Putin's petro politics

During the cold war, Moscow's muscle lay in its nukes. Now it lies in oil and gas, with many of Russia's neighbors becoming dependent on its energy exports. That could be a benign trend if the Kremlin wasn't using its petroleum as a tool for power.

It doesn't have to be this way.

Europe, which imports more than 60 percent of Russia's petro export motherlode, and Moscow could be experiencing a harmonious, commercial coexistence based on the laws of supply and demand.

A win-win for everybody.

Except that Russia wants much more of the "win," and not just the economic winnings. With NATO and the European Union expanding to its doorstep, Russia feels threatened and seeks to expand influence over its so-called near abroad. In Russia's eyes, energy is a handy way to apply political pressure (some say blackmail).

This has not gone unnoticed by the West. NATO, it was reported this week, is concerned that Russia may be seeking to form an international gas cartel. Russia has the largest natural gas reserves in the world. By joining with countries such as Algeria, Libya, and nations of central Asia, it could form a market-shaping club, as OPEC has done for oil. Moscow denies that it has anything of the sort in mind, but also says a gas cartel is "possible" if major producers want one.

The worry at NATO is that Russia could use a cartel to further pressure Europe. Last January, it turned off the gas to Ukraine, in part over a price dispute, but also, Europeans suspect, as payback for Ukraine embracing the West. Now, it's doubling the price of natural gas to Georgia, where it's encouraging separatist regions to break off and rejoin Russia.

Up and down its western flank, Russia is playing European countries off each other – bypassing Poland for an undersea gas pipeline that empties directly in Germany, for instance. The Poles are livid over Russian energy politics, and are now blocking European Union talks to renew economic agreements with Russia.

Russia's also looking east. President Vladimir Putin expects Asia's share of his country's energy exports to rise from 3 to 30 percent in 10 years – mostly due to fuel-hungry China. The US worries about a Beijing-Moscow axis.

So, how can a petro détente – energy trade for the sake of economics, instead of geopolitical control – be encouraged?

One incentive may come from Russia's home front. Because of a lack of investment and expertise in production, Russia faces a domestic gas shortage. This might push it to allow increased foreign investment in energy production.

In turn, such a move would help entwine Russia and Europe so that Moscow has less wiggle room to pose a threat. But Europe will have to stand united if it wants Russia to play by the rules of international investment, which so far it hasn't.

And speaking of rules, another influence may be Russian membership in the World Trade Organization, which just came a step closer now that the Bush administration has given its approval. Once in the WTO, Russia will be subject to global standards of trade – and repercussions if it fails to meet those standards.

It's not the cold war, thankfully. But a bear armed with pipelines still has claws.

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