Illustration: Karin Sunvisson.

Conference reports Russia maintains its focus on gas

The Russian energy strategy for the next few years includes lofty goals. While other countries are investing 1.5 percent of their GDP in the energy sector, Russia is spending 5 percent. This was noted at the Norwegian Institute of International Affairs (NUPI) Annual Conference on Russian and Eurasian Studies.

Published in the printed edition of Baltic Worlds page 13, Vol 4:2010
Published on on January 10, 2011

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The Russian energy strategy for the next few years includes lofty goals.  While other countries are investing 1.5 percent of their GDP in the energy sector, Russia is spending 5 percent. Russia wants to increase production and exports, especially of gas. Tatiana Mitrova from the Center for International Energy Markets Studies at the Russian Academy of Sciences in Moscow explained this during a talk at the Norwegian Institute of International Affairs (NUPI) Annual Conference on Russian and Eurasian Studies. The theme this year was “Russia, Europe, and Energy: Rule of Powers or Power of Rules”.

“The current strategy calls for energy exports to increase by 20–30 percent. But the share of gas exported to the EU is going to decline and the share exported to countries in the East, especially China, is expected to rise”, Mitrova said, and further noted that the plan is to increase exports of gas alone by 30 to 40 percent.

Since Russia’s costly projects and investments are risky, the country is eager to create stable contracts with long-term price agreements. Contracts in which the parties agree to import certain goods in exchange for others are also conceivable, especially when it comes to countries to the east.

Over the next few years, energy as a base product will account for no more than 70 percent of exports, according to the official energy strategy. Russia wants to process the energy itself. One area where foreign investors are being invited to participate involves planning and extracting oil offshore — where outside expertise is required.

The energy issues must be put into a greater context, according to Irina Busygina of the Moscow State Institute of International Relations (MGIMO). Russia is investing in the energy sector because the country wants to play a role in international politics. Busygina is inclined to link geopolitical initiatives to modernization initiatives. The message from the Kremlin is “trade with us but do not interfere”.  Russia will manage its internal affairs on its own.

Everybody is talking about the modernization of Russia. But there is opposition among the masses. They understand that modernization is not going to bring them any advantages in the foreseeable future, according to Busygina. She reminded listeners that the same applied to the “shock therapy” introduced after the fall of communism. Many groups were excluded, groups that have yet to benefit from economic growth in Russia.

“The question is not how Russia will manage to compete in a superpower arena, but how it will manage to become a normal country. These days, people in general are just trying to survive”, Busygina said during the lunch break.

She continued: “Russian policymakers are going to Silicon Valley and now they are talking about creating a similar high-tech center in Russia. As something to show off, a symbol that we are in the game. Innovation and creativity do not come without freedom. There is a discrepancy between vision and reality. The energy policy is one way to manifest to ourselves that we are still one of the big guys.”

Russia intends to maintain its focus on gas, even though the economic crisis has led to declining demand for gas and changed the price structure, according to Derek Averre of the Center for Russian and East European Studies (CREES) in Birmingham. He spoke about a changed realpolitik scenario in which strong, independent states are not in full control. Several other actors are now having an impact on state policy — actors that states cannot influence, such as major energy companies.

The EU has also developed a new energy strategy based on the 20–20–20 principle and an emphasis on investment in renewable energy sources. Similar thinking is seen in the strategy Germany’s recently established.

The EU does not play an especially significant role in the design of energy policy between EU Member States and Russia, for example, said Indra Øverland of NUPI. Agreements on energy supply are made at the bilateral level, even though the EU is currently the biggest consumer of Russian energy and Russia is the EU’s biggest supplier.

In one example of the success of bilateral negotiations, an agreement was finalized last spring in the northern corridor between Norway and Russia concerning offshore rights in the Barents region. Øverland emphasized that this agreement, which had been discussed for 40 years, was now made with no need for involvement by other parties, such as the EU.

Pavel Baev of the Peace Research Institute Oslo (PRIO) noted that gas projects in the southern corridor have been stalled. He sees no risk of conflict surrounding the issue, even though the positions are in gridlock and have been for some time. He notes that, miraculously enough, Russia has not been the victim of a terrorist attack on its pipelines in the Caucasus.

Gas is a multifaceted instrument for the exertion of power. Concerning the pipelines between the southern and northern corridors, through Ukraine, Baev believes that Russia and the EU are in agreement: no one wants anything to do with Ukraine for a while, he says.

“The rational choice would be to go for Ukraine. It is the shortest way between Russian gas supplies and the European market”, said Baev, only to immediately state that this is not on the agenda for either Moscow or Brussels. Both, he said, are fed up with Ukraine.

During the following panel discussion, Ingmar Oldberg of the Swedish Institute of International Affairs (UI) noted that there had been discussion of oil and gas, but no mention of nuclear power.

Tatiana Mitrova answered that nuclear power is a topic people in Russia prefer not to talk about since the Chernobyl accident. A number of safety studies were performed afterwards, but no investments are currently being made in nuclear power, according to her. One pragmatic reason is that Russia has lost know-how.

“The people who had the expertise in this area have either retired or they died in the accident. A lot of them were sent there to study the site and they are now dead”, said Mitrova. ≈