Russia and the Arctics natural resources

There are a number of reasons why the Russians should want to win control over the region's resources. Moscow might just want to stop anyone else from getting hold of the Arctic's oil and gas. Another country, they fear, might use its own more sophisticated technology and know-how to exploit the region's resources and then use the proceeds to dwarf Russia's own assets and conceivably even threaten it. The Russians, in any case, aren't sure when they will develop the skills to exploit the Arctic's natural assets: a decade or two hence it is quite possible that their own energy companies will have narrowed the technological gap and be able to exploit these newly discovered fields themselves with relative ease.

Moscow also knows that if it acquires new territory in a region that is considered to be so rich in natural resources then its bargaining power over foreign companies and governments will be dramatically enhanced. No one wants to argue over one issue, the Russian authorities might reason, if they could lose out over another. So BP or any other Western oil major won't want to create a fuss over the terms of their existing contracts in Russia if, at some future point, they might lose out when newly discovered Arctic reserves are eventually auctioned. So even if commercial quantities of oil or gas are never ultimately unearthed in the Arctic region, Russia can still use the mere prospect of their discovery to reward and threaten the outside world.

Using natural resources as a tool of foreign policy is far from uncommon: the Iranians, for example, are adept at using the lure of their own massive energy reserves in a similarly manipulative fashion.

This is just as true of natural gas as it is of oil because Moscow can use the Arctic's natural gas as a means of luring foreign investors: the Shtokman project has long presented a huge prize for international energy companies, such as Chevron and Total, that are anxious to 'book reserves' and please their shareholders at a time when they are being increasingly sidelined by smaller companies and national enterprises. But in the longer term the Arctic's natural gas might also give Russia a means of maintaining its commercial and strategic grip on its European customers. If another country, such as Norway, is able to stake a claim to these resources then key consumers of Russian gas, like Germany, France and Poland, would be able to diversify their supplies.

Another added advantage for the Russians is that Arctic gas could potentially be piped straight to these European consumers without going through any transit country, such as the Ukraine. This is always a huge disadvantage for both consumer and producer, partly because these third parties can charge lucrative fees that make the exporter less competitive, and also because any disagreement between the supplier and the transit country interrupts service to the consumer, just as the brief interruptions to Europe in January 2006 and 2009 were caused by a pricing dispute between Russia and the Ukraine. This is why Gazprom is so keen to construct a new pipeline, Nordstream, which would move Russian gas to Western Europe not overland but across the Baltic Sea.

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