Putin's Real Great Game: Energy Imperialism

Know your enemy is a great axiom of war – and politics. Whatever we may think of Putin’s despotic rule, it is hard not to admire his ability to continually run strategic rings around Western leaders.

As the West’s leaders meet to consider how best to ‘influence’ Russia to leave the Ukraine, they are resigned to considering economic sanctions as the only real option available. They are wrong.   

Further, their view is predicated on the belief that Putin genuinely believes in the need to reinstate Ukraine’s pro-Russian democratically elected president and protecting the indigenous Russian population. Hence, the public explanation for Russia’s seemingly over-the-top belligerent militaristic intervention. The reality is, however, as I will show, this is NOT the reason for the invasion, just a mere excuse for it.

The reason is part of the Kremlin’s long-term and officially stated (if you bother to look for it) great game: energy imperialism. That is, recovering Russia’s global superpower status via the the chief weapon at its disposal: its oil and energy clout.  

All of the Kremlin’s key foreign policy moves are geared to this end. And economic sanctions won’t even scratch the surface of that commitment. So is there another way? You bet your life there is – tried and proven, too.

Since the break-up of the USSR, Russia has brooked no opposition, using militaristic means whenever necessary, to recover that which was lost when the Berlin Wall – and Soviet global power – fell. Neither has it been reluctant to use energy as a key bargaining weapon.

In 2008, Russia invaded Georgia. Ostensibly, it was to “protect the rights of indigenous Russians” in that country. In fact, it came after a protracted spat with Georgia over the state’s increasing resistance to Russia’s energy pricing. Worse, Georgia was pro-actively working for greater integration with the EU generally. Military force became inevitable if Georgia was to be stopped.  

By 2010, while the other littoral states were arguing over their various claims to the Arctic’s untapped oil and gas riches, Russia effectively militarised 60 percent of the Arctic. Another threat to its oil and gas -based economy effectively neutralised at a stroke.

In 2011, the former Soviet satellite state Turkmenistan announced that it was sitting on natural gas resources so great it would enable it to become a regional energy superpower in its own right. That was dependent on it gaining access to one of a number of pipelines planned for construction that did not transit Russian territory.

The Kremlin moved quickly. Beating potentially competing pipelines to the punch, Russia’s Nord Stream pipeline came online last year. Turning attention on to the Turkmenistan government, the Kremlin pointedly made it clear that any energy deal needed to target “Anywhere but Europe” – or else.

In 2012 the Kremlin warned Moldova to make a stark choice between cheap Russian gas imports and greater EU integration.

In 2012 Russia unexpectedly bought into Israel’s new-found status as a potential energy exporter to Europe. Currently, it is attempting to buy its way into Iran’s efforts to expand their gas markets before Iranian gas exports help to bring the global price down again.   

The blueprint for all this was formally laid down in May 2009, when a Kremlin security document, approved and published by the Russian Security Council, explicitly sanctioned the use of military force in pursuit of the goal of returning Russia to “energy superpower” status. The report specifically cited the Caspian Sea region as a key area of potential conflict.

Over the past decade, threats to cut gas imports to Belarus, the Ukraine and Georgia among others have kept those states on the hook and under the Russian hegemony. As a result, all of Europe’s attempts at diversification have proven an abysmal failure.

During 2011 Russia’s share of the European gas market was 27 percent. By 2013 that rose to a new high of 30 percent. Since 2011, Gazprom’s exports to Germany increased by 21 percent, to Italy by 60 percent and to the UK by 54 percent as North Sea gas reserves dwindle.  

So what changed in the Ukraine that meant it had moved centre-stage and offered a more imminent threat to Russia’s energy hegemony? The short answer is the US shale gas revolution.

The Ukraine is sitting on some of the world’s largest shale gas deposits. And just a few weeks before Ukraine’s President Yanukovich fell from power, his government signed a $10 billion shale natural gas deal with American company Chevron to develop those resources. That would have placed the Ukraine as a net gas exporter by 2020.

The fall of Yanukovich presented Putin with an unexpected and timely opportunity, and with a new pro-EU president in Kiev that would present a clear and present danger to the Russian economy.    

Europe’s hand has been greatly impaired by its own ideological reluctance to cash-in on its own shale gas reserves. Lord Lawson is wholly correct in pointing out that the crisis in Ukraine shows the case for shale gas. It does indeed, but how might that impact the current crisis in the Ukraine?

What should be the focus of Western deliberations if they seriously wish to impact the recurring threat from Russian military intervention, especially in the former Soviet states? The answer is NOT sanction. Instead, take a leaf out of Ronald Reagan’s book.

In the 1980s Reagan talked the Saudis into significantly boosting their oil production, effectively flooding the market with cheap oil. It is not widely understood that this move, resulting in dramatic fall in the global oil price, led directly to the collapse of the Soviet economy and, ultimately, the downfall of the Soviet empire.

Freedom for the Soviet satellite states duly followed. It could do so again if Western leaders understood how to wield the energy weapon instead of pointless sanctions.

First, help to stabilise world energy markets. The current Ukraine crisis has helped push prices back up. That’s what Putin wants. Next, flood the market with plentiful and cheap natural gas.

And the quickest way to do that? Europe could replace a major part of its Russian gas imports with imported US shale gas – a perfectly feasible proposition given US production figures and a president willing to lift curbs on US exports of gas and oil.

Prior to the immediate crisis, the world oil price had remained low. So much of a threat had that become to the Russian economy that one estimate suggested if it fell to a low of $60 a barrel, Vladimir Putin would be out of office within months.

Russia’s strategy of military-backed energy imperialism is not going to see a pull out of Russian forces from the Ukraine. Neither will sanctions impact Putin’s Great Game and the recurring threat of military force elsewhere. Playing the Kremlin at its own energy power game however, as Reagan did, would inevitably bring the Russian economy to its knees.