From Partnership to Competition

The current level of confrontation in U.S.-Russian relations is high – almost as high as in 1962 on the brink of the Cuban Missile Crisis. But that crisis was inevitable. It shouldn’t be associated with the presidency of Vladimir Putin or Barack Obama.

In this context, the burden of responsibility for the way our country comes out of the conflict will weigh heavily on Putin in the coming years. One can hardly hope that with the arrival of any of the new candidates to the White House, our relations will manage to move in a positive direction within one to two years.

In contrast to the Cold War era, today there is no framework in which the sides can engage in dialogue. Now, all contacts are limited to personal talks between the two countries’ foreign ministers. And I would call the position of the U.S. and Russian departments of defense regarding air force operations in Syria a mutual non-aggression treaty.

But a critical component of the political confrontation that is influencing the sides’ behavior is the energy factor.

In the 1990s and 2000s, right up until 2010, in all the official documents of U.S. government agencies, and in documents from Congress (back then there was even a joint “Duma-Congress” working group), energy cooperation came first. Much was accomplished. It’s enough to mention such huge projects as Sakhalin-1, Sakhalin-2, the Caspian Pipeline Consortium, or the start of joint development of the Arctic shelf. The American companies ExxonMobil, Chevron, ConocoPhillips, Baker Hughes, and Halliburton registered in Russia.

But over the last eight years, the world has changed dramatically because of incredible technological breakthroughs (including in the oil and gas sectors), the development of renewable energy sources, and the fact that we’re getting closer to using gas hydrate deposits.

These changes have two enormous consequences.

The first is that America is going from being the world’s largest importer of oil and gas to being a real exporter. The second is that China has become the world’s largest importer and consumer of energy, its gas consumption having increased five-fold and its oil consumption doubled since 2000.

As a result, since 2010 the need for America to cooperate with Russia in the energy sector – or with Saudi Arabia, for that matter – has disappeared. Thus, the U.S. has turned from a partner into a powerful competitor.

At the same time, Europe’s energy policy has changed, and not without America’s influence. Europe has begun to counter Russia’s construction of the Nord Stream and South Stream pipelines. It’s begun to squeeze Russia out of the European oil and gas markets. Are these not signs of a confrontational globalization on Washington’s part? Yet in an effort to build on success in competition, one mustn’t transform partnership into global confrontation.

For example, how will the U.S. initiative to lift sanctions on Iran affect the competition to supply gas to the European Union? Won’t the Americans force Russia out of the market by proxy?

The release of the Iranian nuclear dossier and the lifting of sanctions on Iran is a success of painstaking joint efforts, above all those of the U.S. and Russia. And Moscow’s role is significant. I’m not sure that success would have been certain if Russia had refused to participate in the group’s work. At the same time, Moscow got nothing out of the deal. What’s more, we agreed to a number of restrictions on sales of military supplies. The Iranians are highly appreciative of this. It’s no accident that Ali Akbar Salehi, the head of Iran’s Atomic Energy Organization, recently said that in view of its cooperation with Iran in the field of nuclear energy, Russia will have advantages over other countries.

For all the dividends it received from the recent deal, Iran doesn’t consider itself beholden to anyone whatsoever. And it will hardly just start to give away its resources to multinational companies. Iran will most likely try to actively influence the oil and gas markets. It will hardly give preference to anyone in this sector out of gratitude even to us. At the same time, one should keep in mind that the Iranian factor is closely linked to the actions of Iraq, Saudi Arabia, and the general state of affairs in the region. As for Tehran’s influence on the market today, the increase in oil production or merely the declaration of an increase has had almost no influence on the price of a barrel.

If they force us out, the political and economic situation in the Middle East is so variegated that closer partnership with Saudi Arabia, Qatar (negotiations to that effect are underway), or Israel is possible for Russia. Completely different alliances that will compete with each other in the region might emerge.

But the main market, of course, is Europe, where the perennial talk about diversification and dangerous dependence on Russian gas supplies continues. Truly, instead of this talk, Europe should have put forth enormous effort a decade ago and worked closely with Turkey, Syria, Iran and Iraq for the sake of the long-term stabilization of these countries. Because only then, without fear of war or sabotage, is it possible to lay oil and gas pipelines. But who will lay them there now?

There is another very important point. By way of example, Qatar supplied gas to Europe until it became more profitable to supply it to Japan. As a result, the European gas shortage totaled 25 billion cubic meters per year (approximately 6.6 trillion gallons). What would the Old World have done were it not for the stabilizing factor of gas supplies from Russia, which without hesitation instantly brought back the entire volume of the shortage? Yes, Russia’s oil and gas presence in the European market increased in percentage terms. But they’ve started talking about it in less than flattering tones. For some reason they haven’t wanted to admit that it was Russia that provided gas-supply stability for the businesses and people of Europe. I understand its desire to diversify oil and gas supplies. But it’s necessary to appreciate the reliable partner with whom the countries of the EU are linked by pipelines and a half-century of energy cooperation.