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Washington Post, The (DC)

October 20, 2004
Edition: F
Section: Editorial
Page: A27

A New OPEC in the Pipeline?
Author: Artem Agoulnik

Article Text:

The recent surge in the cost of crude oil has made energy security a crucial election issue. Both President Bush and Sen. John Kerry have cited the development of a viable "hydrogen economy" and renewable energy infrastructure as important aspects of a diversified U.S. energy policy. But so far neither has focused on a fuel that is likely to become the second-most-used energy source in the world in the next few years: natural gas.

This lack of attention is a serious oversight. Natural gas is the fastest-growing source of primary energy, with global consumption projected to rise by over 2 percent annually through 2025. The most noticeable increase in use will take place in some of the world's developing nations, including the former Soviet republics and Eastern Europe, where Moscow is the leading supplier. But, according to the Energy Department, demand for natural gas in the United States is also expected to increase steeply -- nearly 40 percent by 2025.

The growing dependence of the United States on gas has the potential to alter its political dialogue with Russia, a country whose 28 percent share of global natural gas reserves is made more significant by the instability of the other leading exporters, including Iran and Saudi Arabia. Western Europe already relies on Russia for more than a third of its natural gas needs, Finland and Slovakia for a full 100 percent of theirs. Even the United States is expected to substantially increase its imports of liquefied natural gas from Russia by 2025.

Over the past several years, the Kremlin has emerged, virtually unchallenged, as the dominant global player in natural gas. Already heralded as the "Saudi Arabia of natural gas," Russia has also been able to solidify its grip on gas in its "near abroad" of Central Asia and the Caucasus.

Much of this has been done through Russia's sprawling, state-run energy monopolies. In April 2003, Gazprom, the Russian natural gas giant, finalized a 25-year deal with Turkmenistan to purchase Turkmen natural gas. As part of the arrangement, by 2009, Moscow will effectively be in charge of exporting all of Turkmenistan's natural gas, giving it crucial political leverage in the self-proclaimed "neutral" republic.

In June Russian President Vladimir Putin signed a 35-year agreement with his Uzbek counterpart, Islam Karimov, giving Gazprom rights to develop Uzbek natural gas reservoirs. Since then Gazprom has further expressed interest in acquiring a 44 percent share in the Uzbek pipeline monopoly, Uzbektransgas.

Also in June, Gazprom announced its intention to sign a five- to seven-year contract with Kazakhstan to participate in the development of its energy-rich Karachaganak field, and the company has expressed interest in acquiring a sizable share of the country's pipeline infrastructure. Discussions between Gazprom and high-ranking officials in Kyrgyzstan and Tajikistan have also taken place in the past year on similar topics.

In Russia's hands, natural gas has become a geopolitical weapon. Citing a "lack of payments," the Kremlin, via Gazprom, has shut off gas supplies to Belarus, Ukraine, Georgia and Armenia when the domestic or foreign policies of those countries have run counter to its interests. It has also managed to mend ties with Turkey, a longtime regional rival. Beginning in 2001, Gazprom linked Russia's Stavropol region to the Turkish capital of Ankara via the "Blue Stream" pipeline, making Turkey a major Russian energy client. Additional pipeline plans -- with Armenia and Iran -- are also in the works.

Russia has even begun to organize the world's natural gas exporters under its aegis. Analysts are predicting that the Gas Exporting Countries Forum, founded in 2001, may serve as a precursor to a natural gas OPEC with Russia at the helm. In the wake of the forum's June meeting in Cairo, the deputy chief executive of Gazprom, Alexander Ryazanov, made clear that the natural gas policies of member states should be "coordinated" so as to sell gas at the "highest price possible."

In the process, Russia -- already the world's leading oil exporter -- has positioned itself to become the undisputed global energy czar, with the proven ability to dictate policy to Europe and the United States.

This outcome can hardly be part of an energy policy either presidential candidate has in mind.

The writer is a program associate at the American Foreign Policy Council.

Copyright 2004 The Washington Post
Record Number: 1020041832662160

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