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March 15, 2006

International Energy Games

This is interesting:

Ministries Agree on Bill To Limit Foreign Investment in Russian Economy
When I saw that headline I thought it odd because everything else I've read has indicated that Russia wants to use the possibilities of foreign investment as leverage in global policy making. That is, if European countries like France and Germany become dependent on Russian oil and gas resources, then those countries would be more likely to side with Russia against the US or whomever else Russia contended with diplomatically. But Russia cannot afford to keep drilling for oil and gas because of its weak infrastructure. So it needs investment. Countries like China would be happy to invest, because China wants the same thing from Russia - dependency and an ally on the world stage. So, I thought, maybe Russia is getting wise.

But then of course, I read the article:

Vladimir Taraskin, director of the Industry and Energy Ministry's legal relations department, said that the law may come into force in July 2007. He said that the draft law deals with 39 strategic types of activity, which are divided into five sectors: the space industry, the nuclear power sector, arms and military technology production, special technology and aviation.
I've thought about it a bit, and I don't think gas and oil fit into any of these categories. So basically, they are limiting investment, but only in smaller areas that will not affect its ability to make alliances or dependencies.

And as for resources for those industries? Mother Russia isn't giving up control of those either:

"There are other criteria covering monopoly activity and the development of resource fields of federal significance," Taraskin said.

And just to make us think that maybe they are going to bend on the energy issue, the article quote Taraskin as saying:
There is a proposal to include the electricity sector in the draft law also - concerning wholesale generating companies, but this is only being discussed

I don't know what his definition of "discussed" is, but I'd imagine that any discussion isn't all that serious. The ministries can have all the discussions they want, but there happens to be a G8 energy conference this week, where they are seriously discussing foreign investment in Russia.

On Monday Russia was laying out its demands concerning foreign investment in the energy sector.

"We have set ourselves the task of providing the world with energy resources on a reliable, long-term basis," Foreign Minister Sergei Lavrov said at the conference.
Notice, they have done it themselves. They want to be the ones to provide energy to the world - and I think they want the rest of us to pay them to do it.

It's no secret that Europe does not want to fall into this dependency trap, but they have few other options. And that is no secret to Russia:

"Gazprom was, is and will be a reliable guarantor of gas supplies to Europe," [Gazprom deputy CEO Alexander]Medvedev said...

"[EU] dependency is only going to increase," Medvedev said. "There are only four sources of gas in the world: Qatar, Iran, Algeria and Russia."

Wow. Quite a group. Russia's economy isn't great, but it's gas resources are, and they probably have one of the most stable energy infrastructures. And once again, they know it too -
When asked whether Russia was the only one of the four that could be considered stable, Medvedev said, "You can answer that question yourself."
Of course we can, but Russia wants to answer it for us. Russia has the resources, but not the money. So the other question is, who has the money and the need for resources?

The biggest answer to that is China. China wants legitimacy as a diplomatic and capitalistic power. They have their hands in investments all over the world, places like Africa, Venezuela, and Saudi Arabia & Iran.

If China can pump enough money into countries that are desperate for investment, then China can count on them to take their side in global diplomatic arguments. Perhaps it seems that countries like Sudan and Zambia are not important political allies, but what about Venezuela and Iran? These countries need neither more money, nor more strength in their anti-US positions. Russia may seem weak, but a government run by a group of former KGB spies is not the government I want controlling Europe behind the scenes.

There isn't a petition or a protest that we can start to stop these machinations. All we can do is be aware and hope that policy makers know that we may be able to trust our allies only as long as they can afford it.

Posted by Abigail at March 15, 2006 02:35 PM

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This sort of give creedence to the isolationist folks who don't want to be beholden to other governments we may have invested heavily in. I'm not an isolationist per se, but it does make one wonder.

Posted by: Doug Payton at March 15, 2006 03:45 PM

Oh definately, I think that's right Doug.

A country like Germany wants to be isolationist insofar as they don't want to be consistently sending money to other countries in order to buy natural resources. Most likely, they also want to be involved in selling a lot of arms to dictatorships in case anyone digs up the papers later *cough* Iraq *cough*.

However, if they had the money like China does, they might not see anything wrong with spending it to get some favors in return later.

Isolationism can go either way. Choosing to spend money in other countries, whether for donation or investment can do as much to affect the diplomatic balance as not investing at all. In other words, China's government investment plans create friendships, but if the US doesn't give any money to places like Indonesia after the Tsunami, then we are called stingy and our borderline friends have a reason to turn the other way.

When I start to think about it like this, I really am amazed at how huge a part money (whether it be spending it or saving it) plays on the world stage.

Posted by: Abigail Brayden at March 16, 2006 02:40 PM