to go to be able to discuss the real global
energy security issues with the world's largest industrial democracies.
The writer is president of the Institute of Energy Policy in Moscow and
Russia's former deputy energy minister
“Financial Times”, January 25, 2006
http://news.ft.com/cms/s/cd56caa6-8d47-11da-9daf-0000779e2340.html |