Monday, September 8, 2008

Russia Aims To Corner Energy Market

Russia aims to corner energy market.

ROME (Reuters) - Russia aims to extend its control over energy deliveries to the West and it is important that European countries push forward on efforts to diversify routes for oil and gas supplies, a senior U.S. official said on Monday.

As Vice President Dick Cheney visited Italy to seek support for Georgia after its brief war with Russia, the official, said: "The fact is Russia has worked hard to try to corner the market, so to speak, and is working to foreclose options to transit for those energy products across Russia.

"They want everything to come out through Russia and a lot of us think it's more important that there be diverse means of gaining access to those resources," he said, speaking on condition of anonymity.

"No one country ought to be able to totally dominate those deliveries."


Anaconda said...


This writer, in part, previously stated:

"I don't want to see Western Europe in a position to be susceptible to political or economic blackmail by Russia through their petroleum clout -- and if Russia doesn't sense "natural gas can be used as a weapon" as a viable option they won't use it.

Again, the best way to avoid that senario is not to engage in confrontation, but to increase supplies that diminish Russia's dominance of oil & gas -- particularly gas, as this posted article states.

My solution is easily achievable if Western governments are amenable, particularly the United States." -- July 21, 2008 (OIM)
Abiotic FSB Petrostate

This comment was made prior to the "Georgia Incident."

I'm glad to see an American official say, "it is important that European countries push forward on efforts to diversify routes for oil and gas supplies, a senior U.S. official said on Monday."

And see that "Europe also wants to ensure that the Baku-Tbilisi-Ceyhan pipeline, which ships 850,000 barrels per day of high quality Azeri crude from the Caspian to the Mediterranean, remains open and functioning."

Diversity of supply is critical to all parties concerned: The United States, Europe, and counter-intuitively, even Russia should welcome diversity of supply because stability, predictability, and consistency are important for world economic growth, which over the long run will bolster the security of all parties, including Russia.

But diversity is not enough if the diversity means the Middle East and Central Asian republics still supply the vast majority of oil & gas to Europe (the U.S. doesn't import a majority of its oil from the Middle East).

True diversity of supply, means building sources beyond the reach of Russian bear claws.

North America, South America, and other areas must increase oil & gas production.

Pipelines and oil wells on the flanks of Russia's border will continue to tempt Russia into old bad habits.

Not that pipelines and oil wells shouldn't be developed and built on the flanks of Russia's border.

All sources of oil & gas should be developed.

But with increased diversity of supply beyond Russia's grasp, there will be less temptation to think aggressive action, whether economic or military regarding Russia's own supplies or supplies close to its border, will gain Russia critical geo-political advantage.

The lesson for the Russian Bear must be that aggression will only bring political pariah status and diminished economic power, which will in turn diminish its military power.

There is evidence that lesson is already being learned as a result of the "Georgia Incident." Russia has paid a big economic price over the last month for "breaking Georgia's nose."

The Russian ruble has plunged, forcing the central bank to intervene to bolster the currency. The Russian stock market has also dropped sharply, with the benchmark RTS index losing about $290 billion in value since August 7. Scared by Putin's overwhelming military action, investors have pulled as much as $21 billion out of Russia over the last few weeks, according to a Goldman Sachs report cited by Friday by the Financial Times.

Naked confrontation is counter-productive. Sending strong diplomatic signals and taking concrete steps to diversify oil & gas supplies beyond even the temptation of Russia is the right step.

As this writer has consistently argued even before the Georgia got its nose broken.

Diversity of oil & gas supplies is in the national security interests of the United States.

Anaconda said...


Good news and hopefully a "face saving" agreement for all parties, that allows each to "climb down" from heated rhetoric.

As stated in the UK's Guardian newspaper, the deal allows all sides to claim a positive result from the agreement hammered out in Moscow with France's Nicolas Sarkosy playing an instrumental role in achieving the agreement.

Now steps need to be taken to insure all parties live up to their agreements.

Taking a step back from confrontation is a positive development.

David Ignatius provides interesting commentary on the agreement, both in terms of Russia's actions and intentions, but also on U.S. strategy since the "Georgia Incident" happened.

Has somebody been reading Oil Is Mastery in the State Department and the White House.

One can only hope.

Anaconda said...


Diversity of oil and gas supplies is critical. Some politicians want to block American offshore exploration & production.

The Carolina Trough is one area that should be explored as fast as possible. This area sits off the North Carolina - South Carolina coast.

This United States Geological Survey paper focusses on gas-hydrates, but don't be fooled, as is stated in the paper:

"The Carolina Trough is a significant offshore oil and gas frontier area where no wells have been drilled. It is a very large basin, about the size of the State of South Carolina, that has accumulated a great thickness of sediment, perhaps more than 13 kilometers. Salt diapirs, reefs, and faults, in addition to hydrate gas, may provide greater potential for conventional oil and gas traps than is present in other east coast basins."

Focus on this sentence: "Salt diapirs, reefs, and faults...may provide greater potential for conventional oil and gas..."

If you have been reading the Oil Is Mastery website for a while you know that all the above geological features are consistent with oil & gas deposits. The Carolina Trough is on the continental margin in an area with geologic similarities to Brazil's offshore where huge oil finds have been recently made.

Let's unlock this oil & gas for America's strategic national interest.