The Battle of the Arctic

about Russia's zeal to prove its claim on Arctic black gold:

In 2001, the UN Commission rejected claims that the Lomonosov Ridge belonged to Russia, demanding more conclusive scientific proof. Now it seems Moscow is willing to make more money available for Arctic research, in a bid to bolster its case.

It doesn't matter what Russia wants to do, because, according to Jamestown Foundation's Pavel K. Baev, to "bolster its case". On August 2, two Russian vessels pulled off what seemed rather impressive. Using two submersibles, the Akademik Fedorov collected some yellow mud and planted a titanium flag. "This was without doubt a remarkable achievement in the history of Arctic exploration, but its scientific value was compromised by the fact that the goal was not to examine the seabed, but to collect evidence for the Russian claim to a large part of underwater territory, which is political in nature and centered on securing the priority rights on developing natural resources, first of all hydrocarbons."

Aside from the dubious value of the mud, Russia, according to Baev, lacks the fiscal and technological ability to produce the types of research vessels needed to validate its geopolitical claim on the Lomonosov Ridge. But, most importantly, Gazprom is incapable of developing any natural resource field. Baev expects a reprise of the .

For the past five years Gazprom had pondered what to do with the $20 billion Shtokman project, rich enough to supply the entire world?s demand for gas for a year. It negotiated with several foreign firms and made them supply detailed bids; it announced a shortlist of companies which included Norway?s Statoil and Norsk Hydro and America?s Chevron, then last autumn, in a fit of energy nationalism, rejected them all in favour of working alone.

Now it has agreed to give Total a 25% stake in the infrastructure company that will develop the field and share the profit. A further 24% could still be doled out to Norwegian or American companies, while Gazprom will retain 51% of the infrastructure company and 100% of the actual reserves. So why a sudden turn-around, just when Russia?s relationship with the West is so cool? One obvious reason is that Gazprom needs foreign expertise and money to develop deposits which lie more than 300 metres under the surface of the Barents Sea, 600km off the coast of Murmansk. Gazprom has limited experience with offshore fields, particularly in such treacherous conditions.

Gazprom needs to compensate for falling production in its other giant fields in western Siberia. If it does not develop Shtokman fast (its target is 2013) the much-trumpeted Nord Stream pipeline now being built across the Baltic Sea to Germany will be empty. Nor would Gazprom?s ambition to get a share of the liquefied natural gas market in America?another destination for Shtokman gas?be fulfilled.

Yet this does not explain why Gazprom chose Total, which had been considered the least likely winner. The answer is politics. The decision fits in with the Kremlin?s tactic of striking bilateral energy deals within European countries and converting their national energy companies into fervent lobbyists for Moscow?s commercial and political interests. The expansion of Gazprom and other national champions into Western markets has long been a Kremlin ambition, but direct and often clumsy approaches have not worked. Now it has powerful agents in the European Union.

The deal with Total completes a set of joint ventures that Gazprom has built in Germany, Italy, Britain and now France. In Germany, Gazprom has a joint venture with BASF and a close relationship with Ruhrgas which owns about 7% of Gazprom and has a seat on its board. Germany?s former chancellor, Gerhard Schroeder, is the boss of a joint Russo-German consortium that is building the Nord Stream pipeline to Germany. He is one of the Kremlin?s most vocal advocates.

In Italy, Gazpom has a warm relationship with ENI and Enel. This year the two Italian companies (also after Mr Putin held a phone conversation with the country?s prime minister, Romano Prodi) got a bit of Russian gas reserves. ENI is Gazprom?s partner to build an extension of the Blue Stream pipeline across the Black Sea. And just as the relationship between Russia and Britain reached a nadir, BP agreed to form a joint venture and swap assets with Gazprom in exchange for receiving compensation for the loss of the Kovykta gas field. Gazprom may still give BP its 25% in Kovykta back, but it plainly expects favours in return.

So, let Russia have its claim, because with Gazprom in the driver's seat, the exploitation of resources becomes de facto an international geo-economic issue. If flag-burying and mud is all that is required to keep Russia intact, it's a small price to pay for geopolitical stability. And, it will save Canada the trouble of building a spring/summer navy to police the Northwest Passage.

Share and Enjoy:
  • del.icio.us
  • SphereIt
  • Technorati
  • Facebook
  • Google Bookmarks
  • E-mail this story to a friend!
  • Print this article!
blog comments powered by Disqus
Copy Protected by Chetan's WP-CopyProtect.