Ahead of the Curve: The New Axis of Oil

February 13, 2007 Topic: Security Tags: Energy PolicySuperpowerIraq War

Ahead of the Curve: The New Axis of Oil

Mini Teaser: On his landmark visit to Saudi Arabia, Russian President Vladimir Putin declared the two countries partners, not rivals. Last year, Flynt Leverett and Pierre Noel discussed Russian energy strategy.

by Author(s): Flynt Leverett Pierre Noel

Editorial Note: On his landmark visit toSaudi Arabia, Russian President Vladimir Putin declared the two countries partners, not rivals, saying, "RussiaandSaudi Arabiaare the world's leading energy producers and exporters, and here it is easy for us to find common ground." InQatar, the Russian leader noted, "gas producers should coordinate their activities." King Abdullah, for his part, told Putin: "The two countries enjoy huge economic potentials, vast natural resources and a variety of investment opportunities apart from a distinguished cultural heritage. They also enjoy huge political influence at the world stage. This will contribute to taking our mutual cooperation to new heights within a strategic perspective."Russia's energy diplomacy is in full swing-but to what end? Last year, Flynt Leverett and Pierre Noel discussed Russian energy strategy, and in light of Putin'sMiddle Easttour, TNI is offering these excerpts from their essay:

While Washington is preoccupied with curbing the proliferation of weapons of mass destruction, avoiding policy failure in Iraq and cheering the "forward march of freedom", the political consequences of recent structural shifts in global energy markets are posing the most profound challenge to American hegemony since the end of the Cold War. The most strategically significant manifestation, though, is Russia's willingness to use its newfound external leverage to counteract what Moscow considers an unacceptable level of U.S. infringement on its interests.

We describe these political consequences of recent structural shifts in global energy markets by the shorthand "petropolitics." While each of these developments is challenging to U.S. interests, the various threads of petropolitics are now coming together in an emerging "axis of oil" that is acting as a counterweight to American hegemony on a widening range of issues.

Russia stands as perhaps the leading exemplar of supply-side trends. After several years of uncertainty and contestation, President Vladimir Putin has successfully reasserted a definitive measure of state control over Russia's upstream oil and gas sectors, with NOCs like Gazprom and Rosneft playing increasingly important roles, the country's pipeline network firmly in government hands, Russian private-sector companies operating within parameters established by Moscow, and formidable barriers in place to large-scale foreign investment.

Suggestions just a few years ago that Russia could supplant Saudi Arabia as a swing producer for the global oil market were misplaced. There is no evidence that Putin or other senior leaders aspire to such a status, or that the Russian oil industry could muster what it would take to play such a role. Nevertheless, under Putin's presidency the internal conditions have been established for Russia to derive a significant measure of external leverage from its status as an important energy producer.

Moscow is using its market power to push back against the United States in arenas where it perceives U.S. infringement on its interests. Since the collapse of the Soviet Union, the list of accumulated Russian grievances over U.S. initiatives has grown ever longer: NATO enlargement, abrogation of the Anti-Ballistic Missile Treaty, basing of U.S. forces in Central Asia, the Iraq War and support for the "color revolutions" in states neighboring Russia. Through the late 1990s, Russia's ability to respond to these provocations was negligible. The Russian military was bogged down in Chechnya, and low oil and gas prices contributed to economic weakness--epitomized by Russia's 1998 currency crisis--making Russia dependent on the United States and other international players for assistance. In recent years, however, Russia's autonomy has been reinforced by high energy prices, and Putin and his advisors have decided they can use this market power to "push back" against the United States.

Since 2003, Moscow has worked assiduously to establish a new sphere of influence in Central Asia, using regional autocrats' interest in resisting U.S. pressure to democratize, and China's interest in avoiding "encirclement" by U.S. forces, to maximize pressure on America. Russia's status as a major energy producer has given it important tools for pursuing Putin's regional strategy: investment capital with which to assume a leading role in the development and marketing of Central Asian energy resources (with NOCs like Gazprom acting as effective agents of Kremlin policy) and control over access to Russia's state-owned pipeline system, which is essential for moving Central Asian oil and gas to markets in Europe.

Russia has also used its energy-based market power to bolster its political influence in other strategically vital regions in ways that could potentially weaken America's international position. Perhaps most notably, Moscow has taken advantage of its market power to reinforce and enhance its otherwise sagging strategic position in East Asia. Although geopolitical legacies and existing transportation infrastructure orient Russian energy exports toward Europe, Moscow has used the prospect of substantial energy exports from eastern Siberia and the Russian Far East to markets in East Asia to make itself a major factor in the foreign policies of both China and Japan, playing on the interests of Beijing and Tokyo in balancing traditional sources of hydrocarbons from the Middle East in their energy profiles.

The larger reality is that U.S. foreign policy is ill suited to cope with the challenges to American leadership flowing from the new petropolitics. Current policy does not take energy security seriously as a foreign policy issue or prioritize energy security in relation to other foreign policy goals.

The United States cannot change the course of Moscow's energy policy or foreign policy, but American diplomacy can mitigate Russian policymakers' threat perceptions in exchange for more cooperative Russian behavior. This would require the United States to reach a set of strategic understandings with Moscow encouraging mutual respect for each side's critical interests--and also to make clear privately that Washington and its Western partners will not recognize Russia as a provider of energy security as long as it plays geopolitically on the energy security of others.  More broadly, U.S. policymakers need to remember that, even for a global hegemon, to govern is to choose. Washington cannot continue to disregard the impact of its foreign policy choices on the interests of key energy-producing states like Russia if it expects these states not to use their market power in ways that run counter to U.S. preferences.

Taken from "The New Axis of Oil", The National Interest, Summer 2006. The full text of the article can be accessed here.

Flynt Leverett is senior fellow at the New America Foundation and Pierre Noel is part of the Electricity Policy Research Group at Cambridge University's Judge Business School.

Essay Types: Essay