In the Interrogation Room with Gazprom

Police have used the tactic for centuries -- good cop, bad cop. After a few hours of roughing up by a nasty interrogator, a suspect warms to the coffee and banter brought by a seemingly sympathetic officer. Then the suspect throws himself on the mercy of the court.

One sees at least a bit of that strategy in the tandem of Russia's Vladimir Putin and Dmitry Medvedev. After years of nastiness by Putin, Europeans were feeling warm and fuzzy after Friday's European Union annual summit, where they were treated to Medvedev's good cop approach: "being nice to them," as The New York Times' Stephen Castle described it.

I raise this not because it's surprising -- a lot of us see Medvedev as Putin with a nice face; we shall watch how Europe responds.

But it's interesting in combination with a great example of journalistic initiative (also on Friday) by the Financial Times' Carola Hoyos and Ed Crooks. It was a strong email interview the pair managed to land with Gazprom's gonzo CEO Alexei Miller. The paper devoted space on page one, in which Miller says that Gazprom will eclipse Exxon and become "the most influential [company] in the energy business," and dismisses OPEC as no longer relevant. It ran a second article on page three, in addition to a full transcript on-line, in which Miller expands on what's been a self-evident strategy toward which foreign oil companies get new energy deals in Russia: those willing to help Gazprom in its quest to become "a global player on the energy market."

Miller also defended his recent prediction that world oil prices will hit $250 a barrel.

While Russian energy titans are prone to flights of bloated rhetoric, this is not empty talk. Given its vast stores of natural gas, Gazprom may already be the most important energy player in Europe, and Miller says it is striking new deals ranging from Nigeria to North America. In the U.S., Miller is interested in the talk of new natural gas pipelines in Alaska.

In terms of big geopolitics, Miller predicts outright that South Stream, Russia's weapon to defeat Washington in the natural gas pipeline war in Europe, will definitely be built. In the remote chance that the U.S.-backed Nabucco pipeline is also erected, he says, it will pose no threat to Russia's South Stream.

So O and G readers should look for more, not less, Russian assertiveness in global energy. It will simply be quieter.

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C. Boyden Gray: Ho-hum on the Caspian

The Bush administration has finally named a senior diplomat to challenge Russia in the pipeline war in Europe. He is C. Boyden Gray, the Bush family friend and GOP partisan lawyer.

As O and G readers have read over the previous months, Russia and the West, particularly the U.S., have been in fierce competition to control the natural gas supply to Europe, and ultimately to influence the continent's politics. Under Vladimir Putin's determined, hands-on leadership, Russia has been far in the lead and, unless something changes fast, will win the contest.

Hence a push within some circles, including Senator Richard Lugar specifically and the Senate Foreign Relations Committee in general, for Washington to get serious by naming a prominent senior statesman to spearhead the U.S. effort. The first nominee was Thomas Pickering, but his personal finances turned out to be a conflict of interest. Then, someone suggested Bush family friend Donald Evans, the former Commerce secretary, but that also went nowhere.

Now the administration has settled on Gray, who was counsel to George H.W. Bush, and named as a recess appointment by President Bush as envoy to the European Union when the Senate refused to confirm him.

Gray comes from similar aristocratic stock as the Bushes -- with inherited wealth, his father was secretary of the Army under Harry S. Truman, and his grandfather was chairman of R.J. Reynolds Tobacco. He graduated from Harvard, and clerked under Supreme Court Chief Justice Earl Warren.

I'm perplexed. Is this the man to general the West's battle against one of the world's consummate players of brutal market economics, namely Vladimir Putin?

To find out whether I'm simply out of the loop, I took a sampling of some of the best-connected readers of O and G. As usual, this sampling will be anonymously sourced:

1. "Doesn't sound like the person we need to bring some coherency to our policy in that part of the world."

2. "(The Senate Foreign Relations Committee) pressed Condi hard to DO SOMETHING, so, [this is] more or less her saying ‘Get this off my plate!’ This was the political compromise. Politics, not grand strategy.”

3. "[Gray's] pluses -- close to the White House, maybe gravitas (but he is a pompous ass), smart guy. Minuses -- intensely partisan, loves to hector the EU, does not know energy, [does not speak] Russian. Bottom line -- not great but could be worse."

4. "Really lousy appointment. Can hardly think of anyone worse."

What's obvious is that no one of significance would accept the appointment. Which is why you have Rice simply adding new duties onto an existing envoy's portfolio. Which is also why the announcement was made in a one-paragraph statement issued with no fanfare.

In other words, this is a dull spearhead.

Rice in the Race

The Bush administration has officially announced the high-profile Caspian Envoy position we’ve been discussing on this blog for some three months. This would be Washington’s point person in the contest for petro-influence with Russia in Europe.

In reply to a question before the Senate Foreign Relations Committee yesterday, Secretary of State Condoleeza Rice said she’s head-hunting for the position now:

“I do intend to appoint, and we are looking for, a special energy coordinator who could especially spend time on the Central Asian and Caspian region,” Rice said. She added, ``It is a really important part of diplomacy. In fact, I think I would go so far as to say that some of the politics of energy is warping diplomacy in certain parts of the world.”

Rice is right. Russia's Vladimir Putin is far advanced in his shrewd market strategy for dominating Europe's natural gas supply even more than Russia currently does. Putin has personally gotten most of the necessary approvals from other nations for three new natural gas pipelines stretching from Turkmenistan into the heart of Europe. Meanwhile, Washington is not yet out of the starting gate for its rival, Western-controlled pipeline system that also would begin in Turkmenistan.

But I have my doubts about Rice's seriousness given her singular focus on the Middle East as a legacy issue for the Bush administration. Even if she were actively seeking someone, it seems highly unlikely that this late in the administration she could get a commitment from anyone with enough star power to outplay the masterful Putin.

Someone such as Zbigniew Brzezinski or James Baker. And even if someone of that caliber did agree, he or she would likely be in the job just 11 months, until the next administration takes over, which doesn’t seem sufficient time to mold the Western plan into shape.

Back in November, it looked like U.S. super-diplomat Thomas Pickering was imminently to be appointed. In the end, I’m told that the lawyers couldn’t work it out given his position as an adviser to Boeing.

The most realistic question now may be whether it will be too late when the next administration gets up and running.

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Rights: Creative Commons

Becoming Quieter on the Caspian

The prize in the Pipeline War is Turkmenistan. Russia and China -- especially the former -- are far ahead of the West in the contest. One reason has been their willingness to look the other way on the issues of human rights, rigged elections and presidents for life.

Chris Chivers of The New York Times weighed in over the weekend on the American response, which is to lower the volume on the moralizing.

There has been a U.S. policy shift on the Caspian, and that's to tell the presidents that they don't have to be like Norway to get along with Washington. As long as they stay on the good-behavior -end of the spectrum of the generally badboy former Soviet states, they're all right.

Some quiet diplomacy is needed in the region. The U.S. is right to give the benefit of the doubt, for instance, to Turkmen President Gurbanguly Berdymukhamedov as long as he continues to methodically dismantle the legacy of his predecessor, Saparmurat Niyazov.

The aim of the U.S. policy is to help to continue to carve out some long-term breathing room for the region from Russia by championing the trans-Caspian and Nabucco natural gas pipelines to Europe. So far, Turkmenistan has been more favorable toward Russia's competing system, the Nord Stream and South Stream pipelines.

Yet there's a line not to be crossed.

One is pandering. Chivers provides an astonishing public remark by Julie Finley, U.S. ambassador to the OSCE. Speaking to Kazakhs in Europe a couple of years ago about their seizure of unflattering newspapers, Finley said, “Maybe you saved some readers some waste of time, anyway.”

And a second is Uzbekistan. Chivers describes a recent visit to Tashkent by the apparently irrepressible Admiral William Fallon, commander of the U.S. Central Command. Fallon is seeking to help thaw currently frozen relations with Uzbekistan's Islam Karimov, who holds the distinction of being the former Soviet Union's most brutal dictator.

“I told them that we couldn’t do much about the past, but that we could look at the future,” Fallon said of his discussion with the Uzbeks.

With respect, that's incorrect, Admiral Fallon. There is no respectable future relationship with Karimov until, for starters, he proves that he has stopped torturing and killing his people.

Unlike some of the region's other leaders, Karimov took no road to post-Soviet ruthlessness. He began there. My own initial sign of that was back in January 1992, two weeks after the Soviet collapse, when I crossed the street from the Hotel Uzbekistan to talk to the Pulatov brothers at Birlik, the then-Tashkent-based opposition group whose office was across the street. At the bottom of the stairs was a pool of blood. Inside, I learned from the more active of the two Pulatovs -- Abdumanop -- that his brother Abdurahim had been knocked on the head with a pipe by an unknown assailant.

The situation has declined since. Karimov regards entreaties by westerners such as Fallon not as an opportunity to re-open a perhaps positive economic path for his people, but a display of weakness, evidence that he still calls the shots in the dance with the foreigners.

It will probably require Karimov going the way of Niyazov before normal relations with the West can resume.

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To O and G Readers

A very happy 2008. To the healthy and respectful give and take on issues that all of us think are important regardless of where we live, and from which perspective we look at them. Best Steve

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Behr-dee-mukh-uh-MEH'-duv in the White House

In the 1990s or earlier, some knuckle-head who couldn't get his (or her) arms around Central Asia nicknamed it the 'Stans as a catchall for all five of the previously little-known nations. At times the monniker even crossed the Caspian and embraced Azerbaijan, which while also a Muslim Turkic nation technically is part of the Caucasus. The stab at a cutism, however, I think helped ordinary outsiders digest these new nations as places distinct from, say, Russia. And the rest is history -- Kazakhstan's Nursultan Nazarbayev it seems only has to call to say he's in town to get an Oval Office visit. The same goes for Azerbaijan's Ilham Aliyev.

But what can you do with Gurbanguly Berdymukhamedov? There's simply no dignified way of abbreviating the ten-syllable name of Turkmenistan's new president. I even inquired of my wife, who as regular readers of this blog know is a Kazakh; she looked at me as though into the eyes of a child.

Which brings me to President Bush. Bush and his successor are simply going to have to bear down and learn to pronounce this man's name. Why? Because Turkmenistan, the possessor of the world's fourth-largest reserves of natural gas, is the improbable key to winning the current European pipeline war with Russia. Russia wants Turkmenistan's gas to nail down its dominance of the European natural gas market, while the U.S. and Europe want it to diversify Europe's natural gas supply away from Russia. Without Turkmenistan, neither can win.

So far, Russia is far in the lead, and a large part of the reason is courtship -- Russia's Vladimir Putin has met with Berdymukhamedov multiple times over the last year, even flying down to Turkmenistan. Yesterday, Putin seemed to win the fruits of his effort by signing a final agreement with Turkmenistan and Kazakhstan to carry their gas north through a new pipeline. In that part of the world, final is a fungible word, and in my opinion the game still goes on.

Meanwhile Bush has relegated Berdymukhamedov to a mere handshake at the United Nations. This is a blunder. Berdymukhamedov needs to find himself in the White House, over at Camp David, in America's embrace, getting a shoulder massage, a drink, a cigar.

Again, the West has something to learn from Putin.

Meanwhile, On the Field of (Pipeline) Battle

The Europeans have supplied fresh entertainment for spectators of the ongoing East-West pipeline war. It comes in the form of an announcement by BP and Norway's Statoil that they have double the reserves they initially estimated at a huge offshore Azerbaijan natural gas field. That makes the underdog Western side a more serious contender in the battle for economic influence in Europe.

The Caspian Sea occupies its accustomed key role in the events.

For almost a year, Russia and the West (Europe and the U.S.) have been circling one another. At stake has been dominance over Europe's energy supply. Russia, which already supplies more than 30% of Europe's oil and natural gas, wants to build up that formidable position. The West wants to shrink it. The two goals are incompatible, so a diplomatic and economic battle have ensued.

Russia's Vladimir Putin has taken the lead by getting Turkmenistan and Kazakhstan to sign away their natural gas exports and fire sale prices, and to agree to help build a new pipeline to take the supplies north to Russia, and then on to Europe.

Europe and the U.S. have countered by suggesting that Turkmenistan and Kazakhstan instead ship their natural gas west, and on to Europe, where a pipeline called Nabucco would be built to supply the continent. But they are late to the game, and have suffered valid skepticism about their ability to harness sufficient natural gas to justify Nabucco.

The new announcement by BP and Statoil comes from across the Caspian, in Azerbaijan. The companies say they may be able in the next few years to start exporting the natural gas equivalent of an extra 150,000 barrels a day of oil from an offshore field they control.

That's because the companies discovered a new reservoir of natural gas at the giant Shah Deniz field. They did so by drilling the deepest well ever in the Caspian -- 7,300 meters below the seabed.

The companies had already expected to export a peak volume of the natural gas equivalent of 150,000 barrels a day of oil from Shah Deniz. Now they say the new reservoir seems likely to supply that much or more. So, in all, Shah Deniz will export the natural gas equivalent of more than 300,000 barrels of oil a day.

Some of the new gas will be absorbed locally. But the Russians are no doubt scowling, and the Europeans and Americans smiling, at the prospect that the remainder could go on to Europe through proposed Nabucco.

Photo by: Cadd
Photo rights: Creative Commons

The Down Side of Leaving the Nest

A piece in The New York Times today demonstrates that a growing general grasp of the new hard geopolitics on the Eurasian dual continent, driven by economics -- in particular oil and natural gas -- rather than the traditional movement of armies.

In the story, Adam Ellick writes that "Russian power is rapidly returning to the Baltics, only this time the weapons are oil and money, not tanks."

That's an essential point, since the United States has yet to show that it fully comprehends that the nature of conflict, at least in this part of the world, has changed under its feet (see Josh Foust's excellent latest post on the pipeline war), and that Russia with its financial muscle is leading the charge.

But there's a larger point for the small nations crusading most vigorously to be shielded from the hostilities: For the up side of independence, you have to leave the nest entirely.

Which brings us to the Baltic republics' self-serving posture on the proposed Russian-German-Dutch Nord Stream natural gas pipeline. The Balts oppose Russia's resolution for its continuous disputes with the pesky neighbors that stand between it and its European oil and natural gas customers. Russian-controlled Nord Stream would go through the Baltic Sea, bypassing Latvia, Lithuania and Estonia.

There are reasons for apprehension over the total of three new natural gas lines through which Moscow proposes to export Central Asian and Russian gas into Europe. As I'll discuss in the last stop of the book tour tomorrow and Tuesday in New York, Moscow has a record of using its petro-power for political and economic leverage.

But the Baltic states want it both ways. They want NATO and European Union protection from possible Russian aggression, but also the cheap fuel and pipeline tariffs they get as a channel for Russia's energy.

But, like the rest of Europe, they will have to fend for themselves.


Photo: Mshades
Rights: Creative Commons

Georgia: A Mirror of Russia

Yet again Georgia is the target of a mysterious military strike, and yet again Russia is accused of responsibility. The upshot: Georgia continues to be a dramatic example for the West of what Russia's critics mean when they say it is dangerous to be vulnerable to Moscow.

Here is the beginning of a Chris Chivers piece in The New York Times:
MOSCOW, Aug. 8 — The Republic of Georgia presented what it called a mounting body of evidence today that a Russian warplane had entered deep into its airspace and fired an air-to-ground missile. It said it was seeking a special session of the United Nations Security Council to address the incident. Read rest of story

Steve's comment: Europe has wondered aloud for the last several years whether it is risky to become more and more reliant on Russia for its oil and natural gas. The latest news from Georgia is not necessarily, or even likely to be, the future of Europe.

But Russia's denials strain credibility. The trail of such incidents, and denials from Moscow, go back at least 15 years, when Russia backed Abkhazia in its bloody separation from Georgia proper. Russia was, and continues to be, responsible for Abkhazia's uprising. That makes the missile attack a compelling illustration of how Russia behaves with troubling regularity with a country that may be the most vulnerable of all.

Here is a good podcast summary from the Guardian.

Russia For Now Holds Its Trump Card

President Putin's reprisal today was measured. (Video) He shrewdly held out his ultimate card -- energy -- as ammunition to be used as he believes the need arises.

For his domestic audience, Putin could have done no less than the expulsion of an equal number of British diplomats, and possibly also the imposition of visa restrictions that was announced. The moratorium on terror cooperation can be taken with a grain of salt -- the two sides share concern on the important grounds, and joint efforts will continue.

As noted in a comment to the previous post, Russia and Britain to a degree are tied at the waist financially -- BP for instance desperately needs continued good relations with Moscow for its current and future production and reserve base. But Russian business relies on London's capital markets as well.

Concern about Russia's future attitude toward British business is well-founded. That remains the likeliest ground for Putin's long-term reaction to what, if one listens to his remarks, he seems to regard as an intolerable challenge to Russia's image and its law. BP's investments remain Britain's soft underbelly.