Russia took over the rotating chair of the Group of Eight (G8) Presidency on January 1, 2006, and therefore Russian President Vladimir Putin will host the G8 summit in St. Petersburg in July 2006. Putin has made it clear that he wants ???????Energy Security??????? to be the number one topic of the summit, and it appears that he will get his way.

The Russian government wants the summit to be a success and wants to pull it off without any public disputes, however, the US, behind closed doors, is making it clear that Iran must be on the agenda????????threatening that subjects distasteful to the Russians, like democracy issues may be brought up if Russia declines to adequately address Iran????????s nuclear ambitions. A few days ago the US said it would also press for discussions on the political situation in Belarus as well as conflicts in Georgia, Moldova and Nagorno-Karabakh. A deal will most likely be worked out to satisfy the US, but, Energy Security will remain the number one topic.

Why is Putin so intent on discussing Energy Security above all other topics? The answer lies in Russia????????s aggressive plan to take control energy assets (production, transportation and distribution) throughout Europe and Central Asia in order to exert power of its former Soviet republics and other Eastern European countries formally under their control, and thereby be able to influence their internal politics and any western style democracy movements. This strategy also would develop an energy stranglehold on the EU. Putin has learned from the past that trying to be a superpower through military might was economically impossible, and that Russia, during the Cold War, could not keep with Western military power. Russia????????s emphasis on military spending and development of weapons has taken a backseat to the development and control of energy resources. Putin believes that Russian control of energy assets will impact their comeback as a superpower, and will make Russia a significant player in European politics for decades to come. From all indications his plan seems to be a ???????home run.???????

Since becoming President in December 1999, Putin has used Russian energy assets to intimidate and bully the former Soviet republics. Through its companies Gazprom and Transneft, Russia not only intimidates, but looks to take control of oil and gas assets in the former Soviet Republics. Back in 2001, Russia shut off the spigot to the oil pipeline going to Latvia to punish Latvia for its policies on Russians living in Latvia, and to intimidate Latvia to sell a major portion of its interest in the pipeline to Transneft. Since Latvia did not give in to the intimidation, Russia spent $2.2 billion to build the Baltic Pipeline System, which is now in full capacity, and gives Russia a direct outlet to northern European markets, and gives Russia the ability to pipe oil without going through Estonia, Latvia, and Lithuania. The oil now is piped directly through Russia to the Russian Baltic seaport of Primorsk.
At the beginning of 2006, the national Russian energy company Gazprom temporarily cut off gas supplies to Ukraine in order to enforce a major price increase. Putin has also given Hungary and the Czech Republic the ability to use the North European Pipeline, thereby bypassing pipelines that run through Ukraine. These moves were meant to show

Putin????????s displeasure with Ukraine, and to punish Ukraine for its democracy movement and its move toward the West. The Russian company, Gazprom, has made it clear that they would like to takeover ownership of the Ukrainian pipeline network. Even Russia????????s ally Belarus is not immune from the intimidation. Russia????????s Gazprom is threatening to raise gas prices to Belarus in order to give Gazprom control of Belarus???????? natural gas transportation and distribution companies. If Belarus refuses to give up control to Gazprom they will substantially raise the price for gas. Belarus has until April 30 to decide if they will give up their companies to Gazprom or face the price increase. If Belarus agrees to Gazprom????????s demands, Gazprom will takeover the entire pipeline network running through Belarus. Beside the pipeline network Gazprom also has it eye on other energy producing companies in Belarus.
Putin has put pressure on Georgia to turnover control of the gas pipeline going from Russia through Georgia to Armenia. Gazprom has also made offers to buy into the gas distribution networks in Hungary and Poland. Several years ago Slovakia, which is almost totally dependent on Russia for its energy supply, sold 49 % of its interest in its oil pipeline to the Russian oil company Yukos (which Putin is taking control of by jailing most of its executives.)
Examples of Russia????????s move to use energy as its hammer in foreign policy could go on and on. Their attempts to monopolize the oil and gas markets throughout Europe, Central Asia and Asia are highlighted by the various plans for new pipelines and the takeover of existing pipelines and energy producing assets in Europe and Central Asia. Almost all of Putin????????s foreign visits are dominated by energy discussions. Russia has interests in existing or proposed pipelines in, or to, Germany, Turkey, Armenia, China, Kazakhstan, Uzbekistan, Turkmenistan, and is contemplating involvement in the Iran-India-Pakistan pipeline. Last week, Russia’s Gazprom delivered its first shipment of liquefied natural gas to the United Kingdom, and they plan to have a 20% share of the British gas market within ten years. Gazprom is also trying to takeover Centrica PLC, the UK????????s largest gas distribution company. The UK government may pass legislation to stop Gazprom from acquiring Centrica PLC.
In a striking move, Russia has entered into an agreement to sell arms to Algeria in return for Russia????????s involvement in Algeria????????s oil and gas business. The deal would give Russia exclusive rights for oil production in the Sahara Desert. Also as part of the deal, Gazprom will become immersed in Algeria????????s gas production. The deal would also give Russia the western technology that Algeria has relating to gas liquefaction. If this is not enough, the agreement also pledges Algeria to work with Russia in its gas distribution market with Europe. This is significant since Algeria is the only alternative to Russian gas distribution. Algeria currently has gas pipelines running to Slovenia, Spain, Italy, and Portugal, and it exports liquefied natural gas to Europe, Turkey and the US.

What is the EU doing to counter Russia????????s monopoly on gas and oil? There is not much they can do. Russia signed the Energy Charter back in the early 90s, but it has never been ratified by the Russian parliament. The charter calls for liberalized access to Russia????????s pipelines by other countries and their companies. The charter also forces arbitration of any price disputes, and would prohibit Russia from stopping gas deliveries to any country. The EU has pushed Russia to ratify the charter, but, don????????t look for Russia to ratify this charter anytime soon.

Last month the EU had a summit that focused on the question of energy security and the need for an EU strategy. The summit broke down into ???????old Europe??????? versus ???????new Europe.??????? Poland took the lead for ???????new Europe??????? and proposed an ???????Energy NATO???????????????a sort of NATO like security pact that would reduce the dependence on Russia for energy. The Baltic countries and Norway (which is one of the world????????s largest oil and gas exporters, but is not a member of the European Union) support the idea, but, France and Germany strongly oppose it. It should be noted that the EU Energy Commission is currently headed by Andris Piebalgs, who is the Latvian representative to the EU. Piebalgs knows very well the tactics of the Russians when it comes to using their energy might. Also, Germany????????s objection came as no surprise, since Germany is currently working with Russia to build the North European gas pipeline (NEGP) and the Germans are heavily dependent on Russia for oil and gas. The NEGP will deliver gas from Russia to Germany and will run under the Baltic Sea and therefore avoid any transit issues with other countries. (Just before former German Chancellor Gerhard Schroder left office, he finalized a contract to build the NEGP, and not surprisingly, Schroder will become the executive chairman of the consortium that is contracted to build the pipeline.)

I would not expect the EU to take a strong stance against Russia????????s move to monopolize the oil and gas industry since Russia supplies 25% of Western Europe????????s gas, and Russia, being the world????????s second largest oil supplier, exports 85% of its oil to Western Europe. Since the EU imports 50% (expected to grow to 70%) of it energy needs, Russia is a very important player in the EU energy game.

With Russia????????s ability to control and manipulate European energy supplies, Russia is going to play its energy card to re-emerge as a superpower. Europe and the US also fear the large energy thirsty markets of India and China, which will be competing for the energy supplied by Russia. Russia will use this competition to further intimidate, control and exert their might long into the 21st century.

Looking forward to the upcoming G8 summit in St. Petersburg in July, Putin will push his agenda to discuss Energy Security, and don????????t be surprised if he proposes some strong initiatives that are designed to pressure the EU countries to move closer to Russia????????s world view, and meant to irritate the US. After centuries of being hunted to the verge of extinction, the brown bear is making a comeback in Europe????????the comeback of the Big Russian Bear may also be on the horizon.