An excellent article. Russia's lack of own energy production explains the Russian invasion of Georgia in August 2008. Russia's long term goal is to control the pipes that bypass Russia and deliver the Central Asian oil and gas to Europe through Azerbaijan and Georgia.
That is why Russia is so worried about Georgia joining NATO. Russia will not be able to invade or intimidate Georgia, when it becomes part of NATO.
The accuracy of Owen Matthews' analysis is also evident from Russia's gas war with Ukraine and Europe in January 2009.
Putin system abuses not only neighbors, but also own citizen. North Caucasus is devastated and the local population is disenfranchised. The political oppression is increasingly harsh approaching Soviet times. Politacal assasinations of dissenters and journalists is systematic. The elections are nondemocratic and unfree. The free media is suppressed. Corruption is pervasive.
The West must support Russian democratic groups and free media. The West must ensure security of Russia's neighbors. Putin's Russia may not be trusted.
Russia’s Big Energy Secret
Putin wields gas as a weapon. But the reality is that Russia can barely meet its own growing demand.
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Gazprom, the Russian natural-gas giant, is often portrayed as the 1,000-pound gorilla of the energy world. Over the past few years, the company has had huge success in locking in lucrative European markets. It has also been ruthless about making consumers in the former Soviet Union pay something close to world prices for their gas—cutting off supplies, if necessary, to force reluctant customers like Ukraine to pay up. But problems are brewing. Gazprom, it turns out, has too many customers, and too little gas.
The surprising Achilles' heel of Gazprom is that it produces only about 550 billion cubic meters (bcm) of gas—just enough to supply its own domestic market. It relies on cheap imports from Central Asia to meet the majority of its other commitments to customers in Europe, amounting to nearly 80bcm. And since only Gazprom's foreign customers pay full market value, it's the company's exports which make up the bulk of Gazprom's revenues—$21 billion for the second quarter of 2007 alone. Now those nations on which Gazprom's profits rely—including Turkmenistan, Uzbekistan and Kazakhstan—are beginning to cut their own deals with big new customers like China. The deals are in turn becoming an existential threat to Gazprom, one of Russia's most valuable strategic levers of power.
Russian control of a quarter of Europe's gas supplies is a key plank of its foreign policy and renewed national pride; supply of cheap electricity and heat to Russian homes is a touchstone of the Russian government's credibility. Central Asia is now undermining both those fundamentals—and could threaten Vladmir Putin's petro-politics.
Gazprom hasn't opened up a new gas field since 1991, and its existing fields are dwindling. A recent report by the Russian Industry and Energy Ministry warned that if the decline continued, Russia may be unable to service even its own domestic gas needs by 2010, and recommended doubling prices, a conservation move that has upset business and could also put a damper on economic growth.
Meanwhile, Gazprom chairman Dmitry Medvedev—also first deputy prime minister and Vladimir Putin's anointed successor for the next presidential elections in March 2008—has announced a radical plan to revive the company's domestic production, investing $420 billion in exploration and new gas-production facilities.
Relying on cheap imports to supply foreign customers is nothing new for Gazprom; for years the company's been buying gas from the Central Asians for knockdown prices. Until earlier this year, Gazprom was paying just $65 per 1,000 cubic meters to the Turkmens—then selling the same gas to customers in Western Europe who pay up to $250 (possibly only because of Russia's pipeline monopoly). Now ''Russia's monopoly is under attack," says Steve Levine, author of "The Oil and the Glory," a study of Central Asia's energy politics. ''Other neighbors are starting to build pipelines, and local producers are getting smarter, too."
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