Russia's Vast Energy Supplies Worry U.S.

By Desmond Butler | August 12, 2008 | 5:29 AM EDT
Washington (AP) - The Cold War competition between the United States and Russia -- played out in Europe with the threat of mutual nuclear destruction -- ended with the collapse of the Soviet empire nearly two decades ago.

But the Russian bear has re-emerged from its cave with a new and powerful weapon -- the West's dependence on Moscow's vast energy supplies.

The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas.

And Moscow, with its recent attack on its former Georgian republic, may be trying to blunt the West's counteroffensive in the deadly serious energy competition. A key, U.S.-backed pipeline that carries oil out of Caspian and Central Asian fields to a Turkish port on the Mediterranean was nearly hit in recent attacks.

The stakes are high for the Europeans.

Some U.S. lawmakers worry about divisions within NATO due to Russia's domination of European gas markets and the threat of cold, dark winters if an angry Kremlin closes the valves.

"It is unlikely that aggression against our NATO allies will occur with aircraft and tanks and troops," said Indiana Sen. Richard Lugar, the senior Republican on the Senate Foreign Relations Committee, in an Associated Press interview. "A nation could achieve the same and worse effects simply by turning off the taps-- people freeze, industry stops."

To counter this influence, the U.S. sent special envoy C. Boyden Gray to energy-rich Central Asia to lobby for new routes that run through Georgia -- notably the Baku-Tbilisi-Ceyhan oil pipeline that was almost hit by a Russian bombing raid Monday.

That pipeline carries Caspian crude to international markets from suppliers independent not only of Russia but also OPEC. Lesser amounts flow through the Baku-Supsa line, which ends on the Black Sea.

The Caspian Sea port of Baku is the capital of Azerbaijan, another former Soviet republic that controls major petroleum reserves.

In Azerbaijan, Gray's visit in early June was overshadowed when Alexei Miller, the chief executive of Russia's government-controlled energy giant, Gazprom, made a bold offer -- still pending -- to buy all of Azerbaijan's natural gas exports at market prices.

Gray continued on to Turkmenistan. Russian President Dmitry Medvedev immediately announced his own trip and flew there a month later to unveil a major gas agreement that dealt another blow to U.S. hopes.

Those setbacks underscore the challenges confronting Washington and the European Union, which is hamstrung by its limited power to set a unified energy policy in the face of Russia's divide-and-conquer strategy in the gas market.

It has struck lucrative deals with individual European countries and companies to extend its distribution reach to the Western end of the continent. To overcome growing Russian sway, U.S. and European officials believe that the U.S. must use its influence to push through more pipelines from Central Asia to Europe.

While Russia appears to hold a powerful hand, especially its long dominance over former republics in the Caucasus and Central Asia, countries like Turkmenistan, Khazakhstan and Azerbaijan are wary. The former republics want signs the West is serious about building more pipelines before making moves that would anger Moscow.

The Kremlin has used its energy dominance as a weapon.

In late 2006, Russia's Gazprom threatened to cut off natural gas supplies to Georgia in the dead of winter. Russia reduced its oil supply to the Czech Republic last month, shortly after the country agreed to allow a U.S. missile defense radar on its soil over Moscow's objection. Russia had previously cut gas supplies to Estonia, Lithuania, Ukraine and Belarus.

Russia denies political motivation.

As a counter to Moscow's growing strength, Washington wants pipelines built from Turkmenistan, across the Caspian to Azerbaijan, then through the Caucasus to Turkey and on to Western Europe. The route would bypass both Russia and Iran.

Gray's trip and a similar one by Assistant Secretary of State Richard Boucher were aimed at promoting those pipelines and signaling that the U.S. was stepping up its game.

"Paying more attention -- and letting these countries know we are paying attention -- is our main objective," said Gray, who was recently appointed as Special Envoy for Eurasian Energy.

But the Russians seemed to be watching. Whether by coincidence or design, Miller, Gazprom's chief executive, scheduled an overlapping trip that mirrored Gray's.

"People think -- it's too flattering to me -- that Alexei Miller was kind of stalking me when I was in the region," Gray said.

Lugar, who has been pressing his concerns in trips to Central Asia and Europe, praises the appointment of Gray, a confidante of Bush and recent ambassador to the European Union. He says Russia will likely counter U.S. moves in its backyards.

"Given the characteristics of Russian diplomacy, which have been not only competitive but sometimes gripping people by the throat, they are likely to feel irritated that someone else is in the field," he said.

Lugar and others, including Sen. Joseph Biden, D-Del., the Senate Foreign Relations Committee chairman, believe that U.S. efforts to promote pipelines have foundered so far because they are a low priority for the Bush administration.

"The United States does not have a clear, consistent strategy to promote our long-term security interests, or our near-term energy and economic interests. The Russians do," Biden wrote in response to written questions from the AP.

But Konstanin Batunin, an oil and gas analyst at Alfa Bank in Russia, believes the U.S. -- itself dependent on foreign oil -- has failed to make much headway because it has little to offer the Europeans in terms of alternate supplies.

"The powers are not equal," Batunin said, referring to a struggle between the U.S. and Russia to control the region. "The United States cannot offer an adequate alternative. A political resource with no economic element is not enough."
Some U.S. lawmakers worry about divisions within NATO due to Russia's domination of European gas markets and the threat of cold, dark winters if an angry Kremlin closes the valves.