The Bear Sets a Trap: Europe Creates Dependency on Russia

From the desk of Richard Rahn on Sun, 2006-12-03 13:47

Have you noticed New York residents do not fear a cutoff of their natural gas supplies because of a potential political or economic dispute with Texas? But envision a scenario where the State of Texas owned all of the natural gas in that state and the distribution network to other states, and where the governor of Texas decided to ignore pre-existing contracts in order to force New Yorkers to pay more for their gas since they were totally dependent on the Texas monopoly.

Fortunately, in the U.S., the above scenario could not play out because: there are many private suppliers of gas in the State of Texas; the pipelines that carry the gas to New York are privately owned and separate from the gas producers; and, most importantly, the state and federal courts enforce the rule of law and protect pre-existing contracts.

But now another question: Would you agree to have a major and critical portion of your gas supplies controlled by a monopoly state producer that also controls the pipelines and has at times ignored or reneged on existing contracts? If you are a prudent person, you would probably respond by saying, “No way.”

Unfortunately for the Europeans, a number of their governments are cementing a relationship with Vladimir Putin’s Russia which, in effect, will make them hostages of the Russian bear. Russia already accounts for 26% of Europe’s gas imports. It accounts for 44% of Germany’s gas imports, 60% of Poland’s, 63% of Austria’s, and 100% of Finland’s. Russia is now building a new gas pipeline from Russia through the Gulf of Finland and down through the Baltic Sea directly to Germany, bypassing the existing pipelines that go through Ukraine, Belarus and Poland. As European natural gas sources are depleted, Europe will depend increasingly upon Russia.

If Russia were truly a free market democracy that practices the rule of law, with many private Russian gas producers competing for Europe’s consumers, there would be little cause for concern. Americans do not worry about being dependent on Canada for a significant portion of their oil imports, because most of it is provided by private companies and democratic Canada maintains the rule of law.

Russia, however, is a very different story. President Putin has refused to ratify the treaty that would require Russia to open its gas pipelines to third parties and end the monopoly supply position of Russia's state-owned Gazprom. Poland and Lithuania are the only European countries insisting that Russia sign the agreement (to which Russia committed itself in 1994) as a condition to expanding European-Russian trade. The Poles and the Lithuanians are likely to be forced to acquiesce to their larger European neighbors who tend to only think about short-run gains rather than long-term consequences.

Russia has already shown itself an unreliable energy supplier, despite its claims to the contrary. As recently as last winter Russia cut off gas shipments to Ukraine, and Ukraine responded by siphoning off gas destined for the European Union.

Despite the West’s hope that Russia would continue evolving into a true free-market democracy under the rule of law, any objective viewer can easily see the drift backward.

Critics of the Putin regime have a continuing, uncanny ability to get murdered. According to the London Times, “Britain’s intelligence agencies claimed that the poisoning of the Russian dissident Alexander Litvinenko bore the hallmarks of a state-sponsored assassination.” This seems a reasonable conclusion, in part, because the typical killer does not poison his victims with radioactive polonium-210.

Many Russian journalists who were critics of Mr. Putin, such as Anna Politkovskaya and the editor of Forbes’ Russian edition Paul Klebnikov, have recently been gunned down in “unsolved” murders.

The number of elective offices has been systematically reduced under Mr. Putin, and Russia is slowly moving back to an almost one-party state (this time without communist ideology). Key sectors of the economy, such as oil and gas, are in effect being renationalized. Many foreign companies find that what they had thought were binding contracts are suddenly being opened to “renegotiation.”

Last week, it was announced that Gazprom was buying Russia’s most popular newspaper, Komsomolskaya Pravda. The Putin government has brought most of the electronic and print media under the control of state companies or Kremlin-dependent businessmen.

Mr. Putin is smart. He realizes the European leaders are weak, and merely the implicit threat to cut gas supplies will be enough to have them do much of his bidding. He is also aided by those in the West who rationalize his behavior, much as the New York Times’ Walter Duranty became Josef Stalin’s cheerleader in the 1930s.

An insightful Brit noted that “Blair would love to see the Litvinenko murder investigation just disappear because now that Tony announced he is leaving he needs a job and Putin might help.” After all, Mr. Putin (through Gazprom) did hire former German Chancellor Gerhard Schroeder for several million dollars.

 
This piece was originally published in The Washington Times on December 1, 2006.

Russia wants to place 'Russian settlements' in South Ossetia

Submitted by Zen Master on Thu, 2006-12-14 16:33.

South Ossetia and Abkhazia are part of Georgia, just as Chechnya is part of Russia. Russia has fought for years and destroyed much of Chechnya to keep it part of Russia.

Russia is now calling for Russian settlements in the break away province of South Ossetia. This means a ‘Russian occupation’ of part of Georgia. This is meant to keep the Georgian army from taking control of South Ossetia. The Russian army now has ‘peacekeepers’ stationed there.

This is one more example of Russia’s new aggressive policy under Putin. The leaders of the EU should worry about having close ties with Russia and buying so much gas from them.

From the Georgia Times: December 14, 2006

Separatists leader: our course to independence is't whim

The president of the breakaway region of South Ossetia Eduard Kokoity has made comments referring an article, published in Russian internet newspaper Kommersant - New Plan for Abkhazia and South Ossetia, in which it is stated that 'Russia is now preparing a proposal for settlements in Abkhazia and South Ossetia based on the Kosovo plan'. [bold type added’]

Kokoity stated that 'the republic of South Ossetia will not unified with Georgia... because our course to the independent is not a whim, it is nation's will'.’ [end of article]

More Russian arm twisting for Belarus

Submitted by Zen Master on Thu, 2006-12-14 03:44.

This article is a new example of how Russia is using energy for political reason. First the dispute was between Russia and Ukraine over the ‘Orange Revolution’ and Ukraine leaning toward the EU and Nato. They cut- off gas in the middle of the winter. Then Russia became angry with Georgia for becoming more Western. Now they are charging much more for gas to Georgia. The final dispute is over gas to Russia’s closest ally, Belarus. This should make all MEP’s worry about any energy agreement with Russia.

Putin is using energy for political reasons.

Financial Times

‘Gas dispute threatens Belarus, Georgia

By Neil Buckley and Arkady Ostrovsky in Moscow

Published: December 13 2006 22:07 | Last updated: December 13 2006 22:07

Russia is preparing to cut off natural gas supplies to neighbouring Belarus and Georgia unless the two former Soviet republics agree by the year-end to pay much higher prices in 2007.

Coming a year after Gazprom, the Russian gas giant, briefly cut gas to Ukraine in a similar pricing dispute, such a move could provoke further international criticism that Moscow is using energy as a political tool. It might also intensify pressure on Russia to ratify the European Energy Charter treaty, which would require such disagreements to be resolved through arbitration. /Snip/ ….’

Arm twisting

Submitted by Bob Doney on Thu, 2006-12-14 13:25.

I don't really understand the logic of this. Why would Russia want to punish "a close ally" for political reasons? Looks more like a straightforward business decision just because it includes Belarus. And quite right too. An economy distorted by phony prices is not going to be one that thrives long-term in a global economy.

Too much defiance of Russia

Submitted by Armor on Thu, 2006-12-14 14:11.

I would not blame the Russians for taking control of their own gas production. As regards our energy dependance on Russia, I'm not sure it makes much difference whether the oil infrastructure is run by Gazprom or by private American companies. In any case, Russia can cut off the supply at a moment's notice. And I wonder where we are supposed to buy our gas if not in Russia. We already buy a lot of gas from Algeria.

"Despite the West’s hope that Russia would continue evolving into a true free-market democracy under the rule of law, any objective viewer can easily see the drift backward."

The West should worry about the lack of democracy in the West, not in Russia. We have very little democracy at the moment. What we have is economic prosperity, free speech on the internet, and a low level of violence by the government, although European governments are responsible for the crime committed by third-world immigrants. At the same time, our future is being destroyed, and we are not allowed to do anything about that.
My hope for Russians is that they will soon overcome their current difficulties and achieve economic prosperity like us. They are in such a bad pass that I think it would be natural to give them some help. But it seems the West is not well disposed towards Russia. I think that selling their gas at a high price is a good solution. I like the Russians better than the Algerians or the Saudis.

FF: "The Russians are continuing the movements to place themselves in position to enable political challenges through oil resources"

What kind of political challenges?
I'll bet they are more interested in money than political challenges.

Russia demands return of Putin's enemies in exchange for help

Submitted by Zen Master on Thu, 2006-12-07 04:45.

This last story is a perfect example of how little Putin understands democracy. He does not understand that the British government can’t return people they have granted sanctuary to. They say that the police team is told the Chief witness 'has radiation poisoning.' What a strange coincident that the murder victim also had radiation poisoning.

London Times December 6, 2006

Russia demands the handover of Putin's critics in exchange for poison case help

Tony Halpin in Moscow and Daniel McGrory

FSB is off limits, police team is told Chief witness 'has radiation poisoning'

Russia named its price yesterday for providing help in the investigation into the death by poisoning of Alexander Litvinenko. It demanded that Britain hand over the enemies of President Putin who have been given asylum in London.

The ultimatum came as Russian officials imposed strict limits on how Scotland Yard detectives will be allowed to operate as they began their investigation in Moscow.

The strict conditions threatened to deepen the diplomatic rift between Moscow and London caused by the death last month by radioactive polonium-210 poisoning of Litvinenko. ../ Snip/..'

Russia is committing suicide

Submitted by Lancelot Owen on Mon, 2006-12-04 19:59.

Russia has a birth rate of only 1.3 births per woman and a male life expectancy of only 59 years [mainly as a result of endemic alcoholism]. This, combined with what can only be described as a holocaust of abortion – in 2004/05 there were more abortions than live births [1.6 million abortions to 1.5 million live births], means that the population is decreasing by over one million people per year. In only 50 years time Russia will have a population one third smaller than at present.

What one could describe as 'Orthodox Russia' is in it's death throes. That, of course, means that it is unstable, unpredictable and likely to lash out without warning. Why are the British and other European governments allowing themselves to become so reliant on Russian gas?

Beware of energy contracts with Putin

Submitted by Zen Master on Mon, 2006-12-04 18:34.

Many of the EU leaders don’t seem to have a clear understanding that when they have a ‘contract’ with Russia, it is not worth the paper it’s written on. Russia can void the contract at any time they wish. When the price of oil goes up, it is time for Russian to have a new better contract for oil exports.

Many of Putin’s critics are now the victims of ‘gang land’ style contract murders. The EU leaders should wake-up to the fact that Putin constantly mixes business contracts with accepting the foreign policy wishes of Russia.

Russia and Islam

Submitted by Eddy Burke on Mon, 2006-12-04 13:10.

Another article in the Washington Times recently indicated that due to high birth rate among muslims and immigration, the majority of Russia will be muslim by mid century and the majority of the Russian army conscripts will be muslim by 2010.

Combined with the above, this is a frightening prospect for Europe. 

Ed

Putin wants to damage any Russian 'enemy' that wants freedom

Submitted by Zen Master on Sun, 2006-12-03 16:58.

Putin’s strongest wish is to patch together parts of the Soviet Union and use energy to bully Europe. The European leaders are falling into the Russian energy trap. Russia goes back on past energy agreements and voids the contracts with western energy companies. They have interfered with the past two Ukraine elections.

At this moment they are meddling with Georgia. They have cut-off trade ties with their small, five million, neighbor. They accept the two breakaway provinces of Georgia and give them Russian passports. They provide Russian army ‘peacekeepers’ to these Russian inspired provinces of South Ossetia and Abkhazia.

At the same time, they destroyed much of the breakaway province of Chechnya. They spent billions of dollars to keep Chechnya part of Russia. Exactly what is the difference between Chechnya and the breakaway provinces of South Ossetia and Abkhazia? The only difference is the interest of Russia in keeping Chechnya Russian and the wish to damage Georgia. Georgia wants to join NATO and the EU.