When Energy Comes from Russia, It's Also Power

By Patrick E. Tyler N. Y. Times News Service | THE JOURNAL RECORD, August 7, 2002 | Go to article overview

When Energy Comes from Russia, It's Also Power


Patrick E. Tyler N. Y. Times News Service, THE JOURNAL RECORD


WASHINGTON -- Behind the decision facing President Bush on whether to make war on Iraq is a set of calculations that ought to be called the realpolitik of oil -- and Russia is at the center.

Since Sept. 11, oil experts and politicians, including President Vladimir V. Putin, have been promoting Russia and its burgeoning energy sector as the strategic antidote to the threat of another oil shock. The big fears are of war in the Middle East or a move orchestrated against Western interests by Saudi Arabia and the Persian Gulf heavyweights in OPEC, as unlikely as that has seemed for a long time. Many oil traders say there is a $3 to $5 premium on Middle Eastern oil already, because of war jitters.

But Moscow has been engaged in a strategic migration to the West since Sept. 11 that buttresses the view of Russia as a critical partner to the West. And this is changing the psychology of both the marketplace and geopolitics.

Neither Bush nor Putin would be impolitic enough to say he has been drawing up an insurance policy against allies -- the stable oil- producing kingdoms and sheikdoms that have abandoned the notion that oil is a weapon in global politics.

But even if loyalty and alliance hold between Washington and its Persian Gulf friends, who can say what the effect would be if Saddam Hussein fired Scud missiles loaded with anthrax, mustard gas or some ghastly radiological substance onto the main Saudi oil loading terminal at Ras Tanura, causing panic and shutdown?

And since Sept. 11, there has been an additional, intangible element corroding Saudi-U.S. relations -- something between uncertainty and mistrust over the heavy Saudi representation among Osama bin Laden's martyrs and the Saudi tolerance for the culture of jihad. The Saudis, for their part, resent the loss of U.S. initiative to secure a Palestinian homeland, so evident under the elder George Bush and during most of the Bill Clinton years. Today, America and Saudi Arabia drink tea laced with the hemlock of unstated recriminations. "The psychological factor is there," an adviser to the royal family conceded.

In the world of realpolitik, public reassurances about stable oil supplies count only up to a point. Capabilities matter, just as they will in any war with Iraq, where President Bush will have to weigh the risks of going it alone, or nearly so.

Last fall, Bush told his energy secretary, Spencer Abraham, to add 108 million barrels of oil to the Strategic Petroleum Reserve. But that offers the U.S. market just one layer of shock absorption.

"The first principle of energy security is diversification," said Daniel Yergin, the oil markets analyst and historian, and by that measure Russia suddenly figures in international energy markets. The post-Soviet sag in gross oil production is steadily being reversed; indeed, Russia overtook Saudi Arabia this spring by pumping 7.28 million barrels a day in March. In annual figures, Russian oil exports, which bottomed at 3.16 million barrels a day in 1994, are expected to reach 5 million a day this year or next.

"The Russian oil industry is growing at an amazing rate, and it is bringing in Western talent, technology and investment, but most of all it needs markets," said Sarah C. Carey, a Washington lawyer who is on the board of Russia's second-largest oil giant, Yukos, which wants to supply U.S. refineries. By playing on the West's fear of disruption, Russia has found greater tolerance for its bully-boy tactics in the oil markets since Sept. 11; the only sound from the Saudis has been the gnashing of teeth.

But here is the rub of the debate: Russia cannot supplant Saudi Arabia as the world's guarantor of stable oil supplies in a clutch. "They are at full production," the adviser to the Saudi royal family said, referring to Russia. "Everybody is at full production except Saudi Arabia, Kuwait, Abu Dhabi and Venezuela. …

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