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Michael Klare on “Energo-Fascism” of Russia

Today from the leftist author Michael Klare on TomDispatch.com, an essay focusing on the militarization of global energy politics. While Klare’s positioning of these issues is aggressively anti-government and paranoid, his section on Russia is fairly accurate.

The Rising Energy Superpower At the end of the Cold War, it appeared as if Russia was a forlorn, wasted ex-superpower, impoverished in spirit, treasure, and influence. For years, it was treated with disdain by American officials. Its leaders were forced to swallow humiliating agreements like the expansion of NATO to Moscow’s former satellites in Eastern Europe and the abrogation of the Anti-Ballistic Missile Treaty. To many in Washington, it must have seemed as if Russia was little more than a relic of history, a has-been never again slated to play a significant role in world affairs. Today, Moscow, not Washington, seems to be enjoying the last laugh. With control over Eurasia’s largest reserves of natural gas and coal as well as enormous supplies of petroleum and uranium, Russia is the new top dog — an energy superpower rather than a military one, but a superpower nonetheless. First, a look at the big picture. Russia is the absolute king of natural gas producers. According to BP (the former British Petroleum), it alone possesses 1.7 quadrillion cubic feet of proven gas reserves, or 27% of the total world supply. This is even more significant than it might appear because Europe and the former USSR rely on natural gas for a larger share of their total energy — 34% — than any other region of the world. (In North America, where oil is the dominant fuel, natural gas accounts for only 25% of the total.) Because Russia is by far the leading supplier of Eurasia’s gas, it enjoys a position of supply dominance unmatched by any energy provider — except Saudi Arabia in the petroleum field. Even in that realm, Russia is the planet’s second leading producer, falling just 1.4 million barrels short of Saudi Arabia’s 11.0 million barrels per day at the start of 2006. Russia also possesses the world’s second largest reserves of coal (after the United States) and is a major consumer of nuclear energy, with 31 operational reactors. Soon after assuming power as president in 1999, Vladimir Putin set out to convert this superabundance of energy — the economic equivalent of a nuclear arsenal — into the sort of political clout that would restore Russia’s great-power status. By controlling the flow of energy to other parts of Eurasia from Russia and former Soviet republics like Kazakhstan and Turkmenistan (whose energy is exported through Russian pipelines), he reasoned, he could exercise the sort of political influence enjoyed by Soviet officials during the heyday of the Cold War. To accomplish this, however, he would have to reverse the wide-ranging privatization of the oil and gas industry that occurred in the early 1990s after the breakup of the USSR and bring vital elements of Russia’s privately-owned energy industry back under state control. Since there was no legitimate way to do this under Russia’s post-Communist legal system, Putin and his associates turned to illegitimate and authoritarian methods to de-privatize these valuable assets. Here, we see another emerging face of Energo-fascism. Remarkably, Putin himself had long before spelled out the rationale for concentrating control over Russia’s energy resources in the state’s hands. In a 1999 summary of his Ph.D. dissertation on “Mineral Raw Materials in the Strategy for Development of the Russian Economy,” he asserted that the Russian state must oversee the utilization of the country’s mineral raw materials — including oil fields in private hands — for the good of the Russian people. “The state has the right to regulate the process of the acquisition and the use of natural resources, and particularly mineral resources, independent of on whose property they are located,” he wrote. “In this regard, the state acts in the interests of society as a whole.” No better justification for Energo-fascism can be imagined. The most famous expression of this outlook has been the so-called Khodorkovsky Affair. In 2003, Mikhail Khodorkovsky, the CEO of Yukos, then Russia’s top oil producer, was arrested on fraud and tax-evasion charges. He had run afoul of Putin by pursuing all sorts of energy deals independent of the state, including possible joint ventures with Exxon Mobil, and by supporting anti-Putin political forces inside Russia — either of which would have alone been sufficient to earn him the Kremlin’s wrath. However, it is now apparent that Putin’s ultimate goal in engineering the arrest was to seize control of Yuganskneftegaz, Yukos’ prime asset, accounting for about 11% of Russia’s oil output. With Khodorkovsky and his top associates in prison awaiting trial, the government auctioned Yuganskneftegaz to a secretive shell company, which then resold it to state-owned Rosneft at a below-market price. In one fell swoop, Putin had managed to dismember Yukos and turn Rosneft into the country’s leading oil producer. The Russian president has also sought to extend state control over the distribution and export of oil and gas by blocking any effort by private firms to build pipelines that would compete with those owned and operated by Gazprom, the state-owned natural gas monopoly, and Transneft, the state oil-pipeline monopoly. The United States and other consuming nations have long pushed for the construction of privatized oil and gas pipelines in Russia to increase the outflow of energy to Europe and other foreign markets as well as to dilute the power of Gazprom and Transneft. The Kremlin has, however, systematically foreclosed all such efforts. If the concentration of ownership of energy assets in the state’s hands through legally dubious means is one dimension of emerging Energo-fascism in Russia, a second is the utilization of this power to intimidate have-not states on Russia’s periphery. The most notable expression of this to date was the cutoff of natural gas supplies to Ukraine on January 1, 2006. Ostensibly, Gazprom stopped the flow in a dispute over the pricing of Russian gas, but most observers believe that the action was also intended as a rebuke to Ukraine’s Western-leaning president, Victor A. Yushchenko. Remember, this was in the dead of winter, and natural gas is the main source of heat in Ukraine, as in much of Eastern Europe and the former USSR. Gazprom resumed the flow after a last-minute pricing compromise and following vociferous complaints from Western European customers who were suffering their own losses (as the Ukrainians diverted Europe-bound gas for their own use). This was the moment when it became clear to all that Moscow was fully prepared to open and close the energy spigot as a tool of foreign policy. Since then, Moscow has employed this tactic on several occasions to intimidate other neighboring states in what it terms its “near abroad” (as the U.S. used to speak of Latin America as its “backyard”). On July 29, 2006, claiming a leak, Transneft halted oil shipments to the Mazeikiu refinery in Lithuania after its owners announced its sale to a Polish firm, not a Russian one. Observers of the move speculate that Russians officials intended to force a Russian takeover of the refinery. In November, Gazprom threatened to more than double the price of natural gas to its former Georgian SSR from $110 to $230 per 1,000 cubic meters. The alternative offered was a cessation of deliveries. Again, political pressure was believed to be at least part of the motive as Georgia’s pro-Western government has defied Moscow on a wide range of issues. In December, Gazprom pulled the same sort of trick on Belarus, demanding a major readjustment of prices from a close (and impoverished) ally that had recently been showing mild signs of independence. This, then, is another face of Energo-fascism in Russia: the use of its energy as an instrument of political influence and coercion over weak have-not states on its borders. “It is not that energy is the new atomic weapon,” Cliff Kupchan of the Eurasia Group consultancy told the Financial Times, “but Russia knows that petro-power, aggressively and cleverly applied, can yield diplomatic influence.”