Russia is taking steps towards improving the state of global energy security, including diversification of its energy sector away from Europe and development of new technologies.
A member of the Emergencies Ministry takes part in an exercise in front of a storage facility which belongs to oil producer Rosneft, outside Russia's southern city of Stavropol. Photo: Reuters
The New Year was greeted with trepidation by some countries in Eastern Europe. Early January could have been a portent of energy problems for the region due to the ongoing Russian-Ukrainian gas price dispute. However, as it turned out, this year even the acute political crisis in Ukraine did not hinder supplies of Russian gas to Europe.
Moscow took into account its past negative experience of wrangling with Kiev and secured all necessary arrangements in line with its active policy in recent years of improving global energy security.
What else was achieved within the framework of this new energy policy last year? More importantly, what is in the cards for 2014?
The evolving concept of global energy security
The problematic nature of energy security came to light only in the wake of the Arab oil embargo of 1973, when geopolitical and religious conflict roiled the world’s oil markets. The issue became one of national concern for many countries, primarily major Western energy consumers.
Subsequently, experts began to talk about different types of energy security – for energy suppliers, for major consumers, and for transit countries.
However, there is still no consensus as to whether global energy security actually exists in any meaningful sense. If it does, what is it exactly?
Some experts try to define global energy security as a sum of energy securities of individual nations. Others write that global energy security should address issues that lie outside the sphere of responsibility of individual governments: for example, the eradication of global energy hunger, or environmental protection.
However, a more succinct theory looms against the backdrop of such argumentation: Security is the absence of danger. Consequently, global energy security is a state of international relations that creates the conditions for crisis-free development of the global energy industry. In such circumstances, suppliers can sell the volumes of energy they produce, and consumers can satisfy the energy needs of national economies.
Russia's place in the system of global energy security
Source: BP. Infographic by Natalia Mikhaylenko.
Using this approach to analyze the global energy industry, one clearly sees that an international regime of global energy security is in all countries' interests – especially Russia's.
Today Russia occupies a unique place in the global energy sector, occupying three different roles, being at once a major supplier to world markets, one of the world’s largest consumers, and, increasingly, an energy transit country. Russia already ensures the passage of Central Asian energy resources, while the country's geographical location and technological base make it a global pipeline hub.
Consequently, Russia has no particular option other than to do whatever is necessary to guarantee the effective functioning of the international regime of global energy security. Meanwhile, the myriad formats of Russia's involvement in global energy allow Moscow to find common ground with almost all the major world players.
It is from this perspective that the still frequent accusations of Western critics who suspect Moscow of "energy blackmail" seem particularly absurd — any destabilization of the global energy markets is much more dangerous for Russia than for anyone else.
Diversification of Russia’s energy sector
2013 saw a continuation of Russia's energy policy of recent years, which is aimed at strengthening its positions in the global energy industry, thereby shoring up the international regime of global energy security.
While foreign critics were busy alarming Europeans over the continent's growing energy dependence on Russia, the flip side was the Russian economy's growing and dangerous reliance on supplies to Europe. Russian pessimists rightly pointed to the declining performance of Gazprom, one of the cornerstones of the Russian energy sector.
Several progressive steps were taken in 2013 toward resolving these issues. First and foremost, a series of decisions was taken to diversify Russian hydrocarbon exports, namely the signing of an agreement to supply liquefied natural gas from the Yamal Peninsula to China, the resumption of work to commence supplies of Russian gas to South Korea, and the activation of Russian-Japanese cooperation in the energy sector.
It is curious that in almost all of the initiatives undertaken, Russia's habitual energy leader, Gazprom, was conspicuous by its absence. Other Russian companies, in particular Novatek and Rosneft, with the support of the Russian government, are becoming increasingly active abroad.
This is part of the Kremlin's conscious policy to increase competition in the Russian fuel and energy sector. More competitiveness will raise the performance of Russian companies, which in turn will strengthen Russia's positions in the global energy sector.
Russia's plans for 2014
Source: BP. Infographic by Natalia Mikhaylenko.
Forecasting is a fool's game, especially in the rapidly changing energy markets. However, it is possible to postulate with a high degree of probability where the focal points of Russia's energy policy in 2014 and in the foreseeable future will lie.
Russia is not merely the world's largest supplier of hydrocarbons. The strength — and weakness — of Russia's positions consist in the need to harmonize the country's role as both energy exporter and consumer, while keeping an eye on its developing role as a crucial transit country.
This scenario will force the Russian government to pay greater attention to energy conservation in the national economy and the growth of energy production, including the development of new deposits.
Moscow also will seek to expand the presence of Russian companies in the energy industries (both upstream and downstream) of other countries — be it Russia's immediate neighbors, Europe, or even Africa, whose energy weight is growing.
It is clear in this regard that success in tackling these challenges will depend on Russia's cooperation with as many countries in the world as possible. The need for such cooperation is particularly evident in the field of technology, where Russia is developing cutting-edge technologies in several areas at once.
The most striking example of these technologies is oil and gas production in the Arctic, where ExxonMobil and Rosneft are working hand in hand. As it happens, the two companies are due to start joint drilling operations in the Arctic this very year.
The Kremlin draws a clear distinction between political disagreements with the West and economic partnership between Russian and Western firms. The latter have a strong interest in Russia: The wealth of the country's mineral resources, the absence of an agressive environmental lobby, and many other factors make Russia an attractive destination for foreign companies.
On the other hand, for several years now the Kremlin has pursued a policy to reduce energy expenditure in the national economy, which brings Russia's positions on a whole array of issues into even closer proximity with those of Western powers and the developing world.
Hence, there is every reason to believe that this year will see Russia continue to build a broad system of international energy agreements, which will further consolidate the country's positions as one of the key players in the emerging international regime of global energy security.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.