Venik (![[info]](http://l-stat.livejournal.com/img/userinfo.gif){kind=small} venik4) wrote,@ 2008-09-01 13:02:00 |
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The EU Gets the Pipe
As expected, the EU resolution on Russia was all gasconade and bravado. Russia's unspoken threat to restrict energy supplies to the European Union did the trick. Gordon Brown found out that a “root-and-branch” review of relations with Russia may be difficult when you are covered head to toe in Russian oil. Today Russia is supplying nearly 35% of oil and 40% of natural gas consumed by the European Union. The EU is desperate to diversify its natural gas and oil supplies.
The key component in this diversification plan is the proposed Nabucco natural gas pipeline linking Erzurum, Turkey with Central Europe. The Nabucco project will connect with the gas pipeline running from Azerbaijan via unstable Georgia and separatist-infested Turkey. Not exactly the most dependable of arrangements. Just a few weeks ago PKK militants in Turkey blew up the Baku-Tbilisi-Ceyhan pipeline and threatened more such attacks in the future. Not to mention that the pipeline passes near another unstable, ethnically-distinct and potentially breakaway region of Georgia – Ajaria, which also controls Georgia's largest commercial port in Batumi.
A possible decision by the EU to postpone the EU-Russia summit may force Putin to look for a new place to sleep. (Source: MARKKU ULANDER/AFP/Getty Images, Putin at the 2006 EU-Russia Summit)
For its part, Russia is also seeking to diversify its gas and oil export markets. The key to Russia's plan is the nearly 3,000-mile Eastern Pipeline, linking East Siberia and the Pacific Ocean. The pipeline project, with an estimated cost of $24 billion, has been delayed by one year due to adverse weather conditions and technical problems. Also, because of environmental concerns, the pipeline had to be moved 25 miles north of lake Baikal. After stepping down as Russia's president, Putin took personal charge of the pipeline project, which is currently due to open in late 2009. The pipeline will give Russian oil producers direct access to markets in China, Korea, and Japan, dramatically increasing Russia's leverage over the European Union. In the pipeline war, Russia's vast size is a definite advantage.
On Sunday, ahead of the EU meeting in Brussels, Medvedev announced that Russia's recognition of independence of Georgia's two breakaway regions was irreversible. He also announced that Russia will sign bilateral agreements with South Ossetia and Abkhazia to provide these two nations economic, social, humanitarian, and military assistance. The purpose and timing of this announcement were to show the EU that an economic confrontation with Russia was not going to change Russia's policies toward Georgia and its former territories.
So why, twenty years after the end of the Cold War, the Europeans and the Americans still lack any kind of useful leverage against Russia? The various complicated reasons boil down to two simple points: political mistrust and economic protectionism that force the West to keep Russian businesses at an arm's length. The US still haven't repealed the 1974 Jackson-Vanik amendment denying Russia “most favored nation” trading status due to emigration restrictions. Such restrictions in Russia have been lifted in the late 1980s. The result of this pigheaded approach to doing business with Russia is that, when push comes to shove, the West finds itself without means to influence Russian foreign policy, while still dependent on Russian oil and gas.
As expected, the EU resolution on Russia was all gasconade and bravado. Russia's unspoken threat to restrict energy supplies to the European Union did the trick. Gordon Brown found out that a “root-and-branch” review of relations with Russia may be difficult when you are covered head to toe in Russian oil. Today Russia is supplying nearly 35% of oil and 40% of natural gas consumed by the European Union. The EU is desperate to diversify its natural gas and oil supplies.
The key component in this diversification plan is the proposed Nabucco natural gas pipeline linking Erzurum, Turkey with Central Europe. The Nabucco project will connect with the gas pipeline running from Azerbaijan via unstable Georgia and separatist-infested Turkey. Not exactly the most dependable of arrangements. Just a few weeks ago PKK militants in Turkey blew up the Baku-Tbilisi-Ceyhan pipeline and threatened more such attacks in the future. Not to mention that the pipeline passes near another unstable, ethnically-distinct and potentially breakaway region of Georgia – Ajaria, which also controls Georgia's largest commercial port in Batumi.
A possible decision by the EU to postpone the EU-Russia summit may force Putin to look for a new place to sleep. (Source: MARKKU ULANDER/AFP/Getty Images, Putin at the 2006 EU-Russia Summit)
For its part, Russia is also seeking to diversify its gas and oil export markets. The key to Russia's plan is the nearly 3,000-mile Eastern Pipeline, linking East Siberia and the Pacific Ocean. The pipeline project, with an estimated cost of $24 billion, has been delayed by one year due to adverse weather conditions and technical problems. Also, because of environmental concerns, the pipeline had to be moved 25 miles north of lake Baikal. After stepping down as Russia's president, Putin took personal charge of the pipeline project, which is currently due to open in late 2009. The pipeline will give Russian oil producers direct access to markets in China, Korea, and Japan, dramatically increasing Russia's leverage over the European Union. In the pipeline war, Russia's vast size is a definite advantage.
On Sunday, ahead of the EU meeting in Brussels, Medvedev announced that Russia's recognition of independence of Georgia's two breakaway regions was irreversible. He also announced that Russia will sign bilateral agreements with South Ossetia and Abkhazia to provide these two nations economic, social, humanitarian, and military assistance. The purpose and timing of this announcement were to show the EU that an economic confrontation with Russia was not going to change Russia's policies toward Georgia and its former territories.
So why, twenty years after the end of the Cold War, the Europeans and the Americans still lack any kind of useful leverage against Russia? The various complicated reasons boil down to two simple points: political mistrust and economic protectionism that force the West to keep Russian businesses at an arm's length. The US still haven't repealed the 1974 Jackson-Vanik amendment denying Russia “most favored nation” trading status due to emigration restrictions. Such restrictions in Russia have been lifted in the late 1980s. The result of this pigheaded approach to doing business with Russia is that, when push comes to shove, the West finds itself without means to influence Russian foreign policy, while still dependent on Russian oil and gas.
