Why the Kremlin is Winning the Pipeline War

Guy Chazan of The Wall Street Journal weighs in today with the narrative of Russia's thus-far winning strategy against the U.S. for petro-leverage in Europe. As O and G readers know, Vladimir Putin and Dmitry Medvedev have not just out-foxed the Bush administration in this important contest for economic and political leverage across Europe. They also have simply worked harder. The result is a huge advantage for Russia's South Stream and Nord Stream natural gas pipelines. As for the West's competing Nabucco pipeline -- to call it stillborn would be charitable.

The piece puts together how the Russians, using no strong-arm tactics but orthodox economic incentives, so far have triumphed. But pipeline junkies may be amused that it entirely omits Turkmenistan, the center of the pipeline race. Azerbaijan -- a bit player in this project -- is wrongly identified as the vortex. In addition, Matt Bryza, the State Department's deputy assistant secretary for European and Eurasian Affairs, is inaccurately identified as "a key architect" of Washington's triumphant Baku-Ceyhan pipeline. I like Bryza a lot, and no one in State has stuck to the issues longer. But to be fair to a host of others, in the 1990s he was a junior player.

Book recommendation: I reviewed William J. Bernstein's A Splendid Exchange in Business Week. It's one of those personality-driven works where you can actually get through the sweep of history without much effort, in this case using the prism of world trade.

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Presidential Candidates Clueless on Russia; Report: Putin to be NYT columnist

The presidential candidates as a whole don't look very sure-footed on former Soviet policy. That is except for John McCain, who says Russia should be shoved out of the G-8, and that the U.S. should proceed with the non-working missile shield in Poland and the Czech Republic. The Council on Foreign Relations collected the candidates' various positions, and The Washington Post ran them out on Friday.

How about returning to part of the Soviet-era approach -- averting McCain's petulant muscle-flexing, but accepting that there's little overlap in belief systems, that the U.S. and Russia are each out for their own self-interest around the world, and that it's each country for itself in terms of competition?

One challenge of 2008 -- winning the battle to control the new flow of energy into Europe. Russia has the edge in winning over the key country in this battle -- Turkmenistan and its huge natural gas supplies. But Turkmenistan President Kurbanguly Berdymukhamedov is still leaving the door open for Europe and Washington's idea to direct his country's natural gas West.

Putin in the New York Times? The Media Bloodhound reports that NYT editorial page editor Andrew Rosenthal, who just announced a deal to publish his sworn enemy Bill Kristol once a week, has struck a second masterstroke: a weekly column by Vladimir Putin. Satire at its best.

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The Pipeline War: As the CondiBoys Bicker, Putin Laps The West Again

Vladimir Putin has advanced again in the principal current theater of battle between the West and Russia -- the European pipeline war. His antagonists meanwhile are bickering over who will general their troops.

As wars go, this one is easy to figure out. It's purely business driven -- over who will dominate Europe's energy market -- and the spoils are political influence in Europe, where the votes are decisive on numerous issues vital to the West, in particular the U.S.

Russia, which currently controls about a third of Europe's oil and natural gas market, is seeking to enhance its dominance further by building large, new natural gas pipelines into northern and southern Europe.

On the other side, the European Union and the U.S. are trying to lessen Russian influence by building a competing set of natural gas pipelines into Europe.

The improbable key for both sides is that little can happen unless a single state -- Turkmenistan -- goes along. It possesses the world's fourth-largest reserves of natural gas, and it's these supplies that would make either side's pipeline strategy work.

So both the West and Russia have been assiduously courting this desert Central Asian nation, and its new president, Gurbangly Berdymukhamedov.

Except that Putin has been much more assiduous, and today that bore fruit as the leaders of Turkmenistan and also Kazakhstan signed a final agreement to build the first leg of Russia's new pipeline system. It would gather up the natural gas supplies of Turkmenistan and Kazakhstan, ship them north to Russia to be combined with Gazprom's volumes, then exported on to Europe at a much higher price (the profit to go to Russia alone).

I still think this is not a done deal. I've seen such seemingly concrete agreements silently disappear before. The real test is whether the pipeline lengths and bulldozers arrive on the spot, and welders begin working. As a smart friend posed the situation this morning, "Will Putin/Medvedev/Gazpromistan cough up the funds for it? Stay tuned." He was referring of course to Putin's probable successor, Dmitri Medvedev, and the character of today's Russia: The Gazprom State. The Russians aren't renown for willingness themselves to finance such projects.

As if to highlight this point, Berdymukhamedov himself didn't attend the signing ceremony -- which is notable since Putin and Kazakhstan's ultra-cautious Nursultan Nazarbayev did. He seems to be keeping the door slightly ajar for the Western route.

Still, the signs are not propitious for proponents of the Western route. While Putin has personally sat down with Berdymukhamedov numerous times, even flying down to Ashkabad to see him, President Bush gave him a mere photo op at the United Nations a couple of months ago.

Meanwhile, Bush's foreign policy team is in a catfight over who is going to lead the charge. Last month I reported that diplomatic warhorse Thomas Pickering was about to be named the new Caspian energy envoy. It's an inspired choice -- one of America's top two or three statesmen, Pickering brings undisputed gravitas wherever he goes. He exudes seriousness. His deputy is to be Steven Mann, a long-time ambassador and authority on the Caspian Sea.

But I'm told that Dan Fried, the U.S. assistant secretary of state for European affairs, isn't happy. He's intent on installing a senior deputy, Matt Bryza, in one of the two jobs. Bryza is deputy assistant secretary of state for European and Eurasian affairs. Fried and Bryza served together under Condoleeza Rice on the National Security Council before she became secretary of state.

Which brings me to CondiBoys. I realize I am out of it, having spent too much time in Central Asia, but until this week I had never heard this term. It apparently refers to the prevalence in key foreign policy positions of Rice's former mates at the NSC. Such proximity and loyalty to Rice, and not necessarily merit, is said to be key to promotion; loyalty to Bush is said to be helpful as well.

I happen to admire Dan Fried. I was told back in 2005 that he was singularly responsible for America's humane response to the massacre of hundreds of people in the Uzbekistan city of Andijan, apparently on the order of President Islam Karimov. Knowing that Karimov would force out the U.S. military base at the slightest hint of provocation, Fried pushed through a decision to fly out dozens of survivors who had fled to neighboring Kyrgyzstan, and eventually relocate many in the U.S. The U.S. did lose the base.

I also think that Bryza is a highly qualified Eurasian hand, probably the longest-serving Caspian expert in government. Plus he's a nice guy.

But Fried's campaign is absurd. If the CondiBoy description is true, neither Pickering nor Mann are Rice proteges. But you don't bench your first string quarterback if he's willing to play (Asian and European readers: You catch the drift). It seems to me that Fried and Bryza ought to get out of Pickering's and Mann's way so they can go to work.

They have a slog ahead. My friend Russell Zanca, an Uzbek export over at Northeastern Illinois University, just sent a comment on yesterday's posting about Putin containing the following notable remark:

"It's totally natural for the Cen Asians to go w/ Russia--all connections, work ethics, everything is well in place--um, not to mention geography. Meanwhile the U.S. organizes conferences and exhibitions in Ashgabat. As a Tashkent hat seller once told me, America's a good country, but Russia's much closer. "

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The High-Stakes U.S. Courtship of Turkmenistan

The Bush administration's imminent creation of a powerful new Eurasian energy office is part of a late but broad strategy to catch up to and overtake Russia's advanced natural gas juggernaut in Europe.

As I reported a couple of days ago, the administration plans to appoint a potent two-man diplomatic team -- former ambassador to Russia Thomas Pickering, and Steven Mann, currently a senior State Department official on Central and South Asia.

People with whom I've been exchanging messages say the duo's main task is this: To transform a long-shot European natural gas pipeline proposal called Nabucco into reality. Nabucco would carry natural gas from the Caspian Sea to Europe.

By accomplishing that, the U.S. would blunt the impact of an advanced Russian pipeline project that's meant to secure and increase its position as Europe's most important natural gas supplier (Russia's Gazprom already controls about 30% of Europe's natural gas and oil supply).

While Russia sees itself as simply forwarding the market principles that the West espouses as a mantra, the Bush administration and the European Union think it's a bad idea for Gazprom to carve out greater economic influence in Europe. And Nabucco would give Europe a channel for Caspian natural gas independent of Russia.

The key to all this is the republic of Turkmenistan -- possessor of the world's fourth-largest supply of natural gas -- and its neophyte president, Kurbanguly Berdymukhamedov. A dentist by training, Berdymukhamedov was catapulted to the presidency last December on the death of Turkmenistan's ultra-bizarre ruler, Saparmurat Niyazov.

Now the new, 50-year-old Turkmen leader is the subject of one of the world's most curious diplomatic courtships.

Russia's Vladimir Putin is all over Berdymukhamedov. Were they not just five years apart in age, one wouldn't be surprised to hear of Putin trying to adopt him as his only son. Russian delegations are in the capital of Ashkabad almost constantly, and Putin himself has gone down at least twice to see Berdymukhamedov, in addition to meeting him one-on-one in Tehran and Russia.

Why? Putin wants Berdymukhamedov to agree to export almost all his natural gas north to Russia for onward shipment to Europe. And he seems close to succeeding. There actually is a handshake deal (in my experience in the former Soviet Union, a signed contract is equivalent to a western handshake; it only becomes a genuine contract when the pipes arrive on site for welding, and the work actually begins.).

Enter Washington. The State Department has been dispatching regular teams to Ashkabad since last summer. The European Union has, too. They've dangled a higher price for Turkmen natural gas to lure Berdymukhamedov into committing to a competing pipeline -- a trans-Caspian line that would ship his gas to Europe via Azerbaijan, Georgia and Turkey, into Nabucco.

In September, President Bush got into the act with a one-on-one chat with the Turkmen president in New York during the United Nations General Assembly.

But that hasn't been sufficient. I'm told that Berdymukhamedov keeps bringing up the Chinese, who have themselves decided to build a $26 billion natural gas pipeline east to China, absent any participation by the Turkmen at all.

If the West is so interested in the trans-Caspian line, the Turkmen leader says, why doesn't it emulate the Chinese and just go ahead and build it? Isn't the U.S. as great as the Chinese? Why must he aggravate his giant neighbor to the north -- Russia -- by taking the lead?

Plus, Berdymukhamedov is suspicious about the West's human rights agenda. Under the previous Turkmen leader, the republic had one of the worst human rights records in the former Soviet Union, which is saying a lot. Berdymukhamedov has moved to loosen up, but he isn't about to go European.

Washington and the EU have replied that the West isn't like the Chinese -- pipelines have to be built by private companies; the countries don't get involved in actual construction. And on the human rights side, "we tell him, 'We're not asking you to be Sweden or the U.K.," one person involved in the Western courtship tells me. For comparison purposes, they are telling Berdymukhamedov not to look to Europe, but to his neighbors Kazakhstan and Azerbaijan. They've got their autocrats, but generally aren't known for dark prisons with men in chains. "If we can get KazAzerTurk on the same page, that would be a nice little club," this person says.

Berdymukhamedov isn't quite biting, which brings in Pickering and Mann. Washington hopes they can manage to nudge the pipeline over the finish line.

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Explosion: The Age of Pipeline Power

The explosion on the Canada-to-U.S. oil pipeline should help people close to home grasp why the big powers are spending so much time these days worrying about the oil and natural gas flow from the Caspian Sea.

Yesterday's explosion in Minnesota shut off the flow of about a million barrels of oil a day from Canada to the U.S., and that temporarily sent crude oil prices up by $4 a barrel. Even though they settled down fast, the AAA says the accident may push up U.S. gasoline prices in the northeast and midwest for several weeks.

That's just a million barrels -- one-twentieth of the daily U.S. oil diet.

Further afield, NATO is helping to secure the Baku-Ceyhan oil pipeline, the million-barrel-a-day line carrying Caspian crude to the Mediterranean. The U.S. applied enormous diplomatic pressure to get the line built. It came on line last year. Within a decade, the Caspian will be exporting between 4.5 million and 5 million barrels of oil a day.

Now the U.S. and Europe are pitted against Russia to secure natural gas from another part of the Caspian -- the republic of Turkmenistan, which has the world's fourth-largest supply of the fuel.

Again, the matter is pipelines. Russia has actually obtained a contract allowing it to buy much of Turkmenistan's gas supply, move it north through new and refurbished pipelines, and ship it on to Europe and elsewhere at a huge markup. The U.S. and the European Union haven't given up, though. They are championing a competing pipeline that would take Turkmen natural gas West, skirting Russia.

They aren't the only players -- China would also like to grab a big share of Turkmenistan's gas and ship it east.

These countries understand that one big dimension of power and influence today is control not necessarily of oil and natural gas supplies themselves, but over their flow to the market. Similar to the long battle over sea lanes in prior centuries, they are doing all they can to take control over the pipelines that carry former Soviet oil and natural gas to the rest of the world.

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