RUSSIA, THE WEST AND ENERGY: A QUESTION OF DOUBLE STANDARDS?

RIA Novosti, Russia
Feb 6 2007

MOSCOW. (Ian Pryde for RIA Novosti) – It is hardly surprising that the
main headline in the Western media from President Putin’s annual press
conference with Russian and international journalists last Thursday
was his total rejection of accusations that Russia had used energy
as a political weapon in its dispute with Belarus and, last year,
with Ukraine and Georgia.

Let’s take a closer look at Western views on Russia’s energy, although
as usual there was much else of interest in the three-hour question
and answer session.

Writing in the Financial Times’ survey of "The World in 2007" on
January 24, for example, Quentin Peel, the paper’s international
affairs editor, asserted that one "worry is the increasingly
nationalistic behavior of Moscow, with consequences for energy
security," and that America’s "weakness and distraction in the
Middle East seem to provide opportunities for Russian assertiveness,
especially in using its energy wealth."

This is odd. Oil has always been highly political and it is naive to
think it could be otherwise. Why, one wonders, is Russia not allowed
to assert itself and defend what it sees as its national interests?

After all, the most influential school of international relations is
realism, which claims that is precisely what all nations do.

While the West provides ample evidence to support realist notions in
international affairs, its criticism of countries outside the West
often rests on idealism and standards which the West itself fails
to meet as well as it ought to. The inevitable result is that the
West undermines its own influence by leaving itself open to charges
of hypocrisy and double standards, charges which the Third World and
Western left-leaning intellectuals have been making for decades.

During the 1990s, many in the West criticized Russia’s policy of
subsidized energy supplies to the former Soviet republics as being
anti-market, non-transparent and designed to maintain its informal
empire after the collapse of the Soviet Union. The international
financial institutions constantly called for the break-up of Gazprom
and its monopoly and an end to subsidies on the domestic market –
despite the fact that millions of people would be unable to afford the
much higher market prices. Anyone who has experienced a harsh Russian
winter knows this is no joke, but literally a matter of life and death.

Russia’s inept tactics in the gas wars have resulted in a PR disaster
for the country, but it is par for the course that many in the West
have chosen to concentrate on alleged bullying, rather than on Russia’s
broader strategy of ending these massive subsidies of billions of
dollar a year to the inefficient economies of Ukraine, Belarus and
Georgia. As Putin has pointed out, Russia has also increased energy
prices to Armenia, with which it has particularly good relations.

Western realism

It is indeed ironic that the West now criticizes Russia for using the
energy weapon. In the early 1980s, the Reagan administration opposed
construction of the Trans-Siberian natural gas pipeline for fear it
would make Western Europe dependent on the Soviet Union for energy
supplies. It therefore prohibited U.S. companies from supplying
parts to the pipeline and tried to extend the ban to foreign-based
companies that were subsidiaries of U.S. firms or used U.S.-licensed
technology. U.S. Chamber of Commerce President Richard Lesher wrote to
Reagan in February 1982 that the pipeline policy could be likened to a
"strategy of economic warfare." In 1985, the U.S. was more successful
with the energy weapon when it prevailed upon King Fahd of Saudi Arabia
to flood the market with oil in 1985-86 to weaken the Soviet economy.

In mid-2001, the U.S. renewed the 1996 Iran-Libya Sanctions Act (ILSA)
for five years, which penalized any foreign company dealing with Iran
or Libya in amounts of over $20 million, a laughably low hurdle in
the oil and gas business.

Defenders of this approach would doubtless argue that the context
of the Cold War and state-sponsored terrorism make such actions
acceptable, but this hardly applies to the Jackson-Vanik amendment,
which was originally passed in 1975 to punish Communist states
by imposing trade sanctions for their refusal to allow Jewish
emigration. Now, with Russians enjoying more freedom to travel than at
any time since 1914, some circles in America, especially in Congress,
want to retain this wholly anachronistic Cold War relic as a lever
against Russia.

The European Union is also very astute in defending its own
interests. President Putin complained yet again during his press
conference that while Brussels wants European companies to have access
to Russia’s natural resources, the European Union’s single market is
largely closed to Russian exports, an impasse which Putin hopes can
be resolved through normal negotiations.

Nor are the individual members of the EU reticent when it comes to
defending their national interests. The economic absurdities of the
Common Agricultural Policy led the United Kingdom to demand annual
rebates from the EU budget, while the French loudly and vigorously
defend their inefficient farming sector. The Polish vetoing of closer
EU ties with Russia is merely a recent example.

Examples abound in the real world of countries asserting what they
perceive to be their national interests. Indeed, cynics might argue
that nation-states do nothing else, even though this often comes at
a high price to themselves and sometimes other countries as well,
for not all policies are thought through properly, and they often
result in unforeseen consequences.

The EU has frequently been weakened and its decision-making slowed
down or even paralyzed for years in some key areas, while decades
before the current crisis in the Middle East, American foreign policy
was criticized for being against its own national interests.

Russia’s national interests

Certainly Russia has done considerable long-term damage to its
reputation in Europe, more than it realizes.

But the contretemps on energy is no worse, and certainly far less
bitter and extended, than the long-running trade disputes between
Japan and the U.S. in the 1980s and the more recent disagreements
between Europe and the U.S. which culminated in the "banana wars."

In fact, despite the saber-rattling and brinkmanship, Russia quickly
agreed to lower prices and looser conditions than it originally
demanded, with a long transition period which would gradually see
prices rise to European levels.

But of course the entire economy of the developed world is based on
hydrocarbons, and there are simply no other viable alternatives at
the moment. Russia’s actions have inevitably led to a more intensive
European debate on energy and energy security, with Angela Merkel
rethinking the governing coalition’s agreement to scrap nuclear energy.

Russia can hardly afford any repetition of these gas wars, since
the result will be to further undermine the confidence of its main
trading partner and close neighbor, and switching supplies to the
Far East is a less viable option than appears at first sight.

Russia feels that the security of energy supplies to its main customers
in Western and Central Europe are at risk from transit countries. But
one of its proposed solutions, the Nord Stream pipeline running
directly from Russia to Germany under the Baltic Sea, unleashed a
storm of protest in Poland, which would lose out on the transit fees,
and in Germany itself, not least because former Chancellor Gerhard
Schroder is closely involved with Gazprom.

The protests over the Nord Stream pipeline and the gas wars show
just how difficult it will be for Russia to appease certain Western
circles whatever it does.

During her January meeting with Putin in Moscow, German Chancellor
Angela Merkel demanded that in the future, Russia must inform
Europe in good time about any expected interruptions to oil or gas
supplies and suggested setting up a formal mechanism to ensure better
communications.

In contrast to the Soviet Union, however, modern Russia is poor at
communications both internationally and domestically, and no longer
enjoys a frighteningly powerful propaganda machine. At least a partial
awareness of the problem is indicated by reports in mid-January of
Gazprom seeking to engage international PR companies to polish up
its image.

Quentin Peel is wrong when he suggests that America’s "weakness and
distraction in the Middle East seem to provide opportunities for
Russian assertiveness, especially in using its energy wealth."

In the 1990s, following the collapse of the Soviet Union, Russia was
weak, with its economy, like those of the other former republics,
experiencing probably the biggest economic decline seen in peacetime
in the twentieth century.

Long-term trends

It was, however, naive to assume that this state of affairs would
last forever. Russia is becoming more active not only in the Middle
East, but also in Asia and Asia-Pacific, Africa and Latin America,
not to mention Europe and North America.

These trends will continue irrespective of American strength or
weakness for the simple reason that Russia sees itself as a great
power. And, like China and India, Russia is embracing much from the
West, but is doing so increasingly on its own terms.

Russia is by no means above criticism, but Western accusations that
the country uses its wealth as a political weapon – if indeed this was
case – ring hollow and will be rejected by Russians as hypocritical
and self-serving.

Ian Pryde is CEO of Eurasia Strategy & Communications, Moscow.

The opinions expressed in this article are those of the author and
may not necessarily represent the opinions of the editorial board.