No. 1, 2010

In the middle of last November, Russian Prime Minister Vladimir Putin issued an order, approving the Energy Strategy of Russia until 2030. Numerous Russian press reports emphasize that it is focused on achieving the highest possible efficiency in the use of natural fuel and energy resources and the energy sector's potential to provide for sustainable growth of the Russian economy, its stronger position in the world, and more reliable global energy security.

Facts and arguments

It should be noted that almost seven years ago the Energy Strategy of Russia for a period up to the year 2020 was approved by a government order of August 28, 2003. Overall, the practice of its implementation confirmed that most of its key provisions are consistent with the actual process of the country's energy sector development, in spite of the dramatic changes in external and domestic factors determining the basic operating patterns of the Russian Fuel and Energy Complex (FEC). The new Energy Strategy extends the time horizon up to 2030 in line with new objectives and priorities of the country's development. It offers new guidelines for the energy sector's operation within the framework of the Russian economy's shift onto an innovative path of development as envisaged by the concept of the long-term socioeconomic progress of the Russian Federation up to 2020.

The emergence of a new version of the Energy Strategy has not gone unnoticed by the global petroleum community. Foreign media responded in a variety of ways. Realistic and restrained reports appeared in the Western press along with biased and superficial features under catchy headlines, such as: "Russia's New Energy Strategy Seems a Lot Like Its Old One," "Energy Strategy to Avoid Russia," "Flashpoint Russia: Imperial Energy Strategy?". These contained mostly pessimistic scenarios for the Russian oil and gas complex and doubts about the viability of the Energy Strategy. Various reports harp on an approaching "twilight era in Russian oil production," or a crude oil crunch facing Russia. Once again one could hear the "ritualized" hoary tales of "energy pressures" used by Russia, and the need to limit Russian companies' operation in the developed countries of the world.

Russian President Dmitry Medvedev emphasized in his address of November 12, 2009 that "We should launch modernization and technological updating of the entire sphere of production. This is a matter of survival of our country in the contemporary world." According to balanced judgments of a number of leading foreign and Russian analysts, the new Energy Strategy is a realistic policy document that would determine the development ways of the Russian FEC for many years to come. It is quite clear that the formidable challenges set in the Energy Strategy will be met faster if there is a combination of certain positive objective conditions in both the global energy market and the Russian economy.

It should be noted that the Energy Strategy of Russia for a period up to the year 2030 offers new strategic guidelines for the development of the energy sector within the transition of the Russian economy to the innovative path earlier declared in the Concept of the Long-Term Socioeconomic Development of the Russian Federation. The key vectors of future development of the fuel and energy sectors, as specified in the Energy Strategy of Russia, include a shift onto innovative and energy efficient development patterns; changes in the structure and scale of energy production; creation of a competitive market environment; and integration into the global energy system. According to the Energy Strategy, the average volume of investment into the development of the FEC sectors is roughly to double and total $1.8 to 2.2 trillion (in 2007 prices) during that period, and if we add thereto investments into the energy supply sphere, the figure would amount to $2.4 to 2.8 trillion. Furthermore, FEC companies' own funds would serve as the main source of investment (almost 80%). The share of direct foreign investment within the total investment would make at least 12%. Unconditional priorities of the government's policy include the establishment of high-tech enterprises for the production and processing of natural resources, and the shaping of the world's best energy industry.

Structural shifts and growth factors

The Energy Strategy up to 2030 is expected to be implemented in three stages. At stage one (up to 2013-2015) crisis phenomena in the economy and energy industry are to be overcome as soon as possible, and appropriate conditions are to be created and limitations lifted with a view to further post-crisis development; it is also planned to make use of the economic crisis to provide for the qualitative updating and modernization of the FEC, according to the press service of the Ministry of Energy of the Russian Federation. Stage two (up to 2020-2022) is expected to raise the overall energy efficiency in the economy and the energy sector, promote the innovative development of the FEC sectors and accelerate the implementation of energy projects in Eastern Siberia, Russia's Far East, the Yamal Peninsula and the Arctic sea shelf. Stage three (up to 2030) is associated with the effective use of traditional

energy resources and a gradual transition to renewable energy sources of the future. The ES-2030 will be implemented, including decision-making on public funds borrowing, within the framework of the approved policy documents: general development plans for individual branches, and government programs.

The Energy Strategy is expected to lower the Russian economy's dependence on the energy sector through the priority development of innovative low-energy-consuming sectors of the economy and through the deployment of energy-saving technologies. As a result, by 2030 as compared to 2005: the share of the FEC within the GDP and the fuel and energy sources' share in exports are expected to drop at least 41.2%; the share of fuel and energy sources' exports within the GDP, more than 66.7%; the share of investments in the FEC as percentage of the GDP, at least 28.6%, and in

total investments, more than 50%; the GDP specific energy consumption, more than 50%; and the GDP specific electricity consumption, at least 37.5%.

At the same time, during implementation of the Energy Strategy, the Russian oil and gas complex would retain its determining role with respect to important strategic objectives of the country's development. This concerns in the first place building a new energy infrastructure that would make it possible to accelerate socioeconomic development of Eastern Siberia and Russia's Far East, and also to eradicate the infrastructural disunity among Russian Federation regions, and to form new territorial-and-production clusters on the basis of energy supplying and processing facilities' development.

According to Russian Energy Minister Sergey Shmatko, "The set of measures proposed would enable adaptive adjustments to the current guidelines of the national energy policy and at the same time help maintain its key direction, that is, using natural energy resources and the entire capacity of the energy sector with the highest possible efficiency in order to achieve sustainable growth, improved quality of life of the population, and stronger foreign economic position of the country."

By implementing the Energy Strategy up to 2030, the Russian oil and gas complex is and will be developing not because it is a key source of foreign exchange inflow to the country, but due to its underlying innovative strategy. Even today, it is able to influence the other sectors of the Russian economy by the strength of its innovative ideas, a positive example as the leader of the modernization process, objective information and many other things. Efficient implementation of plans outlined in the Energy Strategy would largely determine the dynamic and balanced growth of the Russian economy, as well as improvement of the quality and level of international cooperation in achieving global energy security.